Friday, April 22, 2011

It’s Official: China Will Be Dumping US Dollars

In case you missed it, earlier this week China announced that its foreign currency reserves are excessive and that they need to return to “reasonable” levels.

In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).

This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.

In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.

The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.

What does this mean? We’re on out own in terms of preparing for what’s coming. The US Dollar has already taken out its 2009 low in the overnight futures session. We now have only one line of support before the US Dollar breaks into the abyss (all time lows).

So if you’re not preparing for mega-inflation already, you need to start doing so NOW. The Fed WILL continue to pump money into the system 24/7 and it’s going to result in the death of the US Dollar.

If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.

All in all its 14 pages contain a literal treasure trove of information on how to take steps to prepare AND profit from what’s to come. And it’s all 100% FREE.

To pick up your copy today, go to http://www.gainspainscapital.com and click on FREE REPORTS.

Good Investing!

Graham Summers

Oil Crisis Just Got Real: Sinopec (Read China) Cuts Off Oil Exports

As if a dollar in freefall was not enough, surging oil is about to hit the turbo boost, decimating what is left of the US (and global) consumer. Xinhua, via Energy Daily, brings this stunner: " Chinese oil giant Sinopec has stopped exporting oil products to maintain domestic supplies amid disruption concerns caused by Middle East unrest and Japan's earthquake, a report said Wednesday. The state-run Xinhua news agency did not say how long the suspension would last but it reported that the firm had said it also would take steps to step up output "to maintain domestic market supplies of refined oil products". Oh but don't worry, those good Saudi folks are seeing a massive drop in demand... for their Kool aid perhaps. "Sinopec would ensure supplies met the "basic needs" of the southern Chinese special regions of Hong Kong and Macao, but they also should expect an unspecified drop in supply, Xinhua quoted an unnamed company official as saying." Now... does anyone remember the 1970s?

The report said Sinopec has raised output of refined oil products this year, with its first-quarter production reaching 31.55 million tonnes, an increase of 6.2 percent from the same period last year.

Sinopec last month said its 2010 net profit rose nearly 14 percent on higher oil prices and strong domestic demand for refined oil and chemical products.

It reported a net profit of 71.8 billion yuan ($11 billion).

The Beijing-based company attributed the result to China's rapid economic growth, robust oil demand and "the increase in the price of crude oil, oil products and petrochemical products."

It had said at the time that it would continue to "expand markets" in China and overseas this year, while intensifying its exploration efforts in the country's western regions.

Oil prices have surged on supply concerns as governments in the oil-rich Middle East and North Africa are hit by popular uprisings, while the Japan quake and resulting nuclear crisis led the country to seek other forms of energy other than atomic.

And another perspective on how China just gave Geithner and his inflation exporting dreams the biggest, baddest middle finger, from Global Times:

China Petrochemical Corp (Sinopec Group), Asia's largest oil refiner by capacity, said Tuesday it had halted refined oil exports, except those to Hong Kong and Macao, in order to bolster domestic supply. Analysts said the move would help prepare for a possible domestic fuel shortage later this year.

Due to the turmoil in the Middle East and the earthquake in Japan, Sinopec is facing pressure just to meet demand at home, the company said.

The company will keep its refineries running at full capacity, but will cut petrochemical production and reduce the workload at its chemical plant installations to boost the domestic supply of refined oil, it said. It plans to produce 10.54 million tons of refined oil products in April.

The company did not say how much refined oil it would hold back from the international market.

"With the weather getting warmer, more cars hitting the road and increased demand from the construction, industrial and logistic sectors, the consumption of refined oil is expected to surge in April," said Wang Shunzeng, secretary-general of Beijing Petrol Circulation Industry Association.

Meanwhile, due to inflation and the rising price of crude oil, many private refineries have reduced production, making it necessary for State refiners to step in to fill the gap, analysts said.

China's refined oil inventories fell last month after hitting record highs at the end of February, the National Development and Reform Commission (NDRC) said Tuesday.

The country's apparent refined oil use in March reached a record high of 21.73 million tons, the NDRC said.

"The inventory of refined oil is actually still at the normal level. Sinopec's move suggested that it is making early preparations for peak demand in summer and a possible fuel shortage later this year," Zhong Jian, chief analyst with C1 Energy, told the Global Times.

The country had a shortage of fuels last year, especially a diesel shortfall in the fourth quarter when electricity cuts due to power rationing caused factories to use backup diesel generators to provide power, thus pushing up diesel demand.

Zhong said that China's crude oil processing capability would rise by 17 million tons this year, but this figure is lower than for the two previous years. He also said there would be a 4-million-ton shortage of diesel oil this year

Translation: Shit just got real, and is about to manifest itself in limit ups in both regular, and black gold.

James Grant: Bernanke's Easy Money Party Will Leave A Hangover For Speculators

Video - Jim Grant with Consuelo Mack - April 17, 2011

The interview begins at the 3:50 mark. Regarding inflation, MIT's Billion Prices Project is mentioned which we first highlighted last week.

James Grant Testifies On The Federal Reserve Before Ron Paul's Committee On Monetary Policy

Grant Says The FED Should Be Required To Create A Living Will, He Appoints Ron Paul As Executor Of The FED's Estate

Clashes erupt in Shanghai as truck drivers strike near port

By Royston Chan and Carlos Barria

SHANGHAI (Reuters) - A two-day strike over rising fuel prices turned violent in Shanghai on Thursday as thousands of truck drivers clashed with police, drivers said, in the latest example of simmering discontent over inflation.

About 2,000 truck drivers battled baton-wielding police at an intersection near Waigaoqiao port, Shanghai's biggest, two drivers who were at the protest told Reuters.

The drivers, who blocked roads with their trucks, had stopped work on Wednesday demanding the government do something about rising fuel costs, workers said.

"I want the government to stand up to solve our problems because we cannot take this anymore. We are unable to bear the cost of operating now," said a driver surnamed Chen, 33, a native of Henan province who has been driving for eight years.

The strike comes against a backdrop of rising consumer prices and fuel price increases. China's inflation rate hit 5.4 percent in March, prompting officials to renew vows to use all available means to contain price rises.

Police arrested at least six people and beat up some protesters with batons, said Chen and another driver also surnamed Chen, 35. They declined to give their full names or the name of their company for fear of reprisals.

Both drivers, who work for a small transport company, showed photographs to two Reuters reporters of police carrying a man with a bloodied head, with his wife and daughter at his side.

Repeated calls to the Shanghai public security bureau and the municipal government went unanswered. Continued...

US Dollar - The Rodney Dangerfield of Currency

After S&P downgraded the debt outlook of the US, the stock market sneezed, drank some high liquidity kool-aid, and then regained a lot of its lost ground. The real interesting phenomenon of course, was in the bond market, where market participants all but ignored the warning from S&P and bought US treasuries for their 'safety'.

While some people may think this might be due to the damaged credibility of the credit rating agency after the financial tsunami, or that the US's house of finance is fundamentally strong, the real reason may actually be the strong faith in the bi-winning fed's determination to destroy the dollar by keeping interests rates artificially low. The evidence is best seen through the currency market.

