Thursday, May 9, 2013

Let's Get Real: The U.S. Has Become A Complete Joke

An "unsubstantiated" rumor spread through the markets around noon Denver time today that the Wall Street Journal's mindless mouthpiece for the Fed, Jon Hilsenrath, was going to print an article reporting that the Fed was considering tapering down QE soon.  For those of you who don't know, the Fed was using Hilsrenrath - at least for awhile - to telegraph impending policy decisions.

When this rumor hit, the dollar jumped a lot higher and every other market tanked hard.  Let's think about the implications of the Fed slowing down its purchases of $85 billion in Treasuries and housing mortgages each month.  First, the housing market would absolutely collapse.  That there is a real housing bounce is an absolute joke.  That the Fed has engineered a speculative frenzy in certain markets by injecting $40 billion per month into the housing market is true.  But what if the Fed were to stop that?  Think it about it everyone.  I have a neighbor who has decided to buy and flip a house.  I would love the opportunity to see what happens if the Fed pulls QE before this guy can get the house renovated and back on the market.  Please Ben, make my day.

How about if the Fed stopped buying $45 billion per month in Treasuries?  Anyone care to think about what that would do to the Government's cost of funding all of its welfare programs and imperialistic military activities?  $45 billion per month means that the Fed is buying more than 50% of all of the new Government debt that is being issued every month.  If the Fed takes that bid away, the cost required to induce outside buyers to replace the Fed would drive interest rates up significantly.   It would likely throw our system into a depression.  If that weren't the case, the Fed wouldn't need to buy Treasuries at all.

Go ahead Ben, stop all QE.  Let's see what happens.  You have been making the claim that the economy is improving and inflation is low, as reflected in Treasury rates.  So let's see the Fed stop its QE so we can observe how real all this is.  The truth is Bernanke is making a complete mockery of our system by making the claims he's making about the economy, housing, and the employment level and anyone who thinks about it for less than 3 minutes understands that if the Fed slows down or stops QE, our financial system will collapse.   Ben knows it and that's why he's leaving the Fed at the end of his 2nd term in January.

The other big joke of the day is the Government's Social Security Disability Insurance program.  SSDI hit a new record of recipients in April, at 10,962,532 beneficiaries.  This is more people than the entire population of Greece.  The number of beneficiaries has increased every month since December 1996.  There's 13 full-time workers for every SSDI recipient.  In 1968, that ratio was 51.  You can read all about this de facto welfare program here:  SSDI

The truth is that the SSDI is just another tool the Government uses to hide the true rate of unemployment.  After all, once someone bruises their arm and can't look for a job and therefore qualifies for SSDI, they are removed from the Government's measure of the Labor Force.  In other words, it artificially lowers the reported rate of unemployment.  There's an excellent chart in that link above that shows the high correlation between the unemployment rate and the number of people on SSDI.  It's nearly a 1:1 to correlation.  Hey man, can't find a job?  Go tell a doctor you can't sleep because of uncontrollable nightmares and therefore are unable to find a job.  Based on the number of late night TV ads I've been seeing by law firms who specialize in getting people qualified for SSDI (the one I saw the other night claimed a 92% success rate), it's a better business for lawyers than chasing ambulances.

Even if there are some legitimate SSDI recipients, the truth is that this country can not afford to fund their welfare.  We are borrowing roughly 45 cents of every dollar that is being spent.  And this number goes up every year.  SSDI is unaffordable.  The fact of the matter is that our system has become a complete joke.  And the fraud and deceit going at all levels of business and Government is making a complete mockery of anyone who is trying to live by doing the right thing.


  1. lets not forget that the CBO rated or graded the US deficit to be ~800 billion this fiscal year.As of now a little more than 7 months in we have added over 700 billion to debt. And a few hundred billion to feds BS (take that as balance sheet or other meaning). In the mix were 3 tax increases: restoring soc security tax, tax on those nasty rich people and the obamacare taxes-and obamacare does not start til 2014). Now they are talking about reducing debt. What, after increasing it by 750 billion the last 7 months they will suddenly get religion-.

    Tune in next week as they discuss the debt ceiling, in a hurry, as another congressional recess is only a chip shot away.

    1. Good point. I gotta reload my popcorn so I can have something to much on while I watch the Government squirm while it debates and pontificates leading up to the May 19 debt limit ceiling. Must-see theatre!

  2. Policymakers need stats that reflect reality! Then maybe we would have better policy. Probably asking too much. This blog talks about the issue.