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David Galland: The System is coming unglued

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by David Galland
from Casey Research
Posted September 9, 2011

Our video host Stefan Molyneux speaks with Casey Research Managing Director David Galland about the debt situation in the US and whether the federal government can do anything about it… assuming they’d even want to.


Stefan: Hi everybody, it’s Stefan Molyneux, host of Conversations with Casey. I have on the line David Galland. Thank you so much, David, for taking the time to chat today.

David: Nice to be here.

Stefan: So, we are seven-tenths of the way towards fascism in the United States. I wonder if you could expand upon that. I sort of get a sense that that’s probably true, but you have a little bit more than my gut instinct – you actually have some pretty professional opinions to work with on that.

David: Well, all the elements for fascism are in place. We have a monetary system that is accountable to no one and that’s a very good start. If you think about it, the way that the monetary system is structured, the government at this point can literally spend money on anything. They talk about capping the federal deficits and all that, but they’ll get past that in no time at all. Probably by the time the viewers are watching this they will have announced a big deal, you know, that they have raised the debt cap. And you know, once you have – if you pin your money to nothing, if you have a monetary system that is based on nothing, then you can afford anything. You can afford all the wars you want, you can afford all the bureaucracy you want; and so they have. That’s a first step.

I mean, we’ve – just as an example, here in the little town in New England where Casey Research is located, they have a – they’ve just finished building a massive new Homeland Security center. This is a town of roughly 4,000 permanent residents; it’s a tourist town. It’s the kind of place where the worst crime you’ll ever see is somebody stealing skis from a ski slope, and yet we have something like 36 policemen. We’ve got this huge, brand-new Homeland Security center. Why? Well, because after 9/11 and the overreaction of 9/11 the government made this money available because it could make the money available, because there is nothing stopping it from doing that. And there’s all these local police departments, which should have an “Andy of Mayberry” type police force, took the money and they spent it, and now we’ve got a semi-militarized local operation. So this has gone on and this is multiplied right across the country… and the world.

Stefan: And of course, the decisions that people make in expanding the public sector have immediate implications in payroll, but I think what America is really facing are the long term implications of unfunded pensions that just run into the hundreds of billions of dollars. It’s a lot of the stuff that is not really counted in the public calculation of the debt, which is more immediate obligations, but the unfunded liabilities run $75 to $100 trillion according to many estimates. That’s not something that you see, which makes the whole conversation about should we have two trillion here or there ridiculous to anybody in the know.

David: Oh, absolutely. Again, on the point about whether we’re sort of on the way to a fascist state – and I – this isn’t just the US – it’s important that, you know, people understand this is all over the world. At this point, none of these governments is operating on anything that remotely resembles sound principles. They’re operating on a number of different priorities and a number of different interests – self-interests, because politicians after all are just people. So whatever it takes to kick the can down the road, they’re going to do. You mentioned $75 trillion in unfunded liabilities, absolutely. Because at this point, this is essentially sort of a rising tide of bureaucracy over the last hundred years that is cresting at this point. And they have done this because there are no real operating principles other than buying the votes that they need to get re-elected and to stay in office for as long as they can, and then they pass the baton to the next bureaucrat and the system continues. But it’s reaching the point where, I think, within a relatively short period of time it’s got to come to an end.

Stefan: Now you’ve written an article recently which I found very interesting – I just shared it through my Facebook as well – it’s called The Greater Depression. So you have the Great Depression and now we’re looking at the Greater Depression. I wonder if you could talk about the mechanics and the future as you see it as we go into this abyss.

David: Ultimately, what we’re faced with right now and this is, I think, just some fundamental principles – because there are so many aspects of what’s going on in the economy today that it makes it for most people – for virtually all people – it makes it very hard to really understand what’s going on. So sometimes you just have to sort of step back and ask a few questions to try to get some sort of a compass, if you will. And first and foremost the crisis we’re in right now is caused by debt, too much debt. As you mentioned before $75 trillion in government obligations – everybody knows that money is never going to get paid. So we’ve been brought to this point of extreme government borrowing. Who would have thought we’d see $1.5-trillion deficits? I mean, nobody – five, six years ago if you would have asked anybody on this planet if the US government could run a $1.5-trillion deficit they would have said no way. Well, here we are. So all of the conditions of what this – you can call it a debt-induced depression, all of the conditions that sort of brought us to this place have not improved since the beginning of this crisis; they’ve only gotten worse.