With all the problems in Euro due to its PIIGS members, the latest being the risk of Greece restructuring its debt, the Euro fell from 1.45/dollar to 1.42/dollar, but then reversed its course and marches steeply towards 1.45/dollar again. Another evidence is on USD/JPY. Japan, with a 200% debt/GDP ratio, and a devastating tsunami that will cause the BOJ to keep its interests rates low for a long period of time, reversed its course of its weakness against the dollar, causing USD to trade below its pre-tsunami level once again. While we don't believe the JPY can continue its ascend, and that the repatriation of Yen might be at work here, it nonetheless reflects the relative strength of the dollar.

So when will the dollar strengthen again? Long-term wise, it will probably be after the bi-winning fed exits its QEn program, with the likely scenario that n being a double digit number. In the short-term, however, everyone should be tuning to bi-wining Fed Chairman's April 27th briefing, where every word will be parsed, however un-convoluted his message may be. The markets, whether it be equity, treasury, or currency, are currently placing tremendous faith in the chairman's continued determination to destroy the dollar in order to bring unparalleled prosperity to the US. While this can make a great trade for reversal if there's any surprise, it is hard to argue that the Fed worshipers have the upper-hand given the bi-winning Fed's history.

Daniel Ho is the founder of 10xreturn.com, a financial portal providing financial information and market statistics for investment professionals.

Oil Crisis Just Got Real: Sinopec (Read China) Cuts Off Oil Exports

Sinopec Station in Hong Kong
Wikimedia Commons image
Zero Hedge

As if a dollar in freefall was not enough, surging oil is about to hit the turbo boost, decimating what is left of the US (and global) consumer. Xinhua, via Energy Daily, brings this stunner: "Chinese oil giant Sinopec has stopped exporting oil products to maintain domestic supplies amid disruption concerns caused by Middle East unrest and Japan’s earthquake, a report said Wednesday. The state-run Xinhua news agency did not say how long the suspension would last but it reported that the firm had said it also would take steps to step up output “to maintain domestic market supplies of refined oil products”. Oh but don’t worry, those good Saudi folks are seeing a massive drop in demand… for their Kool aid perhaps. “Sinopec would ensure supplies met the “basic needs” of the southern Chinese special regions of Hong Kong and Macao, but they also should expect an unspecified drop in supply, Xinhua quoted an unnamed company official as saying.” Now… does anyone remember the 1970s?
The report said Sinopec has raised output of refined oil products this year, with its first-quarter production reaching 31.55 million tonnes, an increase of 6.2 percent from the same period last year.
Sinopec last month said its 2010 net profit rose nearly 14 percent on higher oil prices and strong domestic demand for refined oil and chemical products.
It reported a net profit of 71.8 billion yuan ($11 billion).
The Beijing-based company attributed the result to China's rapid economic growth, robust oil demand and "the increase in the price of crude oil, oil products and petrochemical products."
It had said at the time that it would continue to "expand markets" in China and overseas this year, while intensifying its exploration efforts in the country's western regions.
Oil prices have surged on supply concerns as governments in the oil-rich Middle East and North Africa are hit by popular uprisings, while the Japan quake and resulting nuclear crisis led the country to seek other forms of energy other than atomic.

And another perspective on how China just gave Geithner and his inflation exporting dreams the biggest, baddest middle finger, from Global Times:
China Petrochemical Corp (Sinopec Group), Asia's largest oil refiner by capacity, said Tuesday it had halted refined oil exports, except those to Hong Kong and Macao, in order to bolster domestic supply. Analysts said the move would help prepare for a possible domestic fuel shortage later this year.
Due to the turmoil in the Middle East and the earthquake in Japan, Sinopec is facing pressure just to meet demand at home, the company said.
The company will keep its refineries running at full capacity, but will cut petrochemical production and reduce the workload at its chemical plant installations to boost the domestic supply of refined oil, it said. It plans to produce 10.54 million tons of refined oil products in April.

The company did not say how much refined oil it would hold back from the international market.
"With the weather getting warmer, more cars hitting the road and increased demand from the construction, industrial and logistic sectors, the consumption of refined oil is expected to surge in April," said Wang Shunzeng, secretary-general of Beijing Petrol Circulation Industry Association.

Meanwhile, due to inflation and the rising price of crude oil, many private refineries have reduced production, making it necessary for State refiners to step in to fill the gap, analysts said.
China's refined oil inventories fell last month after hitting record highs at the end of February, the National Development and Reform Commission (NDRC) said Tuesday.
The country's apparent refined oil use in March reached a record high of 21.73 million tons, the NDRC said.
"The inventory of refined oil is actually still at the normal level. Sinopec's move suggested that it is making early preparations for peak demand in summer and a possible fuel shortage later this year," Zhong Jian, chief analyst with C1 Energy, told the Global Times.
The country had a shortage of fuels last year, especially a diesel shortfall in the fourth quarter when electricity cuts due to power rationing caused factories to use backup diesel generators to provide power, thus pushing up diesel demand.
Zhong said that China's crude oil processing capability would rise by 17 million tons this year, but this figure is lower than for the two previous years. He also said there would be a 4-million-ton shortage of diesel oil this year
Translation: Shit just got real, and is about to manifest itself in limit ups in both regular, and black gold.

Visit ZeroHedge for some of the best economic news and commentary on the Internet.

China oil giant Sinopec 'cuts off oil exports'

Chinese oil giant Sinopec has stopped exporting oil products to maintain domestic supplies amid disruption concerns caused by Middle East unrest and Japan (NYSE: MCO - news) 's earthquake, a report said Wednesday.

The state-run Xinhua news agency did not say how long the suspension would last but it reported that the firm had said it also would take steps to step up output "to maintain domestic market supplies of refined oil products".

Sinopec would ensure supplies met the "basic needs" of the southern Chinese special regions of Hong Kong and Macao, but they also should expect an unspecified drop in supply, Xinhua quoted an unnamed company official as saying.

AFP was not immediately able to reach a Sinopec spokesman by phone for comment.

The report said Sinopec has raised output of refined oil products this year, with its first-quarter production reaching 31.55 million tonnes, an increase of 6.2 percent from the same period last year.

Sinopec last month said its 2010 net profit rose nearly 14 percent on higher oil prices and strong domestic demand for refined oil and chemical products.

It reported a net profit of 71.8 billion yuan ($11 billion).

The Beijing-based company attributed the result to China's rapid economic growth, robust oil demand and "the increase in the price of crude oil, oil products and petrochemical products."

It had said at the time that it would continue to "expand markets" in China and overseas this year, while intensifying its exploration efforts in the country's western regions.

Oil prices have surged on supply concerns as governments in the oil-rich Middle East and North Africa are hit by popular uprisings, while the Japan quake and resulting nuclear crisis led the country to seek other forms of energy other than atomic.

