Middle Class In Flames: All The Fed Has Done Is Help The Banks

Naked Capitalism supports Occupy Wall Street. Heh, heh. Does Jeep know?

Yves Smith of Naked Capitalism, here:

Oh, puhleeze. Robust recovery for who? The Fed not only threw staggering amounts of firepower at salvaging bank balance sheets, while showing no interest in rescuing ordinary Americans. It was also all-in on the Administration’s program to paper over the banks’ chain of title problems and their widespread servicing abuses, and didn’t bother to obtain any meaningful concessions or reforms, the most important of which would have been principal modifications, a remedy favored by investors as well as homeowners. The Fed has been all too happy to accept mission creep rather than speak up forcefully for the need for more fiscal stimulus.

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The analysis is right, but the prescriptions are left: raising the minimum wage, breaking mortgage contracts, and spending money we do not have. Oh, puhleeze. It's Naked Liberalism.

But she's great on Obama's Mussolini-style corporatism, most recently here in response to The New Republic:

I’m actually a bit miffed that Konczal treats the “corporatism” appellation as the sole property of the right wing (in the style sheet of the Vichy Left, calling them “hysterics” is redundant but necessary for the rubes), since I have a prior claim. And what is particularly rich is that Konczal apparently regards the allusion to Mussolini to be unfair . . ..

Obamacare IS corporatist. Here we have the industries that are significant contributors to why the American medical system is so overpriced – the health insurers and Big Pharma – actually playing a major role in writing the legislation. And how is it not a sop to large companies to have the government require that citizens buy your product or else pay large tax penalties? Mr. Market certainly thought so, for the price of health insurer and drug company stocks jumped the day the ACA passed. And remember, the beneficiaries of Obamacare extend beyond the insurers and pharmaceutical makers. Hospitals, who increasingly engage in oligopoly pricing (most surgeries need to be done in hospitals), also come out even stronger because new requirements imposed on doctors’ practices will make it difficult for a retiring MD who practices medicine, as opposed to servicing the rich (e.g., cosmetic surgeons) to sell their business to anyone other than a hospital.

And the label fits in the banking arena like a glove. I’ve ... called both the Bush, but far more often the Obama bank-friendly policies “Mussolini-style corporatism” since 2008, and well before what [Mike] Konczal [of The New Republic] claims is the origin of this description, Tim Carney’s book Obamanomics, published November 30, 2009.

Mortgaged States Their Grandsires' Wreaths Regret

"Yet Reason frowns on war's unequal game,

Where wasted nations raise a single name,

And mortgaged states their grandsires' wreaths regret,
From age to age in everlasting debt;

Wreaths which at last the dear-bought right convey
To rust on medals, or on stones decay."

-- Samuel Johnson, The Vanity of Human Wishes (1749)

Libertarians At Forbes Completely Misrepresent The Mortgage Interest Deduction

Here:

The mortgage interest deduction (MID) is the largest personal tax deduction on the books and is widely considered one of the most sacrosanct tax benefits in the country because it is seen as making homeownership more affordable for middle-class Americans. Our new Reason Foundation research suggests, though, that the average benefits from the MID are not enough to be the difference between renting and home owning for a household.

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If there's a sacrosanct tax benefit in this country, which by the way benefits mostly upper income people who also pay most of the taxes, it's reduced rates of taxation on dividends and long term capital gains, which the Joint Committee on Taxation says costs the federal government $596 billion in lost revenue between 2012 and 2016. The mortgage interest deduction, by contrast, will cost the feds $364 billion. Leave it to Forbes not to mention that.

The mortgage interest deduction may or may not be "the largest personal" deduction, but in the big picture of revenue forfeited by the feds due to tax preferences, which is categorized as "tax loss expenditure", the mortgage interest deduction represents just 6.9% of the revenue lost out of the largest 21 line items in the JCT's report representing $5.25 trillion in tax loss expenditures for the period mentioned (here).