So what’s the ultimate outcome of this? Well, what’s the one thing that a heavily indebted person or an entity like the government can’t handle? And it’s rising interest rates. You can’t afford for the bank to bump your payments up to, you know, 20% because you’ve missed a payment. Well, the same thing’s true of the government and we are now – we are still – the US interest rates are still bouncing around, you know, all-time lows. It’s completely – it’s a complete aberration. And it can’t last. So why things are going to get worse is because interest rates have to go up. Even if they return to sort of a more normal five to six percent range, from a historical standpoint it would be devastating to the US economy. So the government is doing everything it can to try to get out of this trouble but there really is no way. They have very limited impact on long-term interest rates and if it wasn’t for the fact that Europe was such a basket case and that Japan was such a basket case right now, interest rates in the US would already be taking off but I don’t think we’re going to have to wait long for that and then things are going to get interesting.

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“The Euro is finished”

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from Mike Krieger of KAM LP
Posted September 8, 2011

There are two ways to conquer and enslave a nation.  One is by the sword. The other is by debt. 
– John Adams

What lies behind us and what lies before us are tiny matters compared to what lies within us.
– Ralph Waldo Emerson

TO REGULAR READERS OF MY PIECES OVER THE LAST SEVERAL YEARS this may not seem like a particularly poignant statement.  After all, I have referred to the Euro and the U.S. dollar both as worthless political toilet paper for years.  The reason I bring it up right now is not to state the obvious long-term macro conclusion that the Euro is a foolish, unnatural creation that only political types twiddling their thumbs in a room could come up with.  No, rather the reason I say it now is because I believe the Sword of Damocles is now hovering right over it.

The only question in my mind at the moment regards the specifics of how it will end.  I would say that the majority of those that think there is a strong likelihood that the euro falls apart envision the PIIGS countries leaving or being thrown out. While I certainly think this is a possibility, especially if Greece just calls it quits and then successfully transitions to its own highly devalued currency since this would for sure start the ball rolling and before long many of the other financially weak nations would also bail.

In such an event, I suppose what is left of the euro could be comprised of stronger Northern European nations and in that case what is left of the common currency could in fact strengthen materially versus other fiat currencies for which no such “restructuring” has occurred. However, I am not convinced this is what happens. The reason I am not convinced is because I don’t believe that the desired austerity measures will ever really go into effect in these nations and even if they did it would merely collapse those economies and the problem would not be solved.

As many have stated over and over (including myself) there is no conventional solution to this crisis. There is far too much debt and there is no way real GDP growth can grow fast enough to counter this. The debt will be defaulted on via restructuring/default or a dramatic destruction of the purchasing power of fiat currencies. Nevertheless, the bureaucrats in Europe have such a deep love affair with their preposterous experiment they will turn a blind eye to all the transgressions of the PIIGS and continue to just pretend they have solved something with every new bailout scheme.

So that brings us to the other, and I think increasingly likely, outcome. That is namely that the ECB continues to transfer wealth from the prudent and fiscally more sound nations (mainly Germany) to the periphery until the populace of Germany snaps.  I think that moment is very, very close at hand.  Once that tipping point is reached there will be no turning back. The popular anger at the ECB and Euro will be so profound and so long festering that it will overwhelm all attempts to keep things together. Germany could leave the Euro. Or it could make it so difficult for the PIIGS that they are forced to leave. Either way, Germany is EVERYTHING.

Nothing else in Europe matters right now besides the sentiment on the German street and it has become pretty clear lately which way that is going. I am 100% convinced that Germany will play nice until that crucial moment is reached where it really is put up or shut up (we are close). At that point, I have no doubt that Germany will do what is best for Germany. In the event that Germany was to leave, the Euro would be gone forever. It would become pure confetti overnight. This is not my base case but it could happen. Anything can happen right now.

