Archive for the ‘Bailouts’ Category
The foundation for the housing crisis was laid with the Community Reinvestment Act in 1977, where the government took it upon itself to encourage home ownership by pressuring banks to lend to lower-income buyers, often to meet arbitrary racial quotas. Obviously they haven’t learned a thing from where that got us.
Would it surprise anyone to learn that as a lawyer, Obama sued banks to force them to issue subprime loans? He also worked for ACORN, which specialized in using the Community Reinvestment Act to shake down banks and pressure them to loan money to low-income minorities or face “discrimination” charges.
According to the Washington Post, the Obama administration is pushing big banks to make more home loans available to Americans with bad credit – the same kind of government guidance that helped blow up the housing market:
In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
Think about this statement. The administration is asking banks – banks that Washington bails out; banks that Washington crafts regulations for — to embrace risky policies that put the institution and its investors (not to mention, all of us) in a precarious position. So precarious, in fact, that banks have to ask government if they can be freed of any legal or financial consequences.
What could possibly go wrong?
These types of government policies initially emerged the mid-1970s, when “progressive” Democrats in Congress began a campaign to help low-income minorities become homeowners. This led to the passage, in 1977, of theCommunity Reinvestment Act (CRA), a mandate for banks to make special efforts to seek out and lend to borrowers of meager means. Founded on the premise that government intervention is necessary to counteract the fundamentally racist and inequitable nature of American society and the free market, the CRA was eventually transformed from an outreach effort into a strict quota system by the Clinton administration. Under the new arrangement, if a bank failed to meet its quota for loans to low-income minorities, it ran the risk of getting a low CRA rating from the FDIC. This, in turn, could derail the bank’s efforts to expand, relocate, merge, etc. From a practical standpoint, then, banks had no recourse but to drastically lower their standards on down-payments and underwriting, and to approve many loans even to borrowers with weak credit credentials. As Hoover Institution Fellow Thomas Sowell explains, this led to “skyrocketing rates of mortgage delinquencies and defaults,” and the rest is history.
The CRA was by no means the only mechanism designed by government to impose lending quotas on financial institutions. For instance, the Department of Housing and Urban Development (HUD) developed rules encouraging lenders to dramatically hike their loan-approval rates for minority applicants and began bringing legal actions against mortgage bankers who failed to do so, regardless of the reason. This, too, caused lenders to lower their down-payment and income requirements.
Moreover, HUD pressured the government-sponsored enterprises Fannie Mae and Freddie Mac, the two largest sources of housing finance in the United States, to earmark a steeply rising number of their own loans for low-income borrowers. Many of these were subprime mortgages—loans characterized by higher interest rates and less favorable terms in order to compensate lenders for the high credit risk they were incurring.
Additional pressure toward this end was applied by community organizations like the pro-socialist ACORN. By accusing banks—however frivolously or unjustly—of having engaged in racially discriminatory lending practices that violated the mandates of the CRA, these groups commonly sued banks toprevent them from expanding or merging as they wished. Barack Obama, ACORN’s staunch ally, was strongly in favor of this practice. Indeed, in a 1994 class-action lawsuit against Citibank, Obama represented ACORN in demanding more favorable terms for subprime homebuyer mortgages. After four years of being dragged through the mud, a beleaguered Citibank—anxious to put an end to the incessant smears (charging racism) that Obama and his fellow litigators were hurling in its direction (to say nothing of its mounting legal bills)—agreed to settle the case.
Forbes magazine puts it bluntly: “Obama has been a staunch supporter of the CRA throughout his public life.” In other words, he has long advocated the very policies that already have reduced the real-estate market to rubble. And now he is actively pushing those very same practices again.
Cyprus is only the first domino.
Cypriot President Nicos Anastasiades has struck a deal with the European Union and International Monetary Fund that will seize up to 40% of uninsured funds from wealthier depositors with over 100,000 euros and will not siphon funds from those below that amount.
The 10 billion euros ($13 billion) bailout plan calls for the Cyprus Popular Bank to be dissolved and all its viable assets transferred to the country’s biggest bank, Bank of Cyprus.
Presently, Cypriot banks have imposed a 100 euros ATM withdraw limit, and Cyprus border officials at air and sea ports have been ordered to confiscate the funds of any traveler attempting to leave with over 10,000 euros.
How dare they try to keep the money they worked so hard for and saved AFTER taxes were already paid on it? Don’t they know that private property is an illusion under Socialism? That the government is free to spend as irresponsibly as it wants, and can steal your money at will to pay the tab? That’s what they’ve been voting for all this time, right? Or didn’t they realize it?
Understandably, Cypriots are desperately trying to get their money out, but it’s too late:
The president of Cyprus assured his people a bailout deal he struck with the European Union was in their best interests, but banks will remain closed until Thursday – and even then subject to capital controls to prevent a run on deposits.