Throw Out the Money Changers

The two most destructive forces of human nature—greed and envy—drive the financiers, the bankers, the corporate mandarins and the leaders of our two major political parties

Chris Hedges
Truthdig

These are remarks Chris Hedges made in Union Square in New York City last Friday during a protest outside a branch office of the Bank of America.

We stand today before the gates of one of our temples of finance. It is a temple where greed and profit are the highest good, where self-worth is determined by the ability to amass wealth and power at the expense of others, where laws are manipulated, rewritten and broken, where the endless treadmill of consumption defines human progress, where fraud and crimes are the tools of business.

The two most destructive forces of human nature—greed and envy—drive the financiers, the bankers, the corporate mandarins and the leaders of our two major political parties, all of whom profit from this system. They place themselves at the center of creation. They disdain or ignore the cries of those below them. They take from us our rights, our dignity and thwart our capacity for resistance. They seek to make us prisoners in our own land. They view human beings and the natural world as mere commodities to exploit until exhaustion or collapse. Human suffering, wars, climate change, poverty, it is all the price of business. Nothing is sacred. The Lord of Profit is the Lord of Death.

The pharisees of high finance who can see us this morning from their cubicles and corner officers mock virtue. Life for them is solely about self-gain. The suffering of the poor is not their concern. The 6 million families thrown out of their homes are not their concern. The tens of millions of pensioners whose retirement savings were wiped out because of the fraud and dishonesty of Wall Street are not their concern. The failure to halt carbon emissions is not their concern. Justice is not their concern. Truth is not their concern. A hungry child is not their concern.

Fyodor Dostoyevsky in “Crime and Punishment” understood the radical evil behind the human yearning not to be ordinary but to be extraordinary, the desire that allows men and women to serve systems of self-glorification and naked greed. Raskolnikov in the novel believes—like those in this temple—that humankind can be divided into two groups. The first is composed of ordinary people. These ordinary people are meek and submissive. They do little more than reproduce other human beings in their own likeness, grow old and die. And Raskolnikov is dismissive of these lesser forms of human life.

The second group, he believes, is extraordinary. These are, according to Raskolnikov, the Napoleons of the world, those who flout law and custom, those who shred conventions and traditions to create a finer, more glorious future. Raskolnikov argues that, although we live in the world, we can free ourselves from the consequences of living with others, consequences that will not always be in our favor. The Raskolnikovs of the world place unbridled and total faith in the human intellect. They disdain the attributes of compassion, empathy, beauty, justice and truth. And this demented vision of human existence leads Raskolnikov to murder a pawnbroker and steal her money.

The priests in these corporate temples, in the name of profit, kill with even more ruthlessness, finesse and cunning than Raskolnikov. Corporations let 50,000 people die last year because they could not pay them for proper medical care. They have killed hundreds of thousands of Iraqis and Afghanis, Palestinians and Pakistanis, and gleefully watched as the stock price of weapons contractors quadrupled. They have turned cancer into an epidemic in the coal fields of West Virginia where families breathe polluted air, drink poisoned water and watch the Appalachian Mountains blasted into a desolate wasteland while coal companies can make billions. And after looting the U.S. treasury these corporations demand, in the name of austerity, that we abolish food programs for children, heating assistance and medical care for our elderly, and good public education. They demand that we tolerate a permanent underclass that will leave one in six workers without jobs, that condemns tens of millions of Americans to poverty and tosses our mentally ill onto heating grates. Those without power, those whom these corporations deem to be ordinary, are cast aside like human refuse. It is what the god of the market demands.

When Dante enters the “city of woes” in the Inferno he hears the cries of “those whose lives earned neither honor nor bad fame,” those rejected by Heaven and Hell, those who dedicated their lives solely to the pursuit of happiness. These are all the “good” people, the ones who never made a fuss, who filled their lives with vain and empty pursuits, harmless perhaps, to amuse themselves, who never took a stand for anything, never risked anything, who went along. They never looked hard at their lives, never felt the need, never wanted to look.

Those who chase the glittering rainbows of the consumer society, who buy into the perverted ideology of consumer culture, become, as Dante knew, moral cowards. They are indoctrinated by our corporate systems of information and remain passive as our legislative, executive and judicial branches of government—tools of the corporate state—strip us of the capacity to resist. Democrat or Republican. Liberal or conservative. It makes no difference. Barack Obama serves corporate interests as assiduously as did George W. Bush. And to place our faith in any party or established institution as a mechanism for reform is to be entranced by the celluloid shadows on the wall of Plato’s cave.

We must defy the cant of consumer culture and recover the primacy in our lives of mercy and justice. And this requires courage, not just physical courage but the harder moral courage of listening to our conscience. If we are to save our country, and our planet, we must turn from exalting the self, to subsuming of the self for our neighbor. Self-sacrifice defies the sickness of corporate ideology. Self-sacrifice mocks opportunities for advancement, money and power. Self-sacrifice smashes the idols of greed and envy. Self-sacrifice demands that we rise up against the abuse, injury and injustice forced upon us by the mandarins of corporate power. There is a profound truth in the biblical admonition “He who loves his life will lose it.”

Life is not only about us. We can never have justice until our neighbor has justice. And we can never recover our freedom until we are willing to sacrifice our comfort for open rebellion. The president has failed us. The Congress has failed us. The courts have failed us. The press has failed us. The universities have failed us. Our process of electoral democracy has failed us. There are no structures or institutions left that have not been contaminated or destroyed by corporations. And this means it is up to us. Civil disobedience, which will entail hardship and suffering, which will be long and difficult, which at its core means self-sacrifice, is the only mechanism left.

The bankers and hedge fund managers, the corporate and governmental elites, are the modern version of the misguided Israelites who prostrated themselves before the golden calf. The sparkle of wealth glitters before them, spurring them faster and faster on the treadmill towards destruction. And they seek to make us worship at their altar. As long as greed inspires us, greed keeps us complicit and silent. But once we defy the religion of unfettered capitalism, once we demand that a society serve the needs of citizens and the ecosystem that sustains life, rather than the needs of the marketplace, once we learn to speak with a new humility and live with a new simplicity, once we love our neighbor as ourself, we break our chains and make hope visible.

FBI Raids Chuck E. Cheese For “Undermining U.S. Currency”

By Brandon Smith

The FBI and the Secret Service showed their willingness today to utilize the expanded definitions of “counterfeit currency” and “domestic terrorism” brought about by the recent conviction of Bernard von NotHaus of the alternative currency outlet “Liberty Dollar” when the agencies initiated a surprise raid on an unsuspecting Chuck E. Cheese establishment in Des Moines, Iowa.

Chuck E Cheese is charged with violations of 18 U.S.C. § 514, which covers the counterfeiting of Federal instruments, including currency, as well as 18 U.S.C. § 486, which states:

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.