The Fourth Turning is Global

All of this discussion about the euro brings me to a broader point. While for obvious reasons I focus my attention on the United States because this is where I live and what I know best it is imperative for me to clarify my view that this Fourth Turning we are in is global in nature. Remember, what really characterizes these shifts is the fact that the trends, institutions, political structures and parties, social mores, money systems, etc. all die and are reborn during such episodes.

The last to get this of course are the elites and the political class who are always in bed together and seemingly at the height of their collective corruption once the Fourth Turning hits. We see this everywhere at the moment, from the U.S. to the Eurozone to China. What makes me laugh more than anything else are all these political hacks and financial “analysts” who keep saying that the answer to the crisis in Europe is a fiscal union in Europe.

That somehow this crisis will lead to the necessary resolve to form a fiscal United States of Europe, or some idiocy like that, sorry folks, it’s not going to happen. This whole “problem, reaction, solution” playbook worked for the elite in the prior era but it will no longer work. The playbook is out there. It has been read and studied. We know the playbook. It’s not going to work this time.

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500 Million debt-serfs: the European Union is a neo-feudal Kleptocracy

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by Charles Hugh Smith
Posted July 22, 2011 on Of Two Minds

The banks of Europe are the new Feudal Manors and Masters. All Europeans now serve them as debt-serfs in one way or another.

IF WE KNOCK DOWN ALL THE FLIMSY SCREENS OF ARTIFICE AND OBSCURING COMPLEXITY, what we see in Europe is a continent of debt-serfs, indentured to the banks under the whip of the European Union and its secular religion, the euro. I know this isn’t the pretty picture presented by the EU Overlords, of a prosperity built not just on debt, but on resolving the problem of debt with more debt, but it is the reality behind the eurozone’s phony facade of economic “freedom.”

What else can we call the stark domination of the big banks other than Neo-Feudalism? In one way or another, every one of the 27-member nations’ citizens are indentured to the big international banks at risk in Europe, most of which are based in Europe.

Amidst the confusing overlay of voices and agendas, there is really only one agenda item: save the big European banks. Everything else is just mechanics. The banks are the new feudal manor houses, the bankers are the new feudal lords, and the politicians of the EU and its influential member nations are the servile vassals who enforce the “rule of law” on the serfs.

Here is the fundamental fact: there are trillions of euros of debt which can never be paid back. In a non-feudal system, one in which the banks were not the Masters, then this fact would be recognized and acted upon: something like 50% of the debt would be written off in one fell swoop, all the banks whose assets had just been wiped out would be declared insolvent and liquidated, the remaining debt would be sized to the economic surplus of each debtor nation, and a new, decentralized banking sector of dozens of strictly limited, smaller banks would be established.

To the degree that is “impossible,” Europe is nothing but a Neo-Feudal Kleptocracy serving its Banker Lords.

The Greek worker whose pay has been slashed in the “austerity” demanded by the banks serves the Banker Lords, as does the German worker who will be paying higher taxes to bail out Germany and France’s Banker Lords. Though the German is constantly told he is bailing out Greece, the truth is Greece is just the conduit: he’s actually bailing out the EU’s Banker Lords.

We can clear up much of the purposeful obfuscation by asking: exactly what tragedy befalls Europe if all the sovereign debt in the EU was wiped off the books? The one and only “tragedy” would be the destruction of the “too big to fail” banks, not just in Europe but around the world. As the big European banks imploded, then their inability to service their counterparty obligations on various derivatives to other big banks would topple those lenders.

While the political vassals call that possibility a catastrophe, it would actually spell freedom for Europe’s 500 million debt serfs. From the lofty heights of the Manor House, then the loss of enormously concentrated power and wealth is indeed a catastrophe for the Lords and their political lackeys. But for the debt-serfs facing generations of servitude for nothing, then the destruction of the banks would be the glorious lifting of tyranny.

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When does “Managed Perception” become Reality?

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by Charles Hugh Smith
from Of Two Minds
Posted May 2, 2011

The Federal Reserve and the Federal government are both desperately attempting to “manage perceptions” of the bogus “recovery” and of their own legitimacy. Can “managed perceptions” replace reality?

The Federal Reserve is quite open about the ultimate purpose of all its machinations: to “manage perceptions” so the citizenry believe the “recovery” is real. The Fed reckons that belief will cause people to start a new debt-consumption orgy that will fuel a self-reinforcing cycle of expansion.