Preferential treatment of income from stocks isn't the biggest preference either (11.4%), but it is much bigger than the preference given to mortgage interest. But businesses do get the biggest preference. When employers provide healthcare contributions, health insurance and long term care insurance, they get to deduct all of that. Cost to the feds? A whopping $706.6 billion (13.5%). And that figure will only grow under ObamaCare.

And how about retirement plan contributions? Cost of excluding both defined benefit and defined contribution plans comes to $505.3 billion over the period (9.6%).

Compared to these, the mortgage interest deduction comes in a distant fourth (in fifth is the earned income tax credit at $319.7 billion).

The much-maligned charitable deduction, meanwhile, which was the original basis for the standard deduction in the tax code, at $172.4 billion represents just 3.3% of the lost $5.25 trillion in revenue from 2012 to 2016. It comes in fourteenth.

There's lots of things wrong with the world, but changing the home mortgage interest deduction isn't going to fix them. For libertarians to focus on it as they do should tell you there's more going on here than meets the eye: an ideological bias against home ownership because it limits "freedom". Millions beg to differ.

Largest Sums Of Federal Revenue Forfeited Because Of The Tax Code, Joint Committee On Taxation, 2012-2016

$706.6 billion: exclusion of employer contributions for healthcare, health insurance premiums and long term care insurance premiums.

$596.0 billion: reduced rates of taxation on dividends and long term capital gains.

$505.3 billion: net exclusion of pension contributions and earnings to defined benefit/contribution plans.

$364.0 billion: mortgage interest deduction.

$319.7 billion: earned income tax credit.

$305.0 billion: exclusion of Medicare Parts A&B benefits.

$289.4 billion: credit for children under 17.

$259.2 billion: deduction of nonbusiness state and local government income taxes, sales taxes and personal property taxes.

$239.7 billion: deferral of active income of controlled foreign corporations.

$236.1 billion: exclusion of capital gains at death.

$184.3 billion: subsidies for participation in healthcare exchanges.

$182.8 billion: exclusion of interest on public purpose state and local government bonds.

$175.8 billion: exclusion of benefits provided under cafeteria plans.

$172.4 billion: deduction for charitable contributions.

$172.1 billion: exclusion of untaxed Social Security and railroad retirement benefits.

$153.8 billion: exclusion of investment income on life insurance and annuity contracts.

$143.0 billion: property tax deduction.

$124.1 billion: exclusion of capital gains on the sale of a home.

$119.1 billion: credits for tuition for post-secondary education.

Barack Obama's Unemployment Record Is Now Worse Than Reagan's

Having grown up in the 1960s and lived through the terrible employment situation which prevailed in this country off and on from 1975 arguably through 1996, Barack Obama now owns the dubious distinction of a worse unemployment record than even Ronald Reagan's, and that's saying something.

From the time of Reagan's election in November 1980 right on through December 1985, unemployment stayed at or above 7% for 61 straight months, with an average report of unemployment coming to 8.31%. The severity of it was highlighted in 1981 and 1982 by a string of ten months with unemployment in excess of 10%. It was a brutal time, especially for older workers with homes and families whose dreams for the future were arrested, and for young people who had to start their careers at the very bottom, just as many of their depression-era parents had had to do.

Hard as it may be to believe, unemployment under Barack Obama is now even worse than it was under Reagan. Obama's average report of unemployment over the last sixty months, none of which has been lower than 7%, the same as the case with Reagan but short of one month (we'll see if the 7% threshold is broken in the December figures come January), now stands at an incredible 8.67% even though there's been only one month, October 2009, at 10%. Combined with the housing, stock market and banking collapses, a bona fide if small depression with negative GDP in 2008 and 2009, and a much older, less adaptive population, the impact of unemployment on the psyche and fortunes of the nation this time around is understandably more acute.