The ruling class insists that stealing money out of their bank accounts is “in their best interests.” Doesn’t that make them feel better? They’ll be patriotic and happy to “share the sacrifice” for the greater good, right? Of course not!
Tyler Durden reports that there is a “Cash Exodus From Cyprus Surges Despite Bank Closures, Capital Controls“:
From FAZ, google translation edited:
Despite the closed banks and a lock for payments in the past week, more money flowed out of Cyprus than in previous weeks, Frankfurter experts report for payments. Prior to the escalation of the crisis in Cyprus accruing on the payment system Target liabilities of Cypriot central bank to the European Central Bank (ECB) had increased daily at approximately 100 to 200 million euros. In recent days was after Parliament the stabilization program initially had to fail, the daily has risen to more than double. Just in the last week so could cash assets have been withdrawn from Cyprus in the billions, although the Cypriot central bank has actually issued a lock.
How is it possible that cash is leaving the country even with a bank halt? It isn’t, unless of course, the banks aren’t really halted, and some outbound wire transfers, which are permitted, are more equal than other wire transfers which are stuck on the island. Of course, that would imply an “Europe Farm” type of arrangement, which in the bastion of fairness, equality and honesty which is Europe, would be absolutely impossible.
On the other hand, if indeed the drain of the Cypriot banking system has continued despite all the enacted halts during the past week, then it’s game over for Cyprus, which will soon have only the ECB to thank for providing liquidity, an arrangement that may not be the best long-term outcome for a nation whose economy has basically been gutted in the span of one week.
It also means game over for the bailout as envisioned, as the EUR17 billion is history, and much more cash will have to be injected to cover for the stealth outflows.
Cyprus won’t be the only one affected, of course. An unusually honest Eurozone official has made it clear that the EU will use the same confiscation tactics as Cyprus if things get worse (which of course they will):
Savings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe’s single currency by propping up failing banks, a senior eurozone official has announced.
The new policy will alarm hundreds of thousands of British expatriates who live and have transferred their savings, proceeds from house sales and other assets to eurozone bank accounts in countries such as France, Spain and Italy.
The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, told the FT and Reuters that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.
Dijsselbloem tried to retract the statement after investors started panicking, but the damage is already done. Now the cat is out of the bag:
Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.
Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?
Simple: because what Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout “passed” (at least so far) is because it was structured as a bank restructuring, a financial system “resolution”, not a tax,and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won’t fly.
Hence the shift.
However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but “democratic” impleention pathway, are on the backburner.
And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.
“You ask for miracles, Theo. I give you Diesel-BOOM”
And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of… themselves.
Simon Black at Sovereign Man blog tells readers to “Expect These Eight Steps From The Government’s Playbook“:
To anyone paying attention, reality is now painfully obvious. These bankrupt, insolvent governments have just about run out of fingers to plug the dikes. And history shows that, once this happens, governments fall back on a very limited playbook:
As Cyprus showed us, bankrupt governments are quite happy to plunder people’s bank accounts, especially if it’s a wealthy minority.
Aside from bank levies, though, this also includes things like seizing retirement accounts (Argentina), increases in civil asset forfeiture (United States), and gold criminalization.
Just another form of confiscation, taxation plunders the hard work and talent of the citizenry. But thanks to decades of brainwashing, it’s more socially acceptable. We’ve come to regard taxes as a ‘necessary evil,’ not realizing that the country existed for decades, even centuries, without an income tax.
Yet when bankrupt governments get desperate enough, they begin imposing new taxes… primarily WEALTH taxes (Argentina) or windfall profits taxes (United States in the 1970s).
This is indirect confiscation– the slow, gradual plundering of people’s savings. Again, governments have been quite successful at inculcating a belief that inflation is also a necessary evil. They’re also adept at fooling people with phony inflation statistics.
Governments can, do, and will restrict the free-flow of capital across borders. They’ll prevent you from moving your own money to a safer jurisdiction, forcing you to keep your hard earned savings at home where it can be plundered and devalued.
We’re seeing this everywhere in the developed world… from withdrawal limits in Europe to cash-sniffing dogs at border checkpoints. And it certainly doesn’t help when everyone from the IMF to Nobel laureate Paul Krugman argue in favor of Capital Controls.
Wage and Price controls
When even the lowest common denominator in society realizes that prices are getting higher, governments step in and ‘fix’ things by imposing price controls.
Occasionally this also includes wage controls… though wage increases tend to be vastly outpaced by price increases.
Of course, as any basic economics textbook can illustrate, price controls never work and typically lead to shortages and massive misallocations.
Wage and Price controls– on STEROIDS
When the first round of price controls don’t work, the next step is to impose severe penalties for not abiding by the terms.
In the days of Diocletian’s Edict on Prices in the 4th century AD, any Roman caught violating the price controls was put to death.
In post-revolutionary France, shopkeepers who violated the “Law of Maximum” were fleeced of their private property… and a national spy system was put into place to enforce the measures.