The statute phrases “intended for use as current money”, as well as “of original design” are extremely vague and wide open for any number of unconstitutional interpretations. Traditionally, the concept of “resemblance” or “similitude” in terms of counterfeiting has been considered to mean an attempt to make an exact copy or near exact copy of a unit of U.S. currency with the intent to illegally replicate its appearance as well as its value. However, the FBI found that the Liberty Dollar decision, and the “precedent” set by it, actually expanded the definition of “resemblance and similitude” to mean almost any privately made coin or barter token. That is to say, there are no longer any exact guidelines for what actually constitutes “counterfeiting”, and therefore, all alternative currencies are now fair game, including the insidiously prevalent Chuck E. Cheese game token.

“Haven’t you ever been at the laundry mat with a pocket of change thinking you have plenty of quarters, only to discover that most of them are Chuck E. Cheese tokens?!” railed Anne Tompkins, Department of Justice prosecutor in the Liberty Dollar case, as she read from a carefully prepared DHS script. “That is close enough to counterfeiting for me! It is a blatant destabilization of our democratic economy! What are you supposed to do, let your underpants wallow in filth while Chuck E. Cheese makes a profit? I say no to these financial terrorists!”

“We have to start making examples out of these alternative currency people,” said Agent Heinrich Himmler of the FBI, who was part of the Des Moines raid, “if we don’t chill enthusiasm for this kind of black market activity and so called “free trade” now, then who knows what could happen! We can’t have average citizens attempting to operate their own commerce. That would be un-American!”

Himmler’s sentiments were echoed by Southern Poverty Law Center mascot and all around swell guy, Mark Potok, who stated:

“We know for a fact that the private trade of any alternative currency directly funds terrorist organizations like “white Al Qaeda” (white Al Qaeda is a franchise of Al Qaeda LTD., all rights reserved), the Ku Klux Klan Anti-Semite Aryan Stormfront Warriors, and, the dreaded Cobra Commandos, not to mention the Decepticons. I have no proof of this…..but I work with the Department of Homeland Security, so clearly I don’t need to explain myself to you…”

He related further:

“The majority of Chuck E. Cheese customers are obviously right wing extremists with aspirations of homegrown terrorism. They openly believe in outlandish conspiracy theories, including the claim that the American economy is on a bullet-train to hell, its greased lighting supplied by the rampant unaccountable activities of the Federal Reserve, including their deliberate destruction of our monetary system. These accusations are preposterous. I see absolutely no signs that the economy or the dollar are in any danger whatsoever. Frankly, only a man like Timothy McVeigh would eat at Chuck E. Cheese.”

“Chuck E. Cheese will deny they cater to terrorists, but who are they to argue with me? I have an open invitation to appear on MSNBC anytime I want and say anything I want without ever being questioned. I could go on Hardball, wax my bikini line, and do a naked hula dance in Chris Matthews’ face and no one would say a damn thing! I’m freaken’ untouchable!”

The Secret Service and the FBI were confronted at the scene of the raid by alternative media proponents who questioned the validity of the action, citing an “extreme misinterpretation of currency laws” in order to “railroad anyone who dared to refuse participation in the corrupt dollar based system”. FBI spokeswomen Gertrud Klink refused to allow web news reporters access to the scene, and failed to respond to any queries.

“They aren’t real media anyway”, said Klink. “They may have city or state issued press passes, and they may be pummeling the MSM with their growing readership numbers, but if it doesn’t say FOX or CNN on the ID, who do they expect to take them seriously? If you can’t reinforce people’s ignorant preconceived notions of any given event with sterile corporately crafted talking points broadcast on digital HD cable, then what good are you to the FBI? ‘The O’Reilly Factor’…..now that’s real journalism!”

Alleged terrorists apprehended on the scene included Chuck E. Cheese himself, as well as partners in crime Jasper T. Jowls and Mr. Munch , who was shot and killed by the FBI while attempting to “gnaw an agent’s leg”. The West Des Moines Junior Girls Softball Squad (Go Bulldogs!), were also caught red handed in the act of exchanging illegal Chuck E. Cheese tokens for turns at the “Whack-A-Mole.”

“We stormed in right as they were about to thrash several unmistakable likenesses of Mark Potok with a rubber mallet. It was sickening! I hope Mark knows how much danger he’s really in….”

Twelve year old shortstop, Suzie Silverton, had a different view of the situation:

“We had just won the state championship and thought it would be nice to celebrate with some pizza and stuff…”

“We didn’t know we were doing anything wrong, you know. I mean, nobody ever told us that Chuck E. Cheese tokens were against the law. We’ve been using them since I was little to play games and all that. They don’t look like any real money I know. Only an idiot (or a Liberty Dollar case jury) would mistake them for legal tender. I asked an FBI man if he could show me where in the law it says specifically that tokens are illegal. He said they make the law up as they go along now, then he sprayed me in the face with bear repellent…”

Anne Tompkins defended the actions of the FBI in a press conference statement ghost written by Janet Napolitano herself:

“Chuck E. Cheese tokens are indeed a form of counterfeiting. As we pointed out in the Liberty Dollar case, any round metal token with a portrait, especially a left facing portrait, with visual devices similar to U.S. coins (which are open to our personal interpretation), could easily be mistaken as legal tender by the dull witted American masses. Never mind that the portrait on the token is of a singing rat…”

“We have several versions of the Chuck E. Cheese token that violate the same exact statutes as Liberty Dollar did. Some of the coins have dollar denominations, like 25 cents, inscribed on them, and some even say “In Pizza We Trust”, obviously copied from “In God We Trust” which is prevalent on all U.S. coinage. Honestly, that’s all we need to nail you for conspiracy to commit currency fraud nowadays, so all you Liberty Movement insurgents out there can forget about sound money projects to protect your communities from hyperinflation. We’re going to tap dance on your graves…”

Seven-year-old Tommy Tuddlemeyer of Des Moines interrupted Tompkins’ statement in protest over the raid on his favorite family restaurant.

Tuddlemeyer: “Anne Tompkins is a shameless soulless shill puppet for the DHS and the corporate banking oligarchy! Don’t you see! They’ve made the application of counterfeiting law so arbitrary that no one can ever know what the actual definition of a counterfeit is! It is utterly unconstitutional to leave the interpretation of a law “open ended” so that it can be used as a flail by the establishment to smash anyone who seeks independence in any form from the existing system! Plus……I miss the ball pit and the pizza! Where am I going to have my 8th birthday party now!

Tompkins: “You’re forgetting something, young man. Barter tokens are also undermining the strength of our dollar and our monetary system. It is illegal to create an economic system or an alternative currency that competes with the Federal Reserve Note. By using tokens, you are destroying the integrity of our country and putting the financial safety of everyone at risk.”

Tuddlemeyer: “Listen, you haggard she-goblin! I may have been born almost yesterday, but that doesn’t mean I’m a moron! You can try to misinterpret 18 U.S.C. § 486 all you want, but it doesn’t change the fact that competing barter systems are in no way illegal! Show me the law, wench!”

Tompkins: “Don’t worry, if it’s not written down yet, we’ll make sure it is before the year is out.”