From the long term perspective, unemployment took a systemic turn for the worse in America since the mid-1970s, shortly after we adopted the free trade mania which has done nothing except create a middle class abroad at the expense of the middle class at home. Our chief export has been the prosperity of the nation's vast middle, chiefly through housing which Bill Clinton and Newt Gingrich helped Americans tap like an ATM to buy goods, mostly made abroad. Owner's equity in housing is half what it used to be in this country, squandered away by the squanderers, the Baby Boom.

If you want America to continue to exist, fix that by forcing people to save again, since no one seems to know how to do so for themselves, for the obvious reason. It doesn't really matter how we do it, but do it we must, or it's curtains.

(view the chart here at The Wall Street Journal)

Crony Socialism: Fed Profits On College Student Loans Rank Third Behind Exxon-Mobil And Apple!

Or is that socialist cronyism?

Anyway, those thirsty blood suckers in the federal government made $41.3 billion off the nation's college student loan program in fiscal 2013, according to the Detroit Free Press, here:

It’s a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.

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That's not quite right, however.

In 2012 the profits thrown off from massive numbers of government bonds and mortgage backed securities "purchased" by the Federal Reserve and returned to the Treasury by the Fed were more than double that, as reported here last January:

The Federal Reserve sent a record $88.9 billion in profits to the Treasury Department in 2012 as it reaped gains from the unconventional programs it launched to spur economic growth.

Last year's remittance to Treasury topped the previous record of $79.3 billion in 2010, Fed records show.

"Most Investors Will Hold All The Way Down"

John Hussman, here, last Tuesday:

'While we can make our case on the basis of fact, theory, data, history, and sometimes just basic arithmetic, what we can’t do – and haven’t done well – is to disabuse perceptions. Beliefs are what they are, and are only as malleable as the minds that hold them. Like the nearly religious belief in the technology bubble, the dot-com boom, the housing bubble, and countless other bubbles across history, people are going to believe what they believe here until reality catches up in the most unpleasant way. The resilience of the market late in a bubble is part of the reason investors keep holding and hoping all the way down. In this market cycle, as in all market cycles, few investors will be able to unload their holdings to the last of the greater fools just after the market’s peak. Instead, most investors will hold all the way down, because even the initial decline will provoke the question “how much lower could it go?” It has always been that way.'

LA Times Floats ObamaCare Weasel Word Excuse: We Only Meant SOME Could Keep Their Insurance

Here:

Still, many are frustrated at being forced to give up the plans they have now. They frequently cite assurances given by Obama that Americans could hold on to their health insurance despite the massive overhaul.

"All we've been hearing the last three years is if you like your policy you can keep it," said Deborah Cavallaro, a real estate agent in Westchester. "I'm infuriated because I was lied to."

Supporters of the healthcare law say Obama was referring to people who are insured through their employers or through government programs such as Medicare. Still, they acknowledge the confusion and anger from individual policyholders who are being forced to change.

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The fact is, the 40 million who have private insurance acquired either individually or through their own small businesses are being thrown under the bus first for political reasons. They are not an afterthought, but the key target.

To really understand why, however, one must realize that the oft-stated goal of providing health insurance through ObamaCare to benefit the 30 million uninsured is just a smokescreen, as if sacrificing the one group for the other roughly represents a fair trade. The reality is that ObamaCare is specifically designed to benefit women, a key fact about the law which shows its political meaning in the context of what the Democrats name the Republican war on women and doesn't get enough attention even among conservative opponents of the law.

Employer plans will have to conform to ObamaCare guidelines later, it is true. But since they represent a much larger constituency, Obama has unilaterally and unlawfully delayed key provisions of his own law which affect them in an attempt to phase in the draconian changes to health insurance slowly until after it's too late. The last thing Obama wanted as the poorly crafted law took effect was everyone up in arms at once. Better to boil the frogs slowly, and start with the most important opposition first, which is the Tea Party, which has been the most sensitive group to Obama-inspired federal interventions in American life, beginning with opposition to the mortgage forgiveness schemes in February 2009 which gave birth to the Tea Party and culminating in mobilization efforts to oppose health insurance reform schemes in the House and Senate late that same year. When ObamaCare became a fait accompli in March 2010, all the energy went in to retributive political action, which reached its crescendo with the history-making Republican take-over of the US House in November 2010.

