Conspiracy to Defraud Tax Payers

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The growing number of government loan guarantees and bailouts of failed corporations and financial institutions is nothing short of a conspiracy between elected politicians and wealthy special interest power brokers to steal tax payer's dollars without representation. More than 230 years ago, Americans engaged in a Revolutionary War for this very same crime of government. Wimpy Americans today are more obsessed with race and gender of their elected officials than being ripped off by them.

American voters truly do not understand what is happening here. Hundreds of billions of dollars of tax payer's money have been committed by your elected officials to cover for the incompetence and mismanagement of private corporations, while the managers of those corporations waltz away with 100's of millions of dollars reward for their failures in managing those corporations to the point of bankruptcy and insolvency.

In March the International Herald Tribune wrote:

Bear Stearns had made a fortune in mortgage-backed securities but faced a possible collapse after those investments soured. Wall Street plunged as fears spread about whether other big firms were in jeopardy.

"When you go through a period like this," [U.S. treasury secretary Hank] Paulson said, "policy makers need to balance various consequences."

That bailout will cost tax payers not only the 29 Billion Dollars in loan guarantees, an unfunded mandate adding to the national debt, but much, much more. FSK explains the additional cost this way:
The Federal Reserve recently bailed out Bear Stearns. The Federal Reserve printed $29 billion in new money and gave it to JP Morgan Chase to finance the buyout. (Technically, it was a loan, but at a negative real interest rate of 2.5%, it's essentially a gift.)

According to the Federal Reserve, in February 2008, the M2 money supply was $7.57 trillion. Dividing $29 billion by $7570 billion is 0.38%. All outstanding dollars lost 0.38% of their value when the Federal Reserve printed $29 billion in new money. If you had $10,000 in a checking account, you personally paid $38 to finance the bailout.

The above statement is slightly inaccurate. The US has a fractional reserve banking system. When the Federal Reserve prints $29 billion in new money, that technically causes $290 billion of inflation. For each dollar created by the Federal Reserve, the financial industry then creates nine more dollars, through the power of fractional reserve banking. Viewed this way, the Federal Reserve caused $290 billion of inflation when it bailed out Bear Stearns. Using this calculation, all outstanding dollars lost 3.8% of their value when the Federal Reserve printed new money to bail out Bear Stearns.

The cost of the Federal Reserve isn't free. Everyone else pays the cost as inflation.

While one can argue about the precision of FSK's multiplier effect, there is no logical or true argument to be made that the unfunded mandate adds significantly to the inflation rate of all American consumers who happen to be the one's on the hook for the original $29 Billion.

But, this is peanuts. Your politician has only just begun to fleece you and your children's paycheck tax deductions. Then comes the Big Mama, Fannie Mae and Freddie Mac. These two private corporations, whose executives and shareholders who sold their shares at enormous profits prior to the government takeover, walked away with billions which your politicians have now elected to replace with up to $100 billion for each of these corporations. This $200 billion dollar potential liability is to underwrite the bad debt and worthless paper of the corporations which not long ago was used to demonstrate how solvent they were.

Using FSK's multiplier inflation effect, Americans are out not only up to $200 billion dollars, but, another half trillion to 1 trillion dollars in inflation effect as they go about purchasing food, health insurance, gasoline, clothing, and all manner of other consumer items. As your politician votes to authorize the printing of more money to increase the money supply to cover all this spending and borrowing against future tax hikes, they are robbing your future wages and those of your children for the rest of their work lives. More on that in a moment.

Now, the Big Three auto makers, in fact all auto makers, even foreign auto makers and parts companies, are driving up to the Federal cash window for $25 billion dollars more of your tax dollars with the threat that they won't build fuel efficient cars if your politician doesn't pony up the cash. And make no mistake, your politician is going authorize this.

Lehman Brothers financial corporation is also going belly up and begging for some other corporation to buy it out. So far, no takers. No takers means Congress will pony up to bail its investors out as well and allow its CEO and other execs to walk away with hundreds of millions of tax payer dollars used for the bail out.

Congress views such theft of your tax dollars as an investment in their future reelection, ironically. They count on you and me, the voters, to keep our heads in the sand and pulling that habitual Party lever on election day to reelect our politician thinking it is the other politicians who are at fault. Dumb us.

