Graft Macaroni and Cheese

Feeling sorry for yourself? Struggling to get by? Wondering how you can get a bailout? Well, stop moping, because it's not too late!

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In the last decade, the financial industry's $5 billion investment in campaign contributions and lobbyists resulted in deregulation, which generated trillions for executives. And when the bubble burst, there was another boatload of free money! By Bloomberg News' account, $12.8 trillion worth of taxpayer loans, grants and guarantees - all to Wall Street!

But wait ... there's more!

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Likewise, Goldman Sachs hired former Senate aide Mark Patterson as one of its lobbyists - an investment that proved a huge winner when Patterson became the Treasury Department's chief of staff and the agency subsequently killed proposals to limit executive compensation at bailed-out banks. Cha-ching!

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Rise and Fall: On Intellect and Opposable Thumbs

The derivatives market is the $700 trillion elephant in the room. Not gorilla... elephant. And the $700 trillion elephant is pissing on our heads. The elephant will soon sit on our heads if we don’t nip it. NIP IT... in the bud... like Barney Fife with a snoot-full of corn likker.

Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth, but valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.

To gain some perspective on what $700 trillion means (I do not believe that sum even exists in the whole world), let’s put that number next to a few of the little disasters that already have our fiscal panties in a wad. Try as we might to salvage the residential real estate market, it's at best only worth $23 trillion. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion. Compare any of these amounts to the stoned-tripping-drunk-hallucinating valuation of the derivatives market and you can easily see that we have essentially installed screen doors in our diving submarine. The total value of all the stock markets in the world, by the way, amounts to less than $50 trillion, according to the World Federation of Exchanges.

To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values. Few know what derivatives are really worth. One derivatives trader who manages billions of dollars said she couldn't put a value on her portfolio because "no one knows anymore who is on the other side of the trade."

Derivatives pricing, simply put, is determined by what someone else is willing to pay for the contract. The value is based on an artificial scenario that 'X' will be worth 'Y' if 'Z' happens. Strip away the fantasy, however, and the reality of the situation is akin to a game of musical chairs – without any chairs – and the music must, sooner or later, stop.

That's why the current strategies designed to stabilize the housing market will do little to take the sting out of the snapback we are going through on Wall Street. Once people's mortgages were sold off to secondary buyers, and then all sorts of crazy types of derivative securities were devised based on those, and those securities were in turn traded on down the line, there is now little if any relevance to the real estate values on which they were pegged. We must identify and determine the real value of derivatives before we give banks and institutions a pass-go with more tax dollars. Otherwise, homeowners will suffer as banks patch up the holes left in their balance sheets by the derivatives gone poof; new credit won't be extended until the raff of the old credit is in the rear-view mirror. It isn't the housing market devaluation, or the sub-prime mortgage market defaults that have us in real trouble. Those are nice fakes to sway attention away from the place where greed truly flourished – trading phony instruments to the tune of $700 trillion.

In what may be the strangest, darkest, deadliest head-scratcher ever, derivatives regulation falls under the jurisdiction of the Agriculture committees of both houses, which means a bunch of corn-huskers who have never really considered the issue will have to try to wrap their heads around it before anything can be done. This means --not merely suggests -- that toothless, meaningless non-enforceable regulation was all that was ever intended to guard obligations of more money than actually exists in the world. This ensured that people in-the-know could make the most money possible... and that in doing so, the possibility of genuine catastrophe was considered an acceptable risk and part of the cost of doing business by those whose only motive was getting rich. Only greedy politicians could do something that stupid.

To paraphrase Allen Greenspan: "We thought the issue would police itself." Evidently, and most disturbingly, Greenspan was wrong. But rest not blame completely on the shoulders of Alan Greenspan, dear readers. The likes of the Maxine Waters' and Barney Franks of the world -- crying out for regulation and more regulation, bureaucracy and more bureaucracy, government and more government -- are just as lost as their so-called conservative counterparts who idiotically shriek aloud at even the tiniest hint of regulatory control, for one can write neither the rule nor regulation that greedy human ingenuity and opposable thumbs cannot skirt. Everything these days is a fine print-laden greasy salesman-covered, screw-your-fellowman con. It's in our capitalist nature to make money at any cost, and the path of least resistance is, unfortunately, to tread willfully, greedily and deceptively upon the fortunes of trusting, faceless victims.