Despite being completely broke, governments will dramatically expand their ranks in a last desperate gasp to envelop the problem in sheer size.
In the early 1920s, for example, the number of bureaucratic officials in the Weimar Republic increased 242%, even though the country was flat broke from its Great War reparation payments and hyperinflation episode.
The increase in both regulations and government officials criminalizes and/or controls almost every aspect of our existence… from what we can/cannot put in our bodies to how we are allowed to raise our own children.
War and National Emergency
When all else fails, just invade another country. Pick a fight. Keep people distracted by work them into a frenzy over men in caves… or some completely irrelevant island.
It’s not a “tax.” It is government stealing money directly out of people’s bank accounts – money that was deposited AFTER taxes were already paid on it.
Socialism = theft, pure and simple. Christians who support Socialism need to go back study what the Bible has to say about debt, envy, and theft!
An 11th-hour deal with the EU, which has saved the Cypriot economy from the brink, will see investors with more than €100,000 in the nation’s largest banks forfeit a large chunk of their deposits.
The punishing deal – which has been approved by the eurozone finance ministers – will allow the country to receive the €10bn (£8.5bn) bailout it needed before the European Central Bank pulled funding and sent the island on the path to bankruptcy and a possible exit from the single currency.
Under the new agreement, all bank deposits under €100,000 will be secured and guaranteed by the state. The country’s second-biggest bank, The Popular Bank of Cyprus – known as Laiki – will be wound down whilst holders of deposits of more than €100,000 face big losses.
This will only end well for those who are prepared to take care of themselves and their families.
The Cyprus central bank decided to keep the banks closed until next Tuesday. The panic is building. This will build it even more.
The British media say the government is looking for Plan B. There is no Plan B.
There will be no tax on bank accounts, says the parliament.
Will there still be a bailout? The European Central Bank has said it will remove the life support tube on Monday. The head of the EuroGroup, which is a no-name committee of the eurozone’s finance ministers, said this: “I’m not sure that this package is completely gone and failed, because I don’t see many alternatives.” In short, “the Parliament had better reconsider.” Or else.
Or else what? Default? Cyprus’ departure from the eurozone? Do the Eurocrats want that? Do they want to risk a poster child for the PIIGS to imitate?
Meanwhile, panic builds. When the banks open their doors next week, they will face a true bank run. People now know: they cannot get their money. They never thought this could happen.
The central bank is playing kick the can. It is buying time. Maybe there will be a Plan B. Problem: if there is a Plan B, maybe the parliament will reject it. Then what?
A nation shuts down economically if its banks shut down. The banks can shut down in two ways: because of bank runs or by decree from the central bank. Today, the banking system has been shut down by decree.
The central bank cannot kick the can much longer. The economy will collapse without banks.
The British media are covering the story.
“We don’t have days or weeks, we have only hours to save our country,” Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters as crisis talks in Nicosia dragged on into the evening.
The country’s two main banks – Laiki and the Bank of Cyprus – face potential failure if a bailout is not secured. One official told the Associated Press that Europe and the IMF were pressing for the two banks to be wound down. The Cypriot government was said to be considering the possibility of imposing capital controls amid fears that money would flood out of the country once its banks were reopened.
But if depositors cannot send their digital money out of the country, they can still demand currency. The effect is the same: bankrupt banks.
The central bank cannot print euros. It can bail out the system only if Cyprus pulls out of the eurozone. If it does, this will send a message to the PIIGS: “Get out. We did. Save yourselves. We did.”
Cyprus isn’t the only country facing serious fiscal consequences from unsustainable spending, unfunded liabilities and overwhelming debt.
Robert Romano explains “How the government will steal your savings under Dodd-Frank“:
The people of Cyprus care more about their life savings than propping up financial institutions that lost billions on poor investments in socialist governments’ debts. The idea that somehow they, and not the banks that made those decisions, should bear the brunt of those losses was always disconnected from reality.
Yet that is precisely the presumption the establishment has made — that rather than banks raising substantially more capital to address systemic risk, you and I should pay for bank bailouts — in response to the ongoing financial crisis that began in 2007, and has actually become the basis for such proposals considered all over the world, including the U.S.
In 2009, the G20 asked the International Monetary Fund (IMF) to come up with ways the financial sector might supposedly contribute to its own bailouts.
The IMF study released in 2010 essentially proposed two types of taxes: a levy on financial institutions to create a pool of bailout funds, and a financial transaction tax.
Interestingly, what the IMF came up with as a suggestion had already been implemented a few months earlier by the U.S. Congress in passing the Dodd-Frank so-called financial reform legislation.
Under Dodd-Frank, the Federal Deposit Insurance Corporation (FDIC) is allowed to charge assessments to about 60 bank-holding and insurance companies with $50 billion or more in assets to fund what is called an “orderly liquidation fund.” Really, it’s just a bailout fund allowing the government to take over systemically risky institutions, recapitalize them, and allow them to reenter the market under new management.