'But this isn't going to effect us', many voters will argue; John McCain is going to be elected and he won't raise taxes. Even Obama says he will give 95% of Americans a tax cut of $1000. Au contraire, mon ami! If you are less than 50 years old, your taxes will be rising dramatically years before you retire. And if you are 25 years old, your taxes will be greatly elevated for the rest of your work life. Here is what your politician won't tell you in their lying newsletters sent to your mailbox.

Take a look at the graph below of interest payments on our national debt. Bear in mind, these payments MUST be made each year to prevent the United States government from entering bankruptcy, causing a deep depression. federal Interest payments graph

The Congressional Budget Office has this to say about the graph above: "Net interest payments began to increase in 2004 and CBO projects they will continue rising for at least the next five years, and, under plausible scenarios, could continue rising indefinitely."

The White House in Oct. of 2007 issued an audaciously false statement saying: "Deficit Declining Towards 2012 Surplus". The Bush administration has lied about deficits and debt every year since 2003 when the promise was made to cut the deficit in half. The fact is, the 2008 deficit will be near 1/2 trillion dollars with these bailouts and loan guarantees for failing management of corporations included. And Sen. John McCain insists that the government must cut taxes and prevent the previous Bush Administration tax cuts from expiring.

No matter how one cuts this pie, there are far more people at the table than pie to feed them all. Across the board cuts in federal spending will send millions of Americans into a struggle for food, housing, clothing, and medical care. But, even with across the board spending cuts, such cuts as would balance the budget under a McCain administration would never, EVER, get by the Democratic Congress for the same reason: too many Americans would be severely hurt and harmed.

Yet, Sen. McCain endorsed the bail out of Freddie Mac and Fannie Mae, indicating that not doing so would hurt and harm too many Americans as the economy contracted further as a result. Sen. McCain's position is contradictory. He supports adding to deficits and debt to bail out corporations to prevent too much economic harm befalling Americans. Yet, he insists he will cut government spending for programs that will financially harm millions of Americans and their children depending upon such spending for school meals, housing, transportation, and health care.

Obama's promises to be fiscally responsible by raising taxes on the wealthy and cutting taxes for everyone making under $250,000 per year, plus spending cuts, don't add up to a balanced budget either. But, the President is not the primary culprit in all this debt and rising taxes for decades into the future. That culprit is your Congressman and Congresswoman, who have abdicated their responsibility in managing the nation's economic future, in exchange for the prospect of getting reelected by voters this year and every election year, by letting them eat cake and let their children pay for it when they enter the work force.

The Double Whammy: Opportunity Cost ! Opportunity cost is the measure of cost of options B and C which one cannot select as a result of choosing option A. In concrete terms, this means that because Congress chose to deficit spend in the past, Americans paying today the $480 billion dollars in interest on the national debt this year cannot choose to spend that $480 billion on other things like education, health care, roads and bridge maintenance, or even invading Pakistan to get Bin Laden and his band of murderers with that money. America is poised to receive a brutal lesson in opportunity cost in the decade ahead.

The skyrocketing national debt, without any doubt whatsoever, will result in higher interest rates for taxpayers paying the interest on that debt, and higher inflation of consumer costs as a result of the U.S. treasury printing money to pay the interest on that debt, and for all the rest of the deficit spending for entitlement programs and defense spending. It is a double whammy that is going to further erode the buying power of what net pay one does get after taxes for the decades to come.

The opportunity cost of inflating prices for consumable goods, higher taxes on future earnings, the interest on the national debt coming out of our paychecks, and the unfunded obligations of Social Security and Medicare for increasing millions of retirees, are going to result in ever smaller pay checks, less buying power per dollar, and less and less government assistance for struggling American workers and their children. But, hey, we are just ignorant and under educated voters. We can't be expected to carry the responsibility for the actions of our politicians. We elect them to be responsible.

And logic flies out the window.

We the voters are responsible for what our politicians are doing to us. The founding fathers and leaders after them gave us the vote for the express purpose of voting out corrupt, incompetent, and abusive politicians who use their power to harm us, the people. And the current lot of politicians are harming us with unimaginable billions upon billions of tiny cuts such that we financially bleed to death slowly as they build their wealth to survive the future, the rest of us will suffer and die from.

It has always been up to us, the voters. The sooner we awaken to this fact of democracy, the sooner we can stop them from stealing our futures away from us.

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This page contains a single entry by David R. Remer published on September 12, 2008 7:39 PM.

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