What a fine system we have built, indeed. Even with all the untold trillions thrown into bottomless pits of financial need named AIG and Lehman, (and now Citigroup and probably Bank of America), institutions stupidly considered too big to fail clearly ARE failing. With them – right before our eyes – goes the combined wealth of four American generations, the total wealth of the Treasury of the United States, and every other world government while we sink together, incredulously bewildered, into the sea of global, systemic, synchronized depression.

The human civilization has not yet been born that was too big to fail, and ours is no exception. But that lesson appears to be lost on the deaf ears and blind eyes of the belligerent, immature, child-like incompetents who run the show, frivolously arguing until blue in the face, while Roma Americana burns to the ground around them.

How Low Can You Stand? How Low Is Low?

Stockmarket Cycles editor Peter Eliades laments on market models whispering the possibility of a 4,000 Dow Jones Industrial Average.

How Much Is A Trillion?

A trillion used to be a number that never naturally came up in normal conversation. Now all of a sudden, it's the standard unit we seem to be using to talk about our economic problems and what we're trying to do about them. We are dangerously desensitized to this king of truly mammoth words... and thus, we throw the word around as freely as pennies to a wishing well.

Fortunately, I think I finally got a handle on what $1 trillion really means.

A trillion dollars is about the total amount collected in income taxes by the U.S. federal government in fiscal year 2006-- $1.04 trillion, if you're curious to know the exact number. That gives me a simple rule of thumb for personalizing these numbers. If I want to know what an additional trillion dollars in government borrowing or spending will mean for me, I just imagine what it would be like to pay twice as much in federal income taxes for one year.

So, for example, with the President's proposed budget calling for deficits of $1.75 trillion for 2009 and an additional $1.17 trillion for 2010, after 3 years of paying twice as much as I paid in 2006, I'd have about paid off my share of the bill for the first two years of the proposal.

Couldn't the government get its hands on that $3 trillion from, say, somebody else? Uncle Sam actually did collect an additional $838 billion from social insurance and retirement receipts in 2006, but pretending that yet another midnight raid on Social Security is somehow going to fill the gap is pure fantasy. Then there's that $354 billion in corporate income tax receipts; no doubt there's going to be an effort to grab more out of that cookie jar, although I'm afraid that such efforts will prove to be hugely costly economically and not produce nearly as much revenue as some might think.

Maybe the Federal Reserve could help out. The total currency in circulation at the moment is about $900 billion. If the Fed were to create as much money in the next year as it did during the preceding 95 years combined, and then use it to buy up some of the outstanding Treasury debt, it would doubtless produce an inflation rate in excess of 100%, but at least it would get us most of the way through another of those trillion.

I said most of the way... we're not there yet and I am out of analogies.

Hey Joe

"Hey Joe, where you going with that gun in your hand?"
-Jimi Hendrix

If he were alive today, rock and blues legend Jimi Hendrix's Joe might have been gunning for his fund manager rather than his girlfriend. I'll let Nouriel Roubini, aka Dr. Doom, explain...

We Cannot Reinflate the Bubble

Ron Paul addresses the House Financial Services Committee, and attemts to explain the difference between credit and capital. Bottom line: we cannot patch a system that has already FAILED.

Great Interview with Howard Davidowitz

Yahoo! posted this interview in the "Tech Ticker" section of Yahoo! Finance, a somewhat curious back-page location considering the message.

"The worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better.

Peter Schiff Defends His Record

Mish, I love you, but I think Schiff deserves some slack... maybe even an apology.

Stimulus Bill: Judicious or Malicious?

Peter Schiff has come under fire lately for not positioning his clients as successfully as his rhetoric. While that may be true, the documented proof of his ability to foresee many if not most of the unpleasant economic events that have come to pass is undeniable, and therefore worthy of continued attention.

I hope you enjoy the video that follows, in which Schiff asserts that the stimulus bill currently being debated in Congress will not only be ineffective against our worsening fiscal landscape, it could be downright disastrous, resulting in "inflationary depression worse than anything any of us have ever seen."

Suffice to say that 'worse than any of us have ever seen' would be pretty darn bad.

Squatter's Right: Produce the Note

Many citizens, business owners and government officials in Toledo, Ohio declared the economic downturn in that area a depression. Foreclosures and evictions are rampant.

Tired of seeing Wall Street Robber Barons getting lifelines with no help looming on the horizon for homeowners, one Ohio Congresswoman is telling her constituents to stay put. In a word... squat.