Put another way: the Fed is trying to induce a reanimation of “animal spirits,” i.e. a restored faith in future prosperity that inspires households to load up on more debt and buy, buy, buy.

The difference between blatant propaganda and “managing perceptions” is… well, there isn’t any. The Fed and Federal machinery are both engaged in a massive propaganda campaign to obscure the gargantuan risks implicit in their various trillions-dollar campaigns to mask systemic failure and risk and construct a facade of normalcy and “recovery.” Meanwhile, even the staid MSM flagbearer The Economist is noting that America’s “leadership” hasn’t fixed anything, and has no intention of doing so: What’s wrong with America’s economy? (Thank you, John R.)

The U.S. economy is “recovering” like a drunk “recovers” by chugging half a bottle of rotgut: the terror of reality is replaced by the warm glow of a new high. The terrible reality is the U.S. economy has been hollowed out by financialization and the dishonesty, fraud and corruption that are the essential components of financialization – a process that invariably leads to a concentration of wealth and power.

This concentration of capital and power then creates more incentives for fraud and corruption, which then reinforces the forces of financialization and so on in a self-reinforcing feedback loop.

The Department of Truth, a.k.a. the Ministry of Propaganda, issues a stream of massaged/manipulated data to support the mind-bending “perception” that the economy is in “a real recovery.” Does anyone outside the lapdog mainstream media take the bogus employment statistics seriously? It’s so painfully obvious that the “headline unemployment number” is manipulated via removing millions of people from the workforce, and removing the unemployed from the statistical ledger once their benefits expire. The nation’s GDP is a similar concoction of smoke and mirrors. Let’s see: the Federal government borrows $1.6 trillion a year and transfers much of it to individuals, where it is then counted as “income.”

So if I borrow $50,000 and “pay it to myself,” then my $50,000 a year income just doubles to $100,000! Who knew prosperity could be this easy? The MSM sycophants, toadies and aparatchiks on both sides of the political spectrum (basically two sides of the same Imperial piece of paper) wonder why “job growth” is so weak–could it have anything to do with the actual real economy being so weak that only $5 trillion in borrowed Federal money and another $2 trillion in Fed money has kept the economy from imploding?

What with the bogus “recovery,” a couple of hot wars and an utterly dysfunctional and corrupt political system, the Ministry of Propaganda has been quite busy of late. Housing has bottomed–once again, for the third time since 2008. And we really really really are exiting Afghanistan and Iraq–soon–please ignore those permanent bases and proxy armies.

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Franz Kafka would be proud: On America’s end of Liberty

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by Tyler Durden
Posted on Zero Hedge on Oct 31, 2010

“AMERICANS TODAY ARE CONSTANTLY WATCHING THEIR SPEEDOMETERS and trying to conform to every little rule yet there are so many rules that it’s impossible for even the most honest and hard-working Americans not to be breaking some type of law on a daily basis. We are slaves in a criminal monetary system, where the Federal Reserve steals from the middle class through inflation and transfers this wealth to their banker friends on Wall Street. We are forced to accept pieces of paper of money while the US constitution defined only gold and silver as legal tender…We are now seeing countless signs on a daily basis that the US is headed for a complete societal collapse as we know it, forever.”

The government is finally being exposed for being the most systematic abuser of those primal human weaknesses known to Franz Kafka over a hundred years ago: namely – riddle people with guilt, force them to obey countless rules and regulations, many of which are in stark disagreement with each other, keep them preoccupied with superficial lies, provide them with a marginal education, prevent them from thinking for themselves, allow the constant deflection of individual responsibility, provide a society of countless lawyers where any infarction, no matter how minor, serves as the basis for substantial wealth loss, all the while hiding behind a system of increasingly insolvent welfare, whose sole purpose is to validate the destruction of labor product savings, and the devaluation of money.

At the center of this nearly hundred year successful wealth transfer plan is none other than the Federal Reserve: a private institution controlled by the wealthiest, whose tentacles reach into the government, into the media, and into every classroom (especially those of brainwashed Ivy League students).

As Gerald Celente says, America has become a society where one is guilty until proven innocent. Is it any wonder that nobody respects the constitution any more? MERS fraud, financial collapse, unprecedented political corruption, and not one person found guilty or put in jail… How can one respect what America has become?