Tuddlemeyer: “If you really cared at all about the safety of the dollar and our financial system, then you would use the power of the DOJ to help investigate the global banks and the Federal Reserve. They are destroying the stability of our currency daily and right out in the open! Its apparent that you have no interest in protecting the American people, only keeping us unshielded and weak as corporate elites bleed us dry, making us sufficiently desperate before they introduce the SDR as the new world reserve currency to replace the dollar, and position the IMF as the ultimate global arbiter of all economic activity around the world.”

Tompkins: That’s all “conspiracy theory”. Only silly kooky internet crazies with insane mental illness psycho craziness say things like that.

Tuddlemeyer: What?! It’s admitted! Ever visit the IMF website? I thought a “conspiracy” was supposed to be something secret. This isn’t a secret…

Tompkins: You’re crazy, and therefore everything you say no matter how factual is without merit…

Tuddlemeyer: Even if you were right about competing systems and currencies being illegal, which you’re not, how did Liberty Dollar or Chuck E. Cheese actually “compete” with the greenback? People had to exchange dollars for Liberty Dollar coins, and for Chuck E. Cheese tokens, so dollars were still being used and traded within the barter process. Nothing you say makes any sense. Man, I need a Flintstones vitamin and a shot of Mountain Dew just to get through this conversation...”

Tompkins: “Ok, I admit it; the raids on Liberty Dollar and Chuck E. Cheese were not about counterfeiting in the slightest. In fact, the banking elite are unbearably afraid of average people taking matters into their own hands and applying their own unique solutions to the problems of economic destabilization. If all you serfs go around implementing your own financial protections and localizing your own economies, then you won’t need global banks or the government to “help you” when it really hits the fan in the next couple of years. If you people get even the narrowest inkling that you have the ability to live WITHOUT the dollar, or any other fiat central banking instrument of intergalactic subjugation, then that would really peeve us off, plus put us out of business. Can you see me having to work a real job? I don’t think so! I would rather send goon squads to burn down your dirty little suburban hovels!”

Tuddlemeyer: How do you live with yourself, lady…?

Tompkins: I make sure everyone else is as miserable as I am…

Tommy Tuddlemeyer was promptly tasered for daring to assert his First Amendment rights in a public place and was heard to exclaim as his head was placed into a black bag that he “wanted his mommy”. Police pointed out that if he could not afford his own mommy, an inept court appointed mommy would be provided for him.

The DOJ, the Secret Service, and the FBI are moving forward with similar actions against other organizations using alternative counterfeit currencies, including Disney Dollars, Roller Dollars, “common border” cooperation against Canadian Tire Dollars, and raids on every casino establishment in the greater Las Vegas area:

“We’ll leave no stone unturned” said Agent Himmler. “I have full faith that with the combined efforts of the DOJ, the FBI, the IRS, and the DHS, we will scare the holy bejesus out of anyone who even looks at the dollar sideways. It’s very simple, if you want to stay out of our crosshairs; shut up, use your Fed notes, and your credit card, and keep on shopping, America! Easy peasy! And don’t worry, if anything ever does happen to the dollar, we’ll be there to pick up the pieces for you. Just don’t ever try to pick them up yourself…”

UPDATE: The above news story is a parody. Hopefully you noticed. However, the underlying absurdity of the situation is, unfortunately, very real, and going on today right under our noses. The humorous anecdote is meant to illustrate a point; that the activities of the DOJ and various federal agencies in regards to alternatives commerce of late have been growing more vicious and more irrational as the disintegration of the mainstream economic system nears. Stagflation is striking all sectors, corporate retailers like Walmart are no longer able to absorb wholesale price increases of goods and are now charging much more at the shelf, energy prices are going through the roof, and housing and wages continue to decline. Centralized economic structures like our own always struggle to stay relevant to the people in the face of financial implosion, at least until they can be replaced with yet ANOTHER centralized financial system. Power over the economy and power over currency are the greatest mechanisms of control in existence, at least, beyond the barrel of a gun, and even more so in some cases. The establishment will stop at nothing to maintain their grip on this mechanism. This includes criminalizing even the most logical and moral behaviors.

The bottom line; whether or not barter networks or sound money initiatives are made illegal is irrelevant. What the DOJ, the SPLC, or even the FBI claims is “domestic terrorism” in terms of trade is, in the end, meaningless. When all is said and done, people are going to look for ways to survive. Barter networking and precious metals are a natural economic extension of this inherent instinct. Every single nation in history that has experienced a fiscal catastrophe has immediately sprouted private localized trade in response. Barter is a fact of life that even the Federal Reserve can’t undo. The key, though, to making barter a proactive tool, is to utilize it BEFORE collapse occurs, instead of waiting until after the fact. The key is to preempt disaster with a free market already in place to provide new options for Americans who find themselves afraid, confused, and in the dark. Never forget, if we do not take action now, global banks will be more than happy to introduce their own “solution”; one that is not so free…

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Japan's Disaster and the Manufacturing Meltdown

The effects of Japan’s March earthquake and tsunami are being felt far beyond the shattered region around Sendai and Fukushima. As U.S. auto assembly lines grind to a halt for want of components that usually come from now-disabled factories in northeastern Japan, business strategists may be forced to rethink the way globalized companies do business. The result could well be a retreat from current manufacturing methods -- sourcing key components from a single supplier and running “lean” factories without stocks of supplies on hand -- whose main goal is to minimize costs. Now, management may also pay close attention to risks.

Such a change would represent a reversal of course for major international companies, potentially transforming the way that many of the world’s industrial giants have functioned for the past two decades. Whereas companies used to run separate operations in many countries, each serving a given national market, in the 1980s multinational corporations started to run their affairs with diminishing attention to national borders. Today, a single plant or research center will often take worldwide responsibility for a particular product or business area. And whereas factories once manufactured their own components or purchased them nearby, now even some small plants have supply lines that stretch across the globe. Almost every manufacturer, from your local maker of wedding dresses to Boeing and Caterpillar, is a global company, because its production relies critically on parts or other inputs made or designed outside its home country.

The globalization of manufacturing is responsible for much of the boom in international trade over the past two decades. Around half of the maritime shipping containers that arrive in the Los Angeles and New Jersey ports, for example, contain not products for retail sale but “intermediate goods,” products partially manufactured in one location and destined for further processing somewhere else. Similarly, a large proportion of airfreight consists of high-value components, such as semiconductors and optical lasers, rather than finished consumer goods.
The shift to dispersed, highly specialized operations has significant economic advantages. One is that each producer focuses on the particular things it does best, instead of devoting capital and management attention to a wide variety of activities or to activities that offer poor returns, such as manufacturing components that are already widely available at low prices. A second advantage of this type of production is that it permits economies of scale. A specialized factory may produce only a few types of goods, but it is able to make and sell a lot of each one, since its market is global. This usually means lower costs to produce each unit.

Financially, specialized production and global supply chains make sense. But firms -- and the investors who own them -- have paid too little attention to the risks that such a strategy entails.