Please enjoy the fascinating CNN video that explains how squatting may be an option for many, since all the slicing, dicing, selling and re-selling of deeds has resulted in banks being able to produce actual proof of neither indebtedness nor ownership of the properties at stake. Witness, here, what could very well be the beginning of the second American Revolution…

Mad Rogue Tar Baby Alert

Like Br'er Rabbit in the second Uncle Remus story, the more we fight the economic Tar Baby with more of the same while expecting different results, the more trapped we shall become. Debt must be liquidated, and unfortunately, that means bank shareholders and bondholders are entitled to receive what anybody else should receive from investments that proved to be worthless: SQUAT.

One possible solution was suggested by a regular follower of this blog:

(T)he worst of the failing banks should be seized by the FDIC, have their shareholders and bond holders wiped out, and have new corporations set up with the assets of the banks but not the liabilities. These corporations/assets can then be taken over by the healthier banks, which will strengthen them and help them survive. In short, separate the sheep from the goats in a kind of triage process. This is sort of an American version of the Swedish solution (of 1992-TEB). A key part of the Swedish solution, by the way, was to force the banks to write off all of their bad assets, which made it clear which banks could survive and which ones couldn’t. The U.S. banking industry is (or at least until recently was) about twice the size of what it needs to be because of all of the false and nonproductive activities that had been taking place in the industry involving the financing of homes at inflated prices, the slicing and dicing of loans under conditions of pumped-up leverage, etc. If the Treasury department continues to try to prop them all up, the financial system will just continue in its current dysfunctional state. By the way, Roosevelt’s bank holiday in early 1933, from which many banks never reopened, actually roughly coincided with the time that the U.S. GDP stopped shrinking and started growing again. I think this is in part because the surviving banks were strengthened by the industry purge, realized they could trust each other and lend to each other, stopped hoarding money to such an extent, and helped get the money flowing again (increasing velocity of money, as the economists put it).
-Astatula Map

So we should bite the bullet, take the hit, achieve transparency and a clean slate so we can move on. To be sure, the result will be distasteful for many in the short-term (more deflation, more bankruptcies, and higher unemployment), but much healthier in the long run. Anything would be better than using a squirt gun to put out a house fire, which is basically what our dilly-dallying hath wrought thus far. WWRPD?

Welcome to Great Depression 2.0

The news heading into Monday, January 26, 2009 is simple and dire; the U.S. economy probably contracted the most since 1982 as consumer spending collapsed -- between 5 and 5.5 percent in the last quarter of 2008 -- which means the downward spiral shows signs of neither slowing nor reversing. A contraction of 5 percent to an economy as vast as ours is roughly equivalent to... um... well, nothing short of falling off a cliff, actually.

We're screwed.

Welcome to Great Depression Version 2.0. Please follow these simple installation steps (Step 1 has already been completed for you):
1. Light Fuse
2. Get away.

Mad Rogue David Faber Alert

It is amusing to see a portion of the wild-eyed liberal media admit that maybe letting the bad banks fail would have been a better idea... or at a minimum... certainly a more American way to go.

When Faber adds up Bank of America's numbers, keep in mind that none of Countrywide's subprime mortgage numbers were included... which is a ridiculous, boldface lie of omission given the fact that horrifically and bafflingly disastrous subprime exposure is the reason Countrywide had to be absorbed by somebody in the first place. Keep in mind also that a share of Citi stock can be yours (for a limited time only) at $3.81.

The bottom line, therefore, is that the number one and two banks by deposit in the United states are as good as insolvent despite the literally untold billions of dollars shoved up their asses by the U.S. Congress, Ben Bernanke, Hank Paulson, George Bush, and proud (yet chaffed) American taxpayer lemmings.

God bless America!

Check out this CNBC clip of a highly exasperated David Faber...

Mad Rogue Genie Alert

The Treasury Department says the federal government already has run up a record deficit of $485.2 billion in just the first three months of the current budget year. This means that the deficit is on track to surpass $1 trillion for all of fiscal 2009. The true number, of course, is much higher because the cost of the Iraq and Afghanistan wars are conveniently absent from the Jethro Bodine-like ciphering. The true deficit figure, therefore, is much, much higher.