Since then the effete who still constitute the majority in the Republican Party have done nothing to challenge the incremental imperial assaults of the president against the powers reserved to the Congress by the constitution. Looking back at them all now, one might even say that Obama's many transgressions against the separation of powers were all calculated to inure the people to the fact of them in order to smooth the way for more of the same when he needed it the most with respect to ObamaCare. Some older Republicans like Larry Kudlow, instinctively if not self-consciously, have recoiled from this, laughably calling for all provisions of ObamaCare to take effect as scheduled in the law, in the hope that the political consequences would be so profound that Republicans would win in 2014 and be able with large majorities to overturn a presidential veto of a law scrapping ObamaCare.

Seeing more acutely the threat to their very existence, however, the Tea Party has wanted the funds to ObamaCare cut off NOW. But neither camp has exerted enough influence among Republicans as a whole even as Obama methodically racked up that impressive record of tyrannical offenses against Congressional prerogatives, from the Libyan intervention without Congressional consultation to recess appointments when Congress wasn't in recess. In the face of all that the most contemptible members of the Republican establishment like David Frum instead have gone to war against these voices within their own party, in effect helping Democrats turn up the heat on the frog pot.

In political terms, ObamaCare is a key element in the larger class war being phased in first on the constituency which primarily makes up the Tea Party, the independent-minded traditionalist Americans who fend for themselves and support themselves without help from the nanny state or from a nanny employer, people who are more likely to start businesses, get married, and pay their own way and raise their own children. In a word, what has historically been the Republican base. All the rhetoric from Democrats over the period has been aimed at the these people by design, for a political reason, in order to freeze, personalize, and polarize them, painting them in the most horrific terms as the party of violence (January 2011 Giffords shooting), racism (March 2010 protests in DC), and terrorism (government shutdown in October 2013), among other things. As usual, the complete opposite of what they are, in keeping with what we used to call liberal projection syndrome and which still shows up in inaptly named government programs like the Affordable Care Act, which will not be affordable, will provide insurance but not care, and which was passed more as a partisan assault than a traditional act of Congress.

Health insurance reform under ObamaCare, by contrast, primarily benefits women as a class, whose health care costs are by nature higher and constitute the most obvious first inequality which shows up under health insurance. ObamaCare seeks to alienate women further from their natural condition by simply decreeing that this reality no longer exists. ObamaCare first and foremost puts their premiums on an equal footing with men's, craftily supplanting men as providers of health coverage to their wives through their employer plans and masking the costs women would otherwise have to absorb by themselves if they were paying for them. And then ObamaCare does much more, paying for their maternity care, and without coverage caps, their mammograms, their birth control and abortions, their lactation services and breast pumps, and letting baby mamas everywhere keep their kids on their plans until they reach the age of 26 (their kids reach 26, not the baby mamas). In effect ObamaCare seeks to solidify women as a natural Democrat Party constituency as dependent on the Democrats who provided it as the poor are who support them now because of massively expanded social welfare transfer payments.

If ever there was a public program designed to drive a stake through the heart of the traditional family, ObamaCare is it. That's why it is striking first at the people most likely in our society to take responsibility for themselves and where the idea of the traditional family is strongest. And to the extent that many within the Republican Party sympathize more with the transformational idealisms of female equality than with the realistic conceptions taught by history and nature explains better than anything why we are where we are.

The political party the Tea Party decided to support, unfortunately, hasn't proved itself worthy of them. There's still a little time left for Republicans to prove otherwise, but it is fast running out.

Foreclosed New Jersey Homeowners Staying In Their Homes Rent-Free For YEARS!