As I wrote in “Freight Pain” (Foreign Affairs, November/December 2008), the development of long supply chains was made possible by the decline in the cost of moving goods. But even in 2008, those costs were already rising: “Congested shipping lanes and highways make transit times uncertain,” I wrote, “and this uncertainty hurts profits.” Moreover, the push for ever-greater port security will further slow transit; physical inspection of shipping containers could delay delivery by two to three days or more. As I wrote then, “Even if the proportion of containers pulled out of the flow of traffic is small, importers will be forced to reckon with the possibility that their goods might be delayed in transit. In some instances, importers will adjust by keeping more stocks in their U.S. warehouses at any one time.”

Even more costly, an unforeseen event at one end of the chain may disrupt the flow of components to the next firm thousands of miles away. The problem is compounded if a sole-source supplier stops production. A manufacturer may be left high and dry if its producer of fuel pumps, friction bearings, or graphics processors goes offline. The recent disaster in Japan is an extreme example, but supply- chain problems are far from unusual. A shortage of freight cars, a dock strike, a factory closure due to lack of water, a riot that keeps a supplier’s employees from getting to work -- these and many other events can wreak havoc with production schedules.

It is hard to quantify how much supply-chain interruptions have cost business in recent years, because they generally go undisclosed. After all, no company wants to alert its competitors to weaknesses in its business model. And even in the case of the Japanese disaster, many companies with lower profiles than the automakers have yet to announce how they will be affected by shortages of or higher prices for essential components. Public attention has focused on outages at Japanese plants that turn out silicon wafers and memory chips, but there are surely many more obscure products that are in short supply.

The total cost of lost U.S. production due to shortfalls of Japanese components will easily run into the billions of dollars; slowing or closing down auto assembly lines, as several manufacturers have already done, does not come cheap. Other products that are “made in America,” particularly factory equipment, also rely heavily on Japanese electronics, and even if those producers are not forced to close plants temporarily, the risk of delays in filling orders may cause impatient customers to defect to competitors who do not depend on inputs from Japan.

The 'other' housing market, where house prices have regressed 60pc

An apartment on London's Hyde Park recently changed hands at an astonishing £136m.
Believe it or not, these very same houses and flats were until three years ago as much a part of the British property bubble as everywhere else - perhaps more so in some cases. Photo: PA

Even the row of terraced houses in North West London where I live has managed to put the housing crash behind it; these relatively modest late Victorian properties again sell at record prices.

Yet stray beyond London and the South East, and you see an altogether different picture, one that goes largely unrecorded by the established indices for measuring the UK housing market – Halifax, Nationwide, Rightmove and so on.

To see this "other" housing market, I've been to Newcastle and its surrounding areas in the North East, the region that gave birth to the folly of Northern Rock.

Like all property markets, prices in the region are highly calibrated. There remain sizeable pockets of prosperity, where values, though still significantly off, have held up reasonably well. As in many parts of London, it's easy to imagine from these relatively well to do districts that there never was much of a housing crash.

Unfortunately, they are more the exception than the rule. Little more than a stone's throw from these posher areas lies a tale of catastrophic decline and value destruction to match the very worst the sub-prime crisis has managed to produce in the US. Tens of thousands of houses in the North East alone will have fallen in value by 30-60pc since the peak, and by the look of it, still have further to go.

Many can neither be sold nor let. You've heard about Britain's chronic shortage of housing stock, one of the factors which allegedly underpins the value of domestic property in the UK. Well, there's little sign of it here in Newcastle and the rest of the North East. Row upon row of properties that used to house workers in the region's once proud industrial tradition of shipbuilding, coal and steel lie half boarded up or otherwise derelict.

Yet believe it or not, these very same houses and flats were until three years ago as much a part of the British property bubble as everywhere else – perhaps more so in some cases.

Over a seven year period, prices for a typical two to three bed house or flat were chased all the way up from the low teens to well in excess of £60,000. New build subject to mortgage fraud would fetch £125,000 or more. Today you'd be lucky to get half. Prices are fast regressing all the way back to where they came from before the bubble began.

Typical of this phenomenon is Benwell, located on the hillside that tumbles down to the Tyne in Newcastle's West end. A scene of grim degradation, it stands as a lasting reminder of the policy failures and illusory prosperity of Brown's Britain. Pumped up on a sea of credit, make work public expenditure and benefit payments, prices rocketed from 2000 onwards.

First came the local money, chasing the apparently mouth watering yields that housing benefit could offer to buy-to-let landlords. Then having exhausted the possibilities down south, in came the London investors. In the final hurrah came the Irish, their pockets overflowing with loans from their now hopelessly bust banking system.

Many of these investors will already be in substantial negative equity, but still they refuse to adjust their price expectations to the all too dire reality. So they hold on in the hope they can find the tenants to pay the mortgage and that prices will eventually recover. Denial is the order of the day.

London is always first in and out of any housing market downturn. The trend then ripples out from the capital, with regions such as the North East lagging London by a year or two. If that relationship holds, then you would indeed expect prices in the regions soon to be chasing London higher again. Regrettably, it's more than likely broken. Even if the banks were prepared to fund another rip-roaring property boom – they are still scarcely in any condition to do so – the fundamentals in regions such as the North East are most unlikely to support it.

Highly dependent on public sector employment and handouts – which are being severely cut – there appears nothing to stop the free fall in prices. Ever optimistic, one estate agent in Blyth, on the coast south of Newcastle, insists that with the advent of the prime Easter selling season, things are picking up. Buy-to-let investors from London are back, he says, in part because low interest rates are driving them into riskier assets in the search for income and capital gain. "They know a bargain when they see one", he says, pointing to the recent sale of a property at half its bubble peak. In the real world, prices have in fact taken a further lurch downwards.

A little further south still, at Dean Bank, Ferryhill, it's the same depressing scene of boarded up housing and decline. Even the warm spring sunshine fails to make a dent in the oppressiveness of it all. A woman is grilling meat on a disposable barbecue in her front door porch. "I've been in this town a long time. It always was s*** and it still is. But my mortgage broker is a good man. He'll look after me", she says, generously offering a sausage sandwich. Somehow I doubt it.

But let's not single out the North East. To a greater or lesser extent, you find much the same story around all the major regional cities of Northern England. It's still the same rubbish property with the same down at heel tenants, but in the past ten years the prices have been up like a rocket and now they are falling back down again like a spent stick.

It's hard to know what's going to rescue districts like these. With the anaesthetic of abundant credit and public money now largely gone, many areas of Britain are simply returning to the way they were before the New Labour boom began. It's as if it never happened at all.

George Osborne's hoped for private sector recovery threatens entirely to bypass areas like these. For the North East, the somewhat underwhelming programme of supply side reforms he announced in the Budget is unlikely to make any significant difference. Better education and training may lift things in time, but it all costs money, which is in short supply. Eventually, incomes might slip to levels that make the region competitive with emerging markets, but that's hardly an outcome to aspire to.

Everywhere's hurting right now, yet few places are hurting more than the North East. The collapse in low end property prices is only one outward sign of it. Public policy must focus like a lazer on these forgotten badlands, or risk permanently entrenching an ever more divided society.