All the red ink is occurring because of the massive spending on the $700 billion financial rescue program and a prolonged recession which has depressed. Spending is up and tax revenues are down, but nobody wants to cut any of the spending to which we have all grown accustomed. Meanwhile the Treasury is printing money as fast as it can. Combine these happy facts with rising record unemployment and the $1 trillion 'stimulus' package Obama wants to sic on the problem, and we're cooking fresh asphalt for the Heaven Help Me Highway.

Get ready for the Horror Hayride. The genie is poised at the mouth of the bottle, and once he's out we'll never get him back in.

The Next Great Depression Is Just Getting Started

The JPMorgan Global Manufacturing PMI hit 33.2 in December, a series record. More to the point, you can get a comparison between what is happening now and the 2001"recession lite" with only a swift glance, and of course, the 2009 long recession is only just getting started. Here's the chart I think everyone really needs to see...

Now let's stick it alongside the one Paul Krugman put up last week of the US Great Depression...

Arguably, what we can see here is that the current collapse in industrial activity is starting to get near the US historic one in terms of proportions, but we still aren't quite there yet. What we could note that JP Morgan, in its monthly report suggests, is that the present rates of output are equivalent to an annual fall of between 12% and 15%. Really to compare with the fall in the US, we need to get up into the 20% region, but remember the global index is based on an average for 26 countries, and some of these are much worse than others (Japan, Spain, possibly Russia) and will already be around the 20% annual contraction rate in December. The point is also that the situation is still deteriorating, so hang on a bit, since it is not at all excluded that we will hit a 20% annualized contraction rate for the whole aggregate 26 sometime during the first quarter.

The second half of 2008 has been dreadful for global manufacturing and the sector enters the New Year mired in its deepest recession for decades. Manufacturing will therefore continue to weigh on world GDP figures, with December PMI data consistent with a drop in global IP of around 12%-15% (seasonally adjusted annual rate) as indexes for output, new orders and employment slumped to record lows.

The weakest performance was registered by Japan, whose output and new orders indexes fell to levels unprecedented in the histories of any of the national manufacturing surveys included in the global manufacturing PMI.

Employment fell for the fifth successive month in December, and to the greatest extent in survey history. All of the national manufacturing sectors recorded a drop in staffing levels, most at series-record rates including all of the Euro-Zone nations, China and the UK. The sharpest falls in employment were signaled for Denmark, Spain, the US, Russia and the UK.

The Deflation Back-Slap: The Global Manufacturing Input Prices Index posted 31.3, its lowest reading ever. The rate of deflation was especially marked in the US, were purchase prices fell to the greatest extent since June 1949. Rates of decrease in costs hit series records in the Euro-Zone, Russia, Switzerland, the Czech Republic and Denmark.

And for anyone who is still skeptical that any of this has any validity, here's a PMI/GDP comparison chart for Japan - GDP rates to the left, diffusion index PMI readings to the right. Not a perfect mirror, but the correlation I would say is undeniable...

So never mind the depth, what about the duration? This is where I think things will differ from what happened back then. As you can see in the US Great Depression Chart the 20% annual decrease went on for several years. At the present time I think there is no reason to assume that this will happen, i.e. that we will keep getting massive year on year contractions (in some cases, probably), but activity does look set to fall to quite a low level, and there is no strong reason at present for believing it will simply bounce back up again. More than likely we will simply trawl the bottom, at least for some months, but more likely a couple of years.

P.S. Death for Madoff. But first... OOGOO!

Enough Already: The Case for Doing Nothing

The Labor Department is due to release the December employment report Friday morning before trading starts. Employers are expected to have cut 500,000 jobs from their payrolls after cutting 533,000 jobs in November, according to the forecasts I saw at Briefing.com. The unemployment rate, generated by a separate survey, is expected to have risen to 7% from 6.7% in the previous month... BUT many interested parties think the actual numbers will be a lot higher than that. On Wednesday, payroll services firm ADP reported that the private sector shed 693,000 jobs in December. While the two reports are calculated differently, they both tend to forecast the same trend. This should affect today’s market numbers, but it’s not like it was a secret that today’s jobs numbers were going to suck out loud.

On another note, Obama’s fast talk about trillion-dollar budgets going forward scares the shit out of me. It seems that the Pres-Elect wants to force feed more spending and more borrowing into an economy that is already suffering from acute excesses of both. He’s talking about printing a bunch of money and just spending it; he keeps talking about all the things that government is going to give us. The problem is the government is broke, and the government can’t give us anything it doesn’t take from us, sooner or later. From one side of his mouth comes a promise to reign in spending, from the other side comes “years of trillion dollar debt surplus.” Setting totally undeliverable expectations is not how I was hoping Obama would begin his presidency, but I suppose I was kidding myself by expecting otherwise.