From the story here:

"Its happening all over new jersey with Hudson & Cape May ranking the highest, 80% of people remaining in the home for years during foreclosure."

Doyle McManus Discovers That The Middle Class Is Becoming The Underclass

Here in the Los Angeles Times article "Poof Goes The Middle Class", in which the liberal Doyle McManus relies on a libertarian prognosis for the future where efficiency and economy is all:

. . . middle-class American jobs being eliminated by automation and outsourcing, downward pressure on wages for all but the most skilled, growing inequality between the wealthy and everyone else, and elected officials who don't seem capable of slowing those trends, let alone stopping them. … If people have decent low-cost housing, food and healthcare, they might even be happier in a middle-classless future, [libertarian economist Tyler Cowen] speculates.

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In other words, an impoverished, stratified society based on free trade which Marx welcomed because it would finally lead to the social revolution of the many have-nots against the few haves after eliminating the rung on the ladder between them, the middle class:

"Generally speaking, the protectionist system today is conservative, whereas the Free Trade system has a destructive effect. It destroys the former nationalities and renders the contrast between proletariat and bourgeoisie more acute. In a word, the Free Trade system is precipitating the social revolution. And only in this revolutionary sense do I vote for Free Trade."

-- Karl Marx, 1847

Funny how contemporary libertarianism is completely oblivious to its role in this preparation for revolution and the impetus given to it under America's first Marxist president, while liberalism lies prostrate before it asking, New ideas, anyone?

Libertarians don't just spoil elections for Republicans in favor of Democrats, they ruin conservative republics on behalf of communism no less than liberals do.

Vindictive CNSNews.com blames Speaker Boehner for $3 trillion jump in total public debt

Here:

Thus, all spending and borrowing by the federal government are the de facto and de jure—n.b. constitutional—responsibility of the House of Representatives that John Boehner leads.

Well, yeah, and the Bible says "Judas went and hanged himself" and "go and do thou likewise".

The author of the posting, Terence Jeffrey, never once places the spending and borrowing in their broader historical context of the economic depression which ensued in 2007, long before John Boehner took the reigns as Speaker of the House in 2011.

Never once does Mr. Jeffrey mention the revenue side, which dried up like an old prune in consequence of the panic which saw home prices crash and a record 29.5 million people file first time claims for unemployment in 2009. Nor does he bother to mention the deliberate, bipartisan decision taken to reduce revenues to relieve the American people in this situation by temporarily cutting their Social Security taxes by 33% for back to back years in 2011 and 2012 when nothing else seemed to be working to revivify the economy. Revenues constrained by declining tax receipts due to depression-like conditions all over the economy coupled with these tax cuts, after peaking in fiscal 2007 at $2.568 trillion, for the next five fiscal years never once got above that level after reaching their low in 2009 at $2.105 trillion. What did Mr. Jeffrey expect to happen given that, the debt to decline?

One suspects Mr. Jeffrey isn't interested, however, in any of the facts and their context, only in slamming John Boehner. Otherwise he'd have mentioned them, and that Boehner's predecessor Democrat Nancy Pelosi increased the debt at a rate 63% faster in 2009 and 2010 than Boehner has in his nearly three years as Speaker.

Really bad form, old boy.

Janet Yellen's Crystal Ball Utterly Failed Her In May 2007: She Never Saw The Crisis Coming

(as always, click on the image to enlarge)

“Taking a longer view, I anticipate real GDP growth over the next two and a half years [2008 & 2009] of about 2.6 percent, just a bit below my assessment of potential. My forecasts of both actual and potential growth are a tenth or two stronger than the Greenbook forecasts; but the basic story is very similar, and the underlying assumptions, including the path for the nominal funds rate, are essentially the same. I view the stance of monetary policy as remaining somewhat restrictive throughout the entire forecast period. The key factors shaping the longer-term outlook include continued fallout from the housing sector, with housing wealth projected to be roughly flat through 2008. Given the reduced impetus from housing wealth, household spending should advance at a more moderate pace going forward than over the past few years.” (Quoted here)

Housing Analyst Predicts 20% Decline In House Prices In The Next Year

As reported by Bloomberg:

Talk to Mark Hanson about the housing market for five minutes and you may find yourself wanting to sell your home and park the cash in a suitcase. 