The law, as well as the IMF study, presumes that the financial sector will bear these costs. But as a Congressional Budget Office (CBO) analysis of a similar bank tax proposal by the Obama Administration at the time noted, “the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors, but the precise incidence among those groups is uncertain.”
Meaning, the assessments would actually be passed on to and paid for by savers and consumers of financial products through the indirect taxation of higher bank fees and other financial transaction costs. Americans for Limited Government warned lawmakers about just such an outcome prior to the legislation’s passage as an affront to private property rights.
[...] At least in Cyprus the people’s representatives there actually had an opportunity to vote against such a levy. Whereas here, those fees are and will continue to be imposed by the banks with the blessing of government agencies — all without any vote in Congress.
It may happen sooner than anyone realizes. U.S. financial institutions are said to have as much $641 billion of exposure to financial institutions in Portugal, Ireland, Italy, Greece and Spain (PIIGS) according to the Congressional Research Service.
Should the Eurozone really break apart, and U.S. banks are caught in the crossfire, with the American people suddenly paying exorbitant fees for the “privilege” of conducting business electronically, they can decide for themselves whether this was a good idea.
That is, for Congress to outsource and give unlimited grant of its taxing authority to faceless bureaucrats acting in concert with an international banking cartel with the goal of bailing itself out of its own foolishness.
Cavuto: What’s happening in Cyprus could happen here
View at Fox News Video
In 1913, the 16th Amendment gave the federal government the power to tax American’s earnings for the very first time. Originally a 1% tax to pay for the war, it has ballooned into a confiscatory predator which continually siphons away your hard-earned money to feed the appetite of a government spending addiction that is never satisfied.
Since the immoral premise that government has a right to confiscate your earnings has gone unchallenged for the last 100 years, they now claim the right to steal your assets as well – property that you’ve acquired and invested in with after-tax dollars, through your own hard work an initiative. Nowhere is this more apparent than the recently instituted 3.8% Obamacare tax on home sales.
Think what is happening in Cyprus can’t happen here? It already is.
Cypriot lawmakers on Tuesday rejected a critical draft bill that would have seized part of people’s bank deposits in order to qualify for a vital international bailout, with not a single vote in favor.
The rejection leaves Cyprus’s bailout in question. Without external funds, the country’s banks face collapse and the government could go bankrupt. Nicosia will now have to come up with an alternative plan to raise the money: the government could try to offer a compromise bill that would be more palatable to lawmakers.
The bill, which had been amended Tuesday morning to shield small deposit holders from the deposit tax, was rejected with 36 votes against and 19 abstentions. One deputy was absent.
Too late. The threat has already been made. They have officially declared that they believe that the hard-earned money in private citizens’ bank accounts are fair game for the taking, and property rights are easily dispensed with when governments overspend. I wouldn’t trust them as far as I could throw them, and neither will most Cypriots!
The smart people will get their money out before they have another chance to try a scheme like this.
MP Nigel Farage is warning European investors to ”Get Your Money Out While You Can“:
In Nigel Farage’s first TV appearance since the Cypriot wealth tax was announced, the Englishman pulls no punches. In all his years and all his experience of the desperation of the European Union’s leadership “never did [he] think they would resort to stealing money from people’s savings accounts.” The simple fact is that they know they cannot let any country leave, no matter how small, for “once one country goes, the whole deck of cards will come tumbling down.” There is now “clear irreconcilable differences” between the North and the South of Europe and now that they have done this in one country, “they are quite capable of doing it in Italy, Spain and anywhere.” The message that sends to people is ”get your money out while you can.” As far as his British constituents, he strongly recommends George Osborne (UK Chancellor) urge ex-pats to remove all their money and do monthly transfers from home. “Do Not Invest In The Euro-Zone,” he concludes,“you have to be mad to do so - as it is now run by people who do not respect democracy, the rule of law, or the basic principles upon which Western civilization is based.”
“They are propping up a Eurozone that, in the end, will collapse in disastrous failure and they are prepared to do anything to do so.”
As Neil Cavuto points out, what is happening in Cyprus is already happening in America…it’s just that most people don’t realize it.
Katie Pavlich notes that American’s 401K plans already top the list of assets the government is threatening to seize:
As a reminder, the United States government has been eying and researching how Americans use their 401k plans for quite some time now. Recently we saw the U.S. Consumer Financial Protection Bureau suggest the government help “manage” retirement plans.
[...] In February, the Washington Times went so far as to ask “is your 401k about to be nationalized?”
The $19.4 trillion sitting in personal retirement accounts like the 401K may be too tempting an apple for a government that is quite broke, both monetarily and morally. The U.S. Consumer Financial Protection Bureau director Richard Cordray recently mentioned these accounts in a recent interview, stating “That’s one of the things we’ve been exploring and are interested in, in terms of whether and what authority we have.”