Foreign Policy & War Profiteering

The Economist: Global Debt Clock Now $42T And Ticking

The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for all (or almost all) government debts in dollar terms.

Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals.

Crash Course Chapter 4: Compounding Is The Problem

In order to understand the urgency I feel about the issues covered in the Crash Course, you need to understand the power of compounding. If something, such as a population, oil demand, a money supply, or anything else steadily increases in size in some proportion to its current size, and you graph it over time, the graph will look like a hockey stick.

Said more simply, if something is increasing over time on a percentage basis, it is growing exponentially. With exponential functions, the action really only heats up in the last few moments. There is simply not a lot of maneuvering room once you hop on the vertical portion of a compound graph.

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The purpose of this mini-presentation is to help you understand the power of compounding. If something, such as a population, oil demand, a money supply, or anything, steadily increases in size in some proportion to its current size, and you graph it over time, the graph will look like a hockey stick.

Said more simply, if something is increasing over time on a percentage basis, it is growing exponentially.

Using an example drawn from a magnificent paper by Dr. Albert Bartlett, let me illustrate the power of compounding for you.

Suppose I had a magic eye dropper and I placed a single drop of water in the middle of your left hand. The magic part is that this drop of water is going to double in size every minute.

At first nothing seems to be happening, but by the end of a minute, that tiny drop is now the size of two tiny drops.

After another minute, you now have a little pool of water that is slightly smaller in diameter than a dime sitting in your hand.

After six minutes, you have a blob of water that would fill a thimble.

Now suppose we take our magic eye dropper to Fenway Park, and, right at 12:00 p.m. in the afternoon, we place a magic drop way down there on the pitcher’s mound.

To make this really interesting, suppose that the park is watertight and that you are handcuffed to one of the very highest bleacher seats.

My question to you is, “How long do you have to escape from the handcuffs?” When would it be completely filled? In days? Weeks? Months? Years? How long would that take?

I’ll give you a few seconds to think about it.

The answer is, you have until 12:49 on that same day to figure out how you are going to get out of those handcuffs. In less than 50 minutes, our modest little drop of water has managed to completely fill Fenway Park.

Now let me ask you this – at what time of the day would Fenway Park still be 93% empty space, and how many of you would realize the severity of your predicament?

Any guesses? The answer is 12:45. If you were squirming in your bleacher seat waiting for help to arrive, by the time the field is covered with less than 5 feet of water, you would now have less than 4 minutes left to get free.

And that, right there, illustrates one of the key features of compound growth…the one thing I want you take away from all this. With exponential functions, the action really only heats up in the last few moments.

We sat in our seats for 45 minutes and nothing much seemed to be happening, and then in four minutes – bang! – the whole place was full.

This example was loosely based on a wonderful paper by Dr. Albert Bartlett that clearly and cleanly describes this process of compounding, which you can find in our Essential Reading section. Dr. Bartlett said, “The greatest shortcoming of the human race is the inability to understand the exponential function.” And he’s absolutely right.

With this understanding, you’ll begin to understand the urgency I feel – there’s simply not a lot of maneuvering room once you hop on the vertical portion of a compound graph. Time gets short.

This makes compounding the first Key Concept of the Crash Course.

Now, what does all of this have to do with money and the economy and your future? I can’t wait to tell you. Please join me for Chapter 5: Growth vs. Prosperity.

Thank you for listening.

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Fine Gael Is A Joke: Max Keiser Talks Revolution And Burning Bank Bondholders Straight To The Irish People

Video - Max Keiser on Tonight With Vincent Browne (Pt. 1 of 5) - April 14, 2011

Max Keiser brought his anti-bankster revolution to Irish television last week. Two amazing things about this: a) Max got to bring his message, live, to a national, mainstream audience, and b) Max and the other panelists spent the entire hour talking about how to burn bank bondholders. Better yet, by the end of the show, just about everyone, including the host, agreed -- Fine Gael is a joke and Ireland has no choice but to let the banks and their bondholders take their medicine. Great stuff.

Parts 2 through 5 below.

9 Things The Rich Don't Want You To Know About Taxes

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity—so much so that tax revenues will go up, despite lower rates. The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Tax policy is something the framers left to politics. And in politics, the facts often matter less than who has the biggest bullhorn.

The Mad Men who once ran campaigns featuring doctors extolling the health benefits of smoking are now busy marketing the dogma that tax cuts mean broad prosperity, no matter what the facts show.

As millions of Americans prepare to file their annual taxes, they do so in an environment of media-perpetuated tax myths. Here are a few points about taxes and the economy that you may not know, to consider as you prepare to file your taxes. (All figures are inflation-adjusted.)
1. Poor Americans do pay taxes.

Gretchen Carlson, the Fox News host, said last year “47 percent of Americans don’t pay any taxes.” John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.

Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”

Actually, they pay lots of taxes—just not lots of federal income taxes.

Data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.
2. The wealthiest Americans don’t carry the burden.

This is one of those oft-used canards. Sen. Rand Paul, the tea party favorite from Kentucky, told David Letterman recently that “the wealthy do pay most of the taxes in this country.”

The Internet is awash with statements that the top 1 percent pays, depending on the year, 38 percent or more than 40 percent of taxes.

It’s true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.

Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.
3. In fact, the wealthy are paying less taxes.

The Internal Revenue Service issues an annual report on the 400 highest income-tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2007.

Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks to a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6 percent. Adding payroll taxes barely nudges that number.

Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1 percent in 1961 to 22.5 percent in 2007.

(By the way, during seven of the eight George W. Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that the Obama administration overturned almost instantly after his inauguration.)
4. Many of the very richest pay no current income taxes at all.

John Paulson, the most successful hedge-fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero.

Congress lets hedge-fund managers earn all they can now and pay their taxes years from now.

In 2007, Congress debated whether hedge-fund managers should pay the top tax rate that applies to wages, bonuses and other compensation for their labors, which is 35 percent. That tax rate starts at about $300,000 of taxable income—not even pocket change to Paulson, but almost 12 years of gross pay to the median-wage worker.
The Republicans and a key Democrat, Sen.
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Charles Schumer of New York, fought to keep the tax rate on hedge-fund managers at 15 percent, arguing that the profits from hedge funds should be considered capital gains, not ordinary income, which got a lot of attention in the news.


What the news media missed is that hedge-fund managers don’t even pay 15 percent. At least, not currently. So long as they leave their money, known as “carried interest,” in the hedge fund, their taxes are deferred. They only pay taxes when they cash out, which could be decades from now for younger managers. How do these hedge-fund managers get money in the meantime? By borrowing against the carried interest, often at absurdly low rates—currently about 2 percent.

Lots of other people live tax-free, too. I have Donald Trump’s tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets “professional” real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

Frank and Jamie McCourt, who own the Los Angeles Dodgers, have not paid any income taxes since at least 2004, their divorce case revealed. Yet they spent $45 million one year alone. How? They just borrowed against Dodger ticket revenue and other assets. To the IRS, they look like paupers.

In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for U.S. Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: Everyone should pay less.
5. And (surprise!) since Reagan, only the wealthy have gained significant income.