We cannot spend ourselves out of this mess, boys and girls. We cannot buy our way out of this mess, either.

I do not envy any of our leaders the decisions they will make in the near- and medium-term as they try to help us navigate the economic minefield in which we find ourselves. I make no secret that I prefer non-interference, but it’s far too late to go down that road; we have interfered in ways that could not have been imagined only a few short months ago. Frankly, I think we have done so much that we can never really know what worked and what did not, or what helped us, or harmed us, or had no appreciable effect. I think it’s probably equally as dangerous that we’ll become addicted to continued stimulus, just as we became addicted to spending and borrowing to sustain an unsustainable lifestyle. That said, at this time I hope we err on the side of doing as little as possible for a while. Today, CNN Money has a story that makes the case for exactly that, and here it is...

The case for doing nothing
By Chris Isidore,
CNNMoney.com senior writer
Some argue there is a greater risk of long-term damage if Congress passes a big stimulus bill for the economy, which these experts say is already on the rebound.
NEW YORK (CNNMoney.com) -- Congress will soon debate what kind of economic stimulus package should be passed, but some economists are increasingly wondering whether it's a good idea to approve any stimulus at all.
President-elect Obama again called for quick action Thursday on a yet-unspecified economic stimulus plan that could cost as much $800 billion.
Yet, some argue that the economy is already poised to rebound on its own. They point to steep rate cuts by the Federal Reserve and trillions of dollars in loans and assistance approved by the government in the past year as enough stimulus to get the economy back on track.
In addition, some stimulus skeptics believe that increased government spending will cause more problems than they solve.
Brian Wesbury, chief economist at First Trust Portfolios, said the current economic downturn is due to the financial panic that occurred in September after the bankruptcy of Lehman Brothers. That caused a crisis in financial markets and led to the controversial bailout of Wall Street firms and banks and many new programs by the Fed.
Wesbury said consumers and businesses were more reluctant to spend after the collapse of Lehman led to concerns about how other banks would be in danger if a bailout was not passed. He said he now fears that similar talk about how bad the economy could get if there isn't a stimulus package could cause further declines in spending.
"In the middle of trying to sell a humongous new stimulus package, we'll be creating new panic," he said.
Wesbury acknowledges his view is a minority one, but he's hardly alone. He and Bob Brusca of FAO Economics said they both see signs that the economy might be ready to turn around already, including an unusually large drop in initial jobless claims this week, and a slight increase in the Conference Board's December reading on business activity in the service sector.

Lower taxes now = more taxes later
Other economists expressed concerns about the longer-term damage that could be done to the economy by spending so heavily to fix short-term problems.
Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments, wrote in a research note the stimulus debate has not done enough to focus on the cost to taxpayers that will come from the programs.
"The truth is that the only way out of this mess is less government, more savings, and increased production," Schiff wrote. "Obama's plan is a recipe for economic ruin."
Wesbury said he is pleased by various tax cut proposals being discussed as part of the plan, but he is worried that taxpayers will still have to eventually foot the bill for all the new government spending. He said the only way to pay for stimulus is by taxing those who are productive, joking that the plan is more like a Ponzi scheme than any creation of wealth.
"Every time we bail somebody out, we have to get that money from somebody else. It's like [Bernard] Madoff," he quipped, referring to the financier accused in a $50 billion securities fraud case. Other economists added that many of the steps taken so far have not yet had a chance to work. Those efforts may prove to be sufficient enough to stimulate the economy without additional spending.