The Menlo Park, California, real estate analyst, blogger and founder of consultancy Hanson Advisers predicts a decline of 20 percent in housing prices in the next 12 months. Half the gains since the latest housing bottom in 2011 could be erased in the hot areas -- Florida, California, Nevada, Arizona and Georgia -- by rising interest rates and a thinner herd of speculative private-equity buyers, he says.

Read the rest here.

Obama Wants A Debt Default To Discredit His Opposition?

So suggests JT Young, who makes a plausible, although strictly political argument, here, for why Obama might want a debt default:

[T]he last time Obama faced Congressional Republicans in a debt limit fight, he lost enormously. ... However the roots of the administration's non-negotiating stance may run deeper than just that last defeat. It is not just a repeat of the past it must avoid, but a continuation of the present. ... Obamacare is hardly the worst of the administration's PR problems. According to a Bloomberg News national poll released 9/25, Obama's approval rating on the economy is negative, with 38% approving to 56% disapproving. On the federal deficit, it is -32% (29% to 61%). On the recent Syria sidetrack, his rating is 31% - 53%. ... It is clear that nothing the administration wants is likely to move over the next three years. Historically, the president's party generally loses seats in midterm elections - particularly second midterms - so the president's legislative situation is only likely to worsen. Should it do so, the president's political fortunes and popularity are sure to follow. In sum, there appears to be no variable that will change the chessboard. ... [T]he president's only hope appears to stake everything on a single move. In this case, it appears the move is to goad Congressional Republicans into a dramatic loss in a high-profile - and ideally prolonged - budget battle. That means a shutdown or worse, default, to discredit his opposition - in his best case scenario, to such an extent that he reverses the trend of normal midterm losses and the rapid decline of second term presidents' political relevancy. With his second term initiatives dead early, fighting a continuous rearguard action on his signature achievement, anticipating the loss of additional Congressional seats, and with lame duck status just over a year away, the White House may see little to lose by betting large. If so, America could find itself with quite a lot to lose, as this budget fight gets nastier, longer, and more dangerous than anyone anticipated.

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But what if the non-negotiating stance is more than just political in the conventional sense? What if it's ideological in a more sinister way? What if Obama really means to transform the country not just by eliminating Republicans, who are the political representatives of the middle class, but by eliminating the middle class itself? And capitalism in the process? And using the crisis of a default to install himself permanently at the head of the government? Using the impressive means now at his disposal with surveillance capabilities, militarized police who care nothing for the Fourth Amendment as we saw in the Tsarnaev affair, drones, the Department of Homeland Security generally, and the TSA in particular to control travel? And a de-Christianized, paganized military loyal to the commander in chief?

As all students of communist revolution know, it is the middle class which is the greatest enemy of the communists because being more numerous than the upper class the middle class stands in the way of the revolutionaries' attacks on the rich and on private property as a concept. "Their special interests are absolutely incompatible with the economic disturbances which are the inevitable accompaniment of transitional periods. The disturbance of credit cuts the ground from under their feet. They begin shouting for order, for the strengthening of credit, in such a way that every concession to them leads in effect to a complete restoration of the old order", wrote Bela Kun in 1918.