Just over two hundred years after America’s “independence”, the country has reverted to a despotic state, at whose apex is the New Novus Ordo Seculorm, not that envisioned by the founding fathers, but its mutated, freakish descendant, which managed to survive Andrew Jackson’s victory over the Second Bank of the United States, and is now controlling everything through the secret and unauditable decisions made in the halls of the Marriner Eccles building, and a stock market which is driven exclusively by the order flow emanating from Liberty 33.

And even as America prepares for yet another theatrical farce of what Democracy has become in the form of the mid-term elections, whose outcome will have no bearing whatsoever on the future of this country, the far more important decision, that virtually no American has any control over, except for a few bankers and a few religious fundamentalists, is the Fed’s decision to decisively do away with the reserve currency, appropriately due on the very same day.

We suggest everyone watch the below clip documenting the end of US liberty, and its transition to a state that is everything that those who created America rebelled against.


It’s officially the Beginning of the End

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by Graham Summers
Phoenix Capital Research
Posted originally November 6, 2010

MORE THAN TWO YEARS AGO, THE DAY AFTER WE NATIONALIZED Fannie and Freddie, I penned an article in which I forecast the end of the US as an empire and the end of the US Dollar standard. Despite the fact that others had been calling for a collapse of the US for years, my piece still received a great deal of hostility and condemnation. The comments ranged from, “you’re out of your mind, the US will always be number one” to “I don’t like the bailouts either, but you’re taking it too far.”

Here we are, two years later, and to be honest, the stuff that has come to pass is simply mind-blowing. In plain terms, the US is now a country in which…

• EVERYONE knows that the Wall Street banks KNOWINGLY engaged in fraud (Citibank executives confirmed this under oath), predatory lending, and other felonies and NOT ONE executive has been charged with a criminal act.

• There is clear evidence that elements of the Financial Crisis were INTENTIONALLY induced by key players in order to wipe out their competitors (you know who I’m talking about).

• The head of our central bank has LIED under oath about monetizing the debt (among other things)… and walks free.

• Our Secretary of the Treasury KNOWINGLY chose to hand out as much public money to Wall Street in exchange for what he and everyone else knew were worthless garbage assets. Again, no charges

• Our President increased troop levels for wars EVERYONE knows were started under false pretences (and continued policies of torture!?!?!) and WON the Nobel Peace Prize

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How America’s public servants are now its masters

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by Tyler Durden
Posted originally on October 9, 2010

Mort Zuckerman Is Back, Blasting American Socialism; Or How America’s Public Servants Are Now Its Masters
THE MAN WHO HAS RAPIDLY EMERGED AS THE MOST VOCAL OBAMA CRITIC, Mort Zuckerman, has just penned his most recent scathing anti-administration missive, this time focusing on the schism in US society between “preferred-status” public and shunned private-sector employees, concluding that “Americans cannot maintain their essential faith in government if there are two Americas, in which the private sector subsidises the disproportionate benefits of this new public sector elite.” Is this most recent split in US society being cultivated to take the place of the Wall Street – Main Street dialectic, which even Obama is now forced to realize is a fight he is set to lose (just imagine how anti-Obama Cramer would get if stocks drop by 0.001% during the teleprompter’s next media appearance)?

Certainly, in a society that exists simply on the basis of a simple ongoing “us versus them” distraction, while the true crimes continue unabated behind the scenes, this is not an impossible assumption. Here’s a suggestion to Mort and whoever else wishes to peddle more such diversions: how about framing the next conflict where it rightfully belongs: as that between America’s people and its criminal ruling elite? Full Op-Ed below:

America’s public servants are now its masters
first published in the Financial Times by Mort Zuckerman

There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.

Political tension is bound to grow when jobs disappear faster in the private than the public sector, just as compensation in the former is squeezed more. There was a time when government work offered lower salaries than comparable jobs in the private sector, a difference for which the public sector compensated by providing more security and better benefits. No longer. These days, government employees are better off in almost every area: pay, benefits, time off and security, on top of working fewer hours. Public workers have become a privileged class – an elite who live better than their private-sector counterparts. Public servants have become the public’s masters.

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