Can't afford to 'wait and see'
But since there is so much uncertainty about the economy, some think the government can't afford to wait to see what happens next, especially since this recession is much different in nature than previous ones.
"We have an unprecedented financial crisis being met by an unprecedented policy response," said David Kelly, the chief market strategist for JPMorgan Funds. "The problem is, forecasters work off precedent."
Kelly said he's particularly worried that the economic stimulus plans being discussed, such as construction projects, will take too long to make an impact. Even sending out tax rebate checks, as was done last year, won't necessarily spur spending if people are nervous about the economy.
Kelly said he would prefer cash incentives from the government specifically designed for people to go out and buy a car or a house as a way to jump-start those two battered sectors. He said the incentive program could be set up so that the amount of money available could drop the longer people take to make the purchase. That way, people willing to spend sooner rather than later would be rewarded and the economy could rebound more quickly.
"The big problem here is we've got a wait-and-see economy," said Kelly. "'Wait and see' are the three most dangerous words in economics."
Brusca agreed that there are major risks of the economy continuing to weaken further. He said that even though "there's a case for not doing anything more," Congress can't afford to wait to act.
"It is gambling on something you can't afford to lose," he said.
"You run the risk, if you are being patient, of becoming the patient."
Finally, there are some who believe that the actions taken so far by Congress and the Bush administration, like the $700 billion Troubled Asset Relief Program, or TARP, for banks and Wall Street firms, have done little to help consumers and businesses so far.
"You need something to start the engine," said Rich Yamarone, director of economic research at Argus Research.
"Just having a full tank of gas doesn't get you anywhere. TARP is just a full tank of gas." http://money.cnn.com/2009/01/08/news/economy/case_against_stimulus/index.htm?cnn=yes

Trillion Dollar Deficits Equal U.S. Default

President-elect Obama is talking about several consecutive years of trillion-dollar deficits going forward as if the U.S. can just write a check for whatever it needs. Unfortunately, this is not exactly the case.

Not only will there be vast inflationary consequences for the unlimited dollar-printing happening now, but soon the rest of the world will be put off by our devil-may-care attitude on unlimited debt. The fact that other countries are still buying our debt suggests how financially screwed the world really is if American debt is still perceived as the safest game in town. Foreign Central Banks keep pointing to us as the main culprit for the global financial crisis, yet they can't seem to stop buying more U.S. risk. This is very funny to me; we're all broke but as long as we can keep the money flowing nobody has to face the truth.

Soon the day will come when no one wants to buy more U.S. risk. That will be Default Day for the United States of America. There will be hell to pay on that day like no other in history.

The Cost of Real Disturbia

The total value of the bailouts undertaken by the federal government in 2008 now exceeds the combined cost of every major war the United States has ever engaged in, according to a comparison of war costs calculated by the Congressional Research Service (CRS) and the value of the bailouts as calculated by Bloomberg News or Bianco Research.

According to CRS, all major U.S. wars (including such events as the American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan, but not the invasion of Panama or the Kosovo War), cost a total of $7.2 trillion in inflation-adjusted 2008 dollars.

According to Bloomberg, the federal government has made commitments worth a total of $8.5 trillion in the bailouts of 2008. That includes actual expenditures as well as loan and asset guarantees.

Bianco Research puts the total value of the bailouts at $8.7 trillion.

The $296 billion spent on World War II, America’s most expensive war, would be $4.1 trillion adjusted to today’s dollars, according to the CRS report from June.

The adjusted cost of the Civil War would be $60.4 billion for both the Union and the Confederacy combined. The inflation-adjusted cost of the Vietnam War would be $686 billion. The cost of the current Iraq war up to last June was $648 billion, while the adjusted cost for Afghanistan to that point was $171 billion.

The total cost of the American Revolution was a relatively inexpensive $1.8 billion.

This doesn’t necessarily count the $1 trillion “stimulus” bill that will come up in January or the additional $1 trillion that the Federal Reserve says it is likely to guarantee in the near future. From Marketwatch on December 16:

The Fed’s balance sheet has risen to $2.25 trillion over the past two months from $850 billion and has made promises to spend about a $1 trillion more.

The Fed is using the money to ease strains in the market for the debt of Fannie Mae and Freddie Mac and mortgage-backed securities issued by these GSEs.

These purchases may be expanded, the Fed said. "The FOMC is also evaluating the potential benefits of purchasing longer-term Treasury securities," the Fed said. "By February, the Fed is also going to begin buying credit card debt and student loans.

This template could be expanded.

Under this plan, the Treasury claims to assume the risk of loss while the Fed is making the purchases, and by "Treasury" they naturally mean "taxpayers."

Have a nice day.

Social Security: Countdown to Meltdown

Ron Paul, during today's Madoff Fraud Allegation & Financial Markets Regulation hearing, calls fractional reserve banking and the U.S. Social Security system Ponzi schemes. I could not agree more. Paul makes many excellent points in this brief video, not the least of which is the complete incompetence with which we are managing our financial affairs.