Make no mistake. This has been a transitional period in the mind of Obama, who is trying to transform the country in a number of ways which are not in keeping with America's past. For example, despite growing public opposition since March 2010, Obama continues to insist that ObamaCare must be implemented even though he himself has underscored its unpopularity by unilaterally and unlawfully altering and delaying key features of it. The Supreme Court itself has validated its compulsory basis, which the regime constantly trots out as authoritative as any teaching bearing Pontifical imprimatur. But at what cost to the middle class whose numbers continue to shrink? The best estimates show that ObamaCare will force 16 million heretofore middle class Americans into Medicaid, the healthcare system for the country's poor which already has 70 million participants, dramatically reducing their numbers by transforming their condition to dependency on the government. Fully 93% of American wage earners already make less than $100,000 a year, and 75% bring home less than $50,000 annually. Between the two extremes lie barely 30 million people. This week's posterchild for ObamaCare, for example, was a law student who got cheaper healthcare through Healthcare.gov, ObamaCare's new web portal which just opened, because it shunted him into Medicaid because his income is too low to qualify for a subsidized ObamaCare compliant health insurance plan. This was widely viewed as a positive!

The truth is Obama has done nothing to help the middle class even though he claims to be their champion, just as the Affordable Care Act will neither provide care nor be affordable. In fact, one might say Obama has been exacting revenge on the middle class. Even though he's been in charge of the government going on five years, Obama has done nothing to improve middle class incomes, which have instead headed in the other direction under his watch. Annual household income has been reduced by over 5% since June 2009 alone.

Similarly the hallmark of middle class membership, the home ownership rate has been reversed to the 1996 level after 5 million homes have been repossessed by the banks. During Obama's tenure in office the ranks of those not in the labor force have soared above the 90 million mark as the longest unemployment recession in the post-war period appears to have no end in sight nearly 6 years since it began, driving college graduates back home with their parents and dramatically reducing family formation. The credit expansion of the post-war economy upon which home ownership was based has hit a brick wall since 2007 while the powers that be have claimed to fix it while enriching only the bankers and the richest investors. Total credit market debt outstanding is up less than $8 trillion in the interim when by all rights it should be up $25 trillion. We even have so-called right wingers who both applaud this decline of home ownership and enthusiastically agitate for the elimination of the home mortgage interest deduction. They are as much useful idiots to Obama's pinched leftist vision as have been Republican free-traders who helped the investor class get rich by shipping American jobs to cheaper labor markets abroad, gutting American exceptionalism long before Obama came along.

As if all that isn't bad enough, unprecedented financial repression of the savings of the middle class is the official policy of Obama's Federal Reserve through Zero Interest Rate Policy and Quantitative Easing, arresting the basis of the gains which customarily accrue over time from compounding and destroying the incomes of the already retired.

Its main sources of wealth in employment and earning power, housing and savings already severely punished under Obama, the middle class is just an inch away from losing it all in a debt default. And once they are out of the way, there will be nothing standing between Obama and finally spreading the wealth around of the 2-3 million at the top who hold it.

10-Year Treasury Rate Ends The Week At 2.64%

The 10-year US Treasury Rate ended the week at 2.64%, 43% below the mean level going back to 1871.

Despite the best efforts of the US Federal Reserve to suppress interest rates on behalf of other "investments" like housing and stocks, the current rate of the 10-year Treasury still bests the dividend yield of the S&P500 by 34%, which ended the week at 1.97%. From another perspective, it's even worse than that.

John Hussman noted this week here that based on the ratio of equity market value to national output, you might expect less than zero from the S&P500 going ten years out: 

Likewise, Buffett observed in 2001 that the ratio of equity market value to national output is “probably the best single measure of where valuations stand at any given moment.” On that front, the chart below [follow the link above] shows the value of nonfinancial corporate equities to GDP (imputed from March to the present based on changes in the S&P 500). On this measure, the likely prospective 10-year nominal total return of the S&P 500 lines up at somewhere less than zero. Suffice it to say that our estimates using both earnings and non-earnings based measures suggest a likely total return for the S&P 500 over the coming decade of less than 2.9% annually, essentially driven by dividend income, and implying an S&P 500 that is roughly unchanged a decade from now – though undoubtedly comprising a volatile set of market cycles on that course to nowhere.

In other words, it's possible stocks could return absolutely nothing over the next decade, or just barely beat bonds by less than 10% based on the current 10-year Treasury rate. For sleeping soundly at night, the choice is easy.