The Heritage Foundation, the Cato Institute and similar conservative marketing organizations tell us relentlessly that lower tax rates will make us all better off.

“When tax rates are reduced, the economy’s growth rate improves and living standards increase,” according to Daniel J. Mitchell, an economist at Heritage until he joined Cato. He says that supply-side economics is “the simple notion that lower tax rates will boost work, saving, investment and entrepreneurship.”

When Reagan was elected president, the top marginal tax rate (the tax rate paid on the last dollar of income earned) was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George H.W. Bush and Clinton, and then cut by George W. Bush. The top rate is now 35 percent.

Since 1980, when Reagan won the presidency promising prosperity through tax cuts, the average income of the vast majority—the bottom 90 percent of Americans—has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent’s average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top one-tenth of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show.
6. When it comes to corporations, the story is much the same—less taxes.

Corporate profits in 2008, the latest year for which data are available, were $1,830 billion, up almost 12 percent from $1,638.7 billion in 2000. Yet, even though corporate tax rates have not been cut, corporate income-tax revenues fell to $230 billion from $249 billion—an 8 percent decline, thanks to a number of loopholes. The official 2010 profit numbers are not added up and released by the government, but the amount paid in corporate taxes is: In 2010 they fell further, to $191 billion—a decline of more than 23 percent compared with 2000.


7. Some corporate tax breaks destroy jobs.

Despite all the noise that America has the world’s second-highest corporate tax rate, the actual taxes paid by corporations are falling because of the growing number of loopholes and companies shifting profits to tax havens like the Cayman Islands.

And right now America’s corporations are sitting on close to $2 trillion in cash that is not being used to build factories, create jobs or anything else, but acts as an insurance policy for managers unwilling to take the risk of actually building the businesses they are paid so well to run. That cash hoard, by the way, works out to nearly $13,000 per taxpaying household.
A corporate tax rate that is too low actually destroys jobs. That’s because a higher tax rate encourages businesses (who don’t want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

The 2004 American Jobs Creation Act, which passed with bipartisan support, allowed more than 800 companies to bring profits that were untaxed but overseas back to the United States. Instead of paying the usual 35 percent tax, the companies paid just 5.25 percent.

The companies said bringing the money home—“repatriating” it, they called it—would mean lots of jobs. Sen. John Ensign, the Nevada Republican, put the figure at 660,000 new jobs.

Pfizer, the drug company, was the biggest beneficiary. It brought home $37 billion, saving $11 billion in taxes. Almost immediately it started firing people. Since the law took effect, Pfizer has let 40,000 workers go. In all, it appears that at least 100,000 jobs were destroyed.

Now Congressional Republicans and some Democrats are gearing up again to pass another tax holiday, promoting a new Jobs Creation Act. It would affect 10 times as much money as the 2004 law.
8. Republicans like taxes too.

President Reagan signed into law 11 tax increases, targeted at people down the income ladder. His administration and the Washington press corps called the increases “revenue enhancers.” Reagan raised Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax.

George W. Bush signed a tax increase, too, in 2006, despite his written ironclad pledge never to raise taxes on anyone. It raised taxes on teenagers by requiring kids up to age 17, who earned money, to pay taxes at their parents’ tax rate, which would almost always be higher than the rate they would otherwise pay. It was a story that ran buried inside The New York Times one Sunday, but nowhere else.

In fact, thanks to Republicans, one in three Americans will pay higher taxes this year than they did last year.

First, some history. In 2009, President Obama pushed his own tax cut—for the working class. He persuaded Congress to enact the Making Work Pay Tax Credit. Over the two years 2009 and 2010, it saved single workers up to $800 and married heterosexual couples up to $1,600, even if only one spouse worked. The top 5 percent or so of taxpayers were denied this tax break.

The Obama administration called it “the biggest middle-class tax cut” ever. Yet last December the Republicans, poised to regain control of the House of Representatives, killed Obama’s Making Work Pay Credit while extending the Bush tax cuts for two more years—a policy Obama agreed to.

By doing so, Congressional Republican leaders increased taxes on a third of Americans, virtually all of them the working poor, this year.

As a result, of the 155 million households in the tax system, 51 million will pay an average of $129 more this year. That is $6.6 billion in higher taxes for the working poor, the nonpartisan Tax Policy Center estimated.

In addition, the Republicans changed the rate of workers’ FICA contributions, which finances half of Social Security. The result:

If you are single and make less than $20,000, or married and less than $40,000, you lose under this plan. But the top 5 percent, people who make more than $106,800, will save $2,136 ($4,272 for two-career couples).
9. Other countries do it better.

We measure our economic progress, and our elected leaders debate tax policy, in terms of a crude measure known as gross domestic product. The way the official statistics are put together, each dollar spent buying solar energy equipment counts the same as each dollar spent investigating murders.

We do not give any measure of value to time spent rearing children or growing our own vegetables or to time off for leisure and community service.

And we do not measure the economic damage done by shocks, such as losing a job, which means not only loss of income and depletion of savings, but loss of health insurance, which a Harvard Medical School study found results in 45,000 unnecessary deaths each year.

Compare this to Germany, one of many countries with a smarter tax system and smarter spending policies.

Germans work less, make more per hour and get much better parental leave than Americans, many of whom get no fringe benefits such as health care, pensions or even a retirement savings plan. By many measures the vast majority live better in Germany than in America.

To achieve this, unmarried Germans on average pay 52 percent of their income in taxes. Americans average 30 percent, according to the Organization for Economic Cooperation and Development.

At first blush the German tax burden seems horrendous. But in Germany (as well as in Britain, France, Scandinavia, Canada, Australia and Japan), tax-supported institutions provide many of the things Americans pay for with after-tax dollars. Buying wholesale rather than retail saves money.

A proper comparison would take the 30 percent average tax on American workers and add their out-of-pocket spending on health care, college tuition and fees for services, and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a tiny risk in Germany.

Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other modern countries. While soaring medical costs are a key reason that since 1980 bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among modern countries—almost twice the rate in Germany, which is close to the average of modern countries.

On the corporate tax side, the Germans encourage reinvestment at home and the outsourcing of low-value work, like auto assembly, and German rules tightly control accounting so that profits earned at home cannot be made to appear as profits earned in tax havens.

Adopting the German system is not the answer for America. But crafting a tax system that benefits the vast majority, reduces risks, provides universal health care and focuses on diplomacy rather than militarism abroad (and at home) would be a lot smarter than what we have now.

Here is a question to ask yourself: We started down this road with Reagan’s election in 1980 and upped the ante in this century with George W. Bush.

How long does it take to conclude that a policy has failed to fulfill its promises? And as you think of that, keep in mind George Washington. When he fell ill his doctors followed the common wisdom of the era. They cut him and bled him to remove bad blood. As Washington’s condition grew worse, they bled him more. And like the mantra of tax cuts for the rich, they kept applying the same treatment until they killed him.

Luckily we don’t bleed the sick anymore, but we are bleeding our government to death.