This agency, created by the 2010 Dodd-Frank-Act, is very concerned about how safe your retirement savings are. They are apparently concerned that retiring baby boomers may become victims of financial scams.
If the government takes control of retirement accounts, it will not be called “nationalization.” There will most likely be an indecipherable document that provides an opt-out option (initially), but why would you want to do that? The US government only wants to ensure the safety of your retirement funds; they did after all create a new bureaucracy for that specific purpose. And what could be a safer investment than US bonds?
Karl Denninger…cites some reasons for being concerned that this express train intends to flatten the US in the coming years. He lays out whywe may need recourse to something like this.
In two years federal medical spending along with Social Security and interest will, on current paths, reach the total of all tax receipts. At the outside the market will realize that Congress will never address the underlying issue with medical care because they have steadfastly refused to do so…. There is about $20 trillion in US Retirement “assets.” A “small” 10% “one time” tax levy on those assets would fund the US Deficit a couple of years from now, and I will go out on a limb now and predict that exactly that will be done. Of course the “one time” aspect will be a lie too…
He goes on to explain how the test case for this has already been successful. And how the American People have already allowed the legal precedents to allow this to happen to be codified in case histories all the way up to the USSC.
the precedent has already been set, and you, the common American, sat for it.
You allowed the GM bailout to take place where the seniority of bondholders was ignored and they were screwed while the UAW was made whole. You allowed Obamacare to be passed with the Congress denoting it was a “fine” rather than a Tax, because Congress knew that a direct, unapportioned tax was unconstitutional — and then you sat again when Judge Roberts of the USSC rewrote Obamacare to be that very same unconstitutional direct Tax.
Mark my words, Obamacare has very little to do with Health Insurance. This is why nobody in government feels any particular concern over the fact that it screws health insurance up so badly. If you are in government and you want the power to run things by fiat, this law just gave you the keys to a Barchetta with a full tank of petrol.
Now some of you have quaint hang-ups stemming from a silly political dope-deal known as The American Bill of Rights. For those who knit-pick abstruse details, Amendments IV and V get really anal about this property rights jib-jab.
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
Not to worry Komerade Amerikan. There are apps for this as well. Kelo v. New London is a landmark case that helps put the subjects in their proper place. As long as your bank account can be construed as conferring a public benefit through public use, this lovely piece of jurisprudence would justify its seizure down to the last penny.
Bottom line: The state can steal your property, your wealth and your sustinence at any time they get pissed off enough or desperate enough to do so. You have no recourse to the law against this. The law is pathetically bastardized. Remember how that Arch-Conservative Supreme Court was poised to heroically strike down The AACA? Forget it Jake, we are all Cypriots now.
European bank customers just woke up to discover that the government is stealing money directly out of their accounts. Think it can’t happen here? Think again.
People with bank accounts in Cyprus were shocked Saturday to learn that as part of an agreement reached with international creditors, the government has imposed a tax on all deposits to help bail out the nation and its banks.
While the island nation may be small, it’s an international favorite for offshore banking– particularly for wealthy Russians. The tax will range from 6.75% to 9.9%, depending on how much is in the account.
“This is a clear-cut robbery,” Andreas Moyseos, a former electrician who is now a pensioner in Nicosia, told the New York Times. Iliana Andreadakis, a book critic, further added: “This issue doesn’t only affect the people’s deposits, but also the prospect of the Cyprus economy. The E.U. has diminished its credibility.”
And indeed, following the massive run on banks in Cyprus, many are concerned that a minor panic could spread to the rest of the Eurozone. After all, it has just set a precedent for taxing private bank accounts at exorbitant rates without warning.
Why the sudden tax? Because Cyprus is on the verge of bankruptcy, and this is the condition Germany imposed in exchange for bailing them out:
View on YouTube
The banks are closed until Tuesday, to prevent depositors from accessing their money. ATM’s have quickly run out of cash as desperate citizens line up to withdraw their money before it is confiscated:
This is setting up the possibility of a widespread run on European banks:
In a move that could set off new fears of contagion across the eurozone, anxious depositors drained cash from ATMs in Cyprus on Saturday, hours after European officials in Brussels required that part of a new €10 billion ($12.6 billion) bailout must be paid for directly from the bank accounts of savers.
The move – a first in the three-year-old European financial crisis – raised questions over whether bank runs could be set off elsewhere.
Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered. Although banks placed withdrawal limits of €400 on ATMs, most of them had run out of cash by early evening. People around the country reacted with disbelief and anger.
Someone with €8,000 of life savings in the bank can ill afford to lose an arbitrary €540, but that’s exactly what is going to happen. The Cypriot parliament is probably not going to revolt this weekend, but any politician who votes for this bill is going to have a very, very hard time getting re-elected. This decision is important not only because of the precedent it sets with regard to bank depositors, but also because of the way in which it points up just how powerless all the Mediterranean countries (plus Ireland) have become. More than ever before, it’s Germany’s Europe. That’s bad for Cyprus — and it’s not even particularly good for Germany.
Saxo Bank CEO says, “This Is Full-Blown Socialism And I Still Can’t Believe It Happened“:
It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors’ money and 9.9 percent of big depositors’ funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?
I heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.
This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere – not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.
If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer’s money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.
Depositors in other prospective bailout countries must be running scared – is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.
Depositors are justified in their panic, given that the amount they stand to lose changes by the hour:
If initially Europe came out as utterly deranged in its Cyprus deposit-confiscation scheme, at least it was consistent. Now, it appears that Europe is desperate to appear not only completely incompetent but also unable to even make a simple decision and stick with it, following news from both the WSJ and the FT that the original confiscation thresholds of 6.75% and 9.9% for deposits below and over €100,000 is about to be revised.
From the FT: “a revised deal being discussed in Nicosia, with the blessing of the European Commission, would shift more of the burden on to deposits larger than €100,000, according to officials involved in the talks. Under a controversial deal struck with international bailout lenders in the early hours on Saturday, a 6.75 per cent levy would be imposed on all deposits under €100,000 while accounts over that threshold would be hit with a 9.9 per cent levy. The depositor levy was demanded by a German-led group of creditor countries to bring down the bailout’s price tag from €17bn…. Officials involved in last night’s talks said the changes in the levy’s rates were in flux, but they could see the higher rate increase to as much as 12.5 per cent while the smaller deposits could be about 3.5 per cent.”
Elsewhere, according to the WSJ, the deposit “tax” would be under 5% for deposits under €100K, under 10% for deposits between €100 and €500K, and over 13% for deposits greater than half a million.
While this idiotic last minute revision will only infuriate Russian oligarchs even more, it will achieve absolutely nothing to streamline the passage of the bill through Cyprus parliament where it appears to have hung without enough support: the damage has already been done, and it is a virtual guarantee that Cyprus banks will suffer a full blown bank run the second banks reopen, which may be Tuesday, Wednesday, or never, at the current pace. That line around the block at your local neighborhood Nicosia ATM: that is not, and will not, be for people seeking to make a deposit, that much we can guarantee, no matter what the final confiscation percentage is.
What is worse, however, is the painful demonstration of the absolutely and completely arbitrary decision-making process out of Europe. Sure: the ECB and the European Commission may decide to fully unwind the deposit confiscation scheme before all is said and done, but the genie is now out of the bottle, and it is very clear that in the European Disunion, a few unelected oligarchs will now determine until such time as the Eurozone finally implodes, just whose wealth and deposits are ripe for the taking. That not even Germany can make a decision and stick with it is just icing on the cake of the European Titanic.
This is the end result of the “Utopia” known as Democratic Socialism: large, powerful bureaucracies, out-of-control spending, runaway debt, forced redistribution, no respect for private property, and eventual collapse.
Europeans thought they could enjoy the unsustainable promises of Marxism without going full-blown communist. They chose a deceptive “third way” alternative, but it turns out the new boss is equally as destructive as the old one.
This is the path that Obama insists we follow, even as Europe’s warning signs glaringly flash “turn back now!”
Many Christians vote for politicians who support completely unbiblical economic policies because they have no idea what the Bible has to say about economics. All they know about economics they learned in secular government schools and the talking points put forth by politicians and political activists.
The world is reeling from poverty, drowning in debt, and suffering from other hardships caused by bad economic policies. God’s Word has the answers. Christians are called to disciple the nations to obey everything Christ commanded, INCLUDING in the area of economics, but we can’t teach hurting nations what we haven’t bothered to learn for ourselves.
A week ago, a lot of Americans received a jolt. After the election dust settled, they realized a majority of voters don’t want to lessen the role of government in their lives. If anything, they want to see government expand.
It was (and continues to be) the talk of the airwaves and Internet. As one radio host put it, in light of the election results, what we need is significant economic education. He is right – we do.
It is a pretty grave problem. The truth is that a majority of Americans in both political parties are radically ignorant of basic economics. In numerous ways, most people in the United States have been committed to some form of economic suicide for generations. They just don’t realize the extent of it.
This is one of the main reasons we created Economics for Everybody. The long-term implications of government intervention in the economy are extremely dangerous to all of us, especially to our religious freedoms. More and more people have a sinking feeling about this. But unless they take time to learn the basics of economics, nothing will change.
What is really at stake here?
If a majority of Americans are committed to the expansion of the welfare state, it will lead to increasing poverty for all. A basic economic principle is that whatever you subsidize you get more of.
If a dad offers to give money to his kids to clean up their rooms, he’ll get cleaner rooms. In the same way, if a government offers money to its citizens when they are unemployed, it will get more unemployment. Strange as it may seem, statistics consistently bear this out. And since the government offers money for all sorts of things it shouldn’t be offering money for, it’s no wonder we are where we are. We discuss this at length in ‘Lesson 10 – The Corporate and Welfare States of America.’
Next, if a majority of Americans are committed to government intervention in business through regulation, it will lead to a shrinking business sector. The basic economic principle here is that governments are unable to make accurate economic calculations.
The whole idea behind a planned economy is that central planners know better than producers and consumers what’s good for the economy. But such an idea assumes that a few people not only can comprehend, but actually direct the unique and ever-changing choices of limitless producers and consumers better than they can themselves.
It would be like a few people telling everyone else what they should buy at a grocery store. It’s functionally impossible to know all the discrete needs and desires of that many people, so the only way to attempt it is through general rules that restrict and direct consumption for all. At a business level, such a regulatory approach always ends in more and more businesses not being able to operate profitably and shutting down, ultimately resulting in the slow strangulation of an economy. We explain exactly how it happens in ‘Lesson 8 – The Basics of Government Intervention.’
Finally, if a majority of Americans don’t understand the relationship between economic freedom and religious freedom, they will inevitably lose both. The economic principle is that we are caught in a cosmic battle that has many economic aspects: God wants us to build up a godly civilization with our resources while Satan wants to prevent us from doing so.
In an economy based on Christian principles, there is economic freedom for people to use their land, labor and capital as they see fit. It is a matter of individual stewardship based on God-given ability and property. But in an economy based on atheistic principles, the government is a tool of Satan to control the lives of individuals so that they cannot steward their resources and time for God’s Kingdom. Think of the many socialist and communist economies that persecuted tens of millions of Christians.
The fact that there is a spiritual battle going on that has economic dimensions is lost on most people. But it is the reality of this, as well as the fact of sin in the world, that is so important economically. History reveals this to us over and over again. We explain it in greater detail in ‘Lessons 6 & 7 – A Tale of Two Theologies.’
There is, of course, even more to economics. We try to explore as many basic principles as necessary in the twelve-lesson series. Our belief is that if people go through the entire Economics for Everybody curriculum, they will be in a much better place to understand what happened last Tuesday on Election Day. They will also understand what needs to happen in the future.
This is what happens when government interferes in the marketplace and tries to pick winners and losers:
FORTUNE — Do we need to worry about Too Small to Survive?
Now that President Obama has been re-elected, analysts, consultants and dealmakers have turned from whether Dodd-Frank will be repealed to what it means for banks now that it’s likely here to stay. The overwhelming conclusion: Thousands of small banks will soon disappear.
More lost jobs, more individuals and small businesses struggling to get quality service from a “too big to fail” bank that knows it will be bailed out no matter what crappy decisions they make.
Obama: Banks Are In It To Make Money And That’s Why We Need To Regulate Them
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Whenever Obama goes off teleprompter, it’s only a matter of time before his Marxist roots start to show. He just can’t help himself:
“Look, these financial institutions are in to make money and that’s why we need some smart regulations and this is an example of the difference in this campaign because my opponent says he wants to roll back all those [Dodd-Frank] regulations.”
Obama is right in this regard; this worldview is an example of the difference between his campaign and Romney’s. The Massachusetts Governor does not believe making a profit is a bad thing government needs to regulate.
Further, what Obama does not understand is that such regulations — like Dodd-Frank — have actually hurt small and community banks that do not have the resources of the larger financial institutions to deal with the burdens such laws impose.
One of the biggest drivers of the financial crisis was the federal government creating artificial, politically-driven incentives that moved these financial institutions to even make these “reckless bets.” Finance isn’t blameless, but how is more government involvement and control a desirable idea?
[...] Firstly, the president has yet to sufficiently explain why a large, entrenched bureaucracy seeking political gain through fiat is somehow nobler than a private, productive business seeking monetary profit by meeting consumers’ choices. As Ammon Simon writes for Forbes, Dodd-Frank is the very definition of tyranny. Secondly, Mitt Romney and Paul Ryan are not financial anarchists, but yes, they do want to roll back these new economy-damaging, job-killing, small-bank-sinking regulations still being written that are protecting large institutions “too big to fail” status rather than mitigating it.
This is socialism in its purest form, but most Americans don’t recognize it because they have never experienced it and you can be sure that our liberally run education system would not teach it as such. Instead, they disguise it as being pro-poor people and teach our children that successful business people are the real villains of our land.
Others who have come here from other countries who have lived under socialist rule readily see what Obama is doing and try to warn us about letting him turn us into another failed socialist country. Many have come here to escape socialism and are now living with the fear that America will become like the countries they left.
Obama believes that businesses shouldn’t be in it to make money. If you take away the profit motive, and why would anybody work?
It is any wonder his policies have hurt so many businesses and jobs, while swelling the numbers on welfare and food stamps?
We can’t afford 4 more years of this!
You think the current power grabs are bad? Just wait and see what happens if he’s re-elected and no longer accountable to the voters.