The 10-year Treasury rate has backed off about 10% since Ben Bernanke reversed himself on tapering bond purchases this month, seeing how it was knocking on the door of three.

Normalization of the 10-year yield would cost the US government dearly, jacking up interest expense costs over time which are paid from current tax revenues, by nearly double. In the last four years under Obama, interest payments on the debt have averaged $403 billion annually. Increasing those payments 43% would add another $173 billion to budgetary requirements, again, not all at once but over time.

Completed Foreclosures In July Still 133% Of Pre-2006 Averages, Starts Down To 7.25% Above Normal

Corelogic reports here at the end of August that completed foreclosures in July 2013 ran at a level of 49,000. The pre-2006 average level was 21,000. Though still highly elevated, July 2013 is a big improvement over July 2012 when completed foreclosures were at 65,000. That means conditions have improved by almost 25% in the last year.

Corelogic puts completed foreclosures since September 2008 at 4.5 million, with 949,000 homes presently in some state of foreclosure.

Separately CNBC and AP Obama here are happy to report that foreclosure starts are almost back to 2005 levels and are within 7.25% of normal at 55,775 in August:

Lenders initiated foreclosure action in August against the fewest U.S. homes for any month in nearly eight years, a trend that should help reduce the number of homes lost to foreclosure in the months ahead. Some 55,775 homes entered the foreclosure process last month, a decline of 8 percent from July and down 44 percent from August last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Fed Tapering QE "In Part To Relieve The Collateral Scarcity"

Mentioned here by Peter Coy:

The abrupt shrinkage of the budget deficit this year caused the Treasury Department to cut back on issuance of debt in the shorter maturities that are sought after on Wall Street. Foreign demand has been strong, partly because some European government securities that had been used as collateral are no longer considered safe enough. Finally, the Federal Reserve, in its efforts to stimulate the economy, has been soaking up $85 billion a month of Treasuries and mortgage-backed securities. Some market participants argue that the Fed is planning to taper its bond purchases in part to relieve the collateral scarcity.

Home Buyers Using All Cash Hits All Time High

So says the National Association of Realtors, here:

Walt Molony, a spokesman for the National Association of Realtors, says that the association’s estimates of the share of the market made up by all-cash buyers are lower than the others, at 31% in July, but that they’re still at an all-time high. ... Molony says that investors make up 35% of all-cash buyers (70% of all investors pay cash), while retirees who’ve built up equity in their homes or paid off their mortgages account for 12%. The rest include vacation-home buyers and foreign buyers.

Ironman Arrives At The Same Conclusion Reached By The True Born Sons Of Liberty

TARP is fascism

At Real Clear Markets, here:

The United States would appear to be well on its way to adopting fascist Italy's political-economic system, favoring the politically-connected while starving entrepreneurs out of the economy. Although today in America, we call it "crony capitalism". And the people who practice it "progressives".

Do you think we should start calling it what it really is?

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This blog was born of the observation here in 2009, and I think first used the term in the specifically financial sense involving not just banking, but housing, a year later, here. Since those days, however, we've decided England invented fascism long before Mussolini did and founded America on the principle, but the English undoubtedly got it from the great old Roman idea of the patron-client relationship.

Mortgage Securitization Only Works At The Expense Of Taxpayers And Banks

So says Arnold Kling for The American, here, who provides a useful summary of crony capitalist rent-seeking since World War II:

At this point, all signs point to victory by two of the biggest culprits in the mortgage crisis — the mortgage bankers (firms that originate loans to distribute, not to hold) and the Wall Street investment banks. Both depend on securitization if they are to participate in the mortgage lending process. However, securitization has only been able to compete with traditional bank lending when securities are backed by guarantees from the taxpayers and when bank capital requirements punish banks that hold their own loans.

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Arnold Kling is otherwise famous for his firm grasp of the obvious: "Most home owners are not libertarians."