First President Obama said “the private sector is doing fine.” Then he lectured business owners, “you didn’t build that.” Now he wants to extend the government’s auto-industry takeover across the board. Mr. Obama simply cannot understand how the economy can function without government’s firm guiding hand.
At a campaign stop in Pueblo, Colo., on Wednesday, Mr. Obama touted the alleged success of his government-backed takeover of two-thirds of the domestic car business. “The American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.”
The Obama administration ritually flaunts the General Motors bailout as its model of success, but “government motors” is actually a cautionary tale. The bailout cost taxpayers around $100 billion, which means the government coughed up around $780,000 for every American GM job that Mr. Obama claims he “saved.” The feds hold 500 million shares ofGM stock, which has plummeted almost 45 percent since its initial public offering.
Believing in GM’s resurgence is only possible through creative accounting. GM counts a car as “sold” when it arrives at a dealership, not when it is in the hands of a consumer. The increased “sales” the administration brags about are surplus cars sitting in dealer lots, a practice known as “channel stuffing.” In a healthy economy, dealers have approximately a two-month inventory on hand; GM now has over double that. So long as GM pumps out cars that are “bought” by dealers, Mr. Obama can continue to claim things are looking up. Of cars that are actually driven off the lot, many are being bought by the majority stockholder: the government. In June, government purchases of GMcars went up 79 percent. This is a Ponzi scheme, not an economy.
Obama is deliberately selling the next two generations of Americans into debt slavery.
In presidential campaign ads, President Barack Obama claims that his economic plan includes “$4 trillion in deficit reduction.” For a president who has increased the national debt more than all U.S. presidents from George Washington to George H.W. Bush combined, the claim seems incredible. Indeed, it is.
A new analysis of Mr. Obama’s budget reveals the president’s plan would add $10.6 trillion in debt accumulation over the next decade, bringing the U.S. federal debt to a jaw-dropping $25.4 trillion.
[...] In addition, the Obama budget contains $1.8 trillion in tax increases over the next decade. Specifically, the top marginal tax rate would jump to 39.6 percent, taxes on dividends would skyrocket to 43.4 percent (from 15 percent), and the death tax would leap to 45 percent.
Rachel Alexander has an excellent piece at Townhall breaking down exactly how government meddling in the housing market caused the bubble and bust that ended up costing many Americans everything they had:
The epidemic of home foreclosures has been made far worse than necessary due to the banks’ unwillingness to work with homeowners. Although Congress has passed numerous laws to force the banks to assist homeowners, the banks have found ways not to comply. The banks also brazenly break other laws to further their profits at the expense of homeowners, most recently by falsifying interest rates in theLIBOR scandal.
Regular middle class Americans everywhere have unjustly lost their homes to foreclosure. They ended up in homes they could not sell due to the Federal Reserve Board, not their own actions. The Fed manipulates interest rates in order to grow or shrink the economy. It kept rates artificially low several years ago for a lengthy period of time. At the same time, Congress relaxed the laws on lending. The Obama administrationordered banks to lend to risky borrowers or face lawsuits. Many people with poor credit bought homes who were clearly risky borrowers. A large number were issued subprime loans they could not afford, ensuring their default.
Once the defaults began in 2007, the abandoned homes flooded the housing market, driving down home values for everyone. This left most homeowners unable to sell their homes, since most homeowners have a sizable mortgage. Someone who bought a home with a mortgage for $200,000 saw the value of their home dip to as low as half of that. Upside down, there is no way for someone to sell their home without owing the bank a considerable amount.
As people began losing their jobs due to the recession, they could not downsize to a smaller house or apartment because of being upside down on their mortgages. Many tried to short sale their homes, in the hopes of walking away without owing anything. In order to force the banks to accept a short sale, homeowners had to play chicken and stop paying their mortgages. Other homeowners stopped paying their mortgages in hopes of getting a loan modification, relying upon laws that were passed requiring banks to work with homeowners on loan modifications.
Very few of these homeowners were able to save their homes from foreclosure. The banks routinely turned down their requests for loan modifications, for trumped-up excuses like not turning in enough information or ironically missing mortgage payments, a catch-22. The banks turned down their short sale offers, for equally invalid excuses like claiming perfectly reasonable offers were not a good deal, or losing their paperwork. Finally, when some homeowners began to see their home values bounce back this year, allowing them to sell, the banks would not give them a payoff amount but went ahead with foreclosure.
Under Obama’s Homeowner and Stability Plan of 2009, the banks were given bonuses for each loan modification they implemented; $1,000 to the bank and $1,500 to the servicer. The banks put some homeowners in temporary “trial” loan modifications, collected the bonuses, then ultimately rejected the homeowners from permanent modifications and foreclosed on their homes. Half of the homeowners who entered the program were booted out. It soon became apparent that the program had been implemented to stave off foreclosures until after the 2010 election. Treasury Secretary Timothy Geithner, architect of the 2009 Troubled Asset Relief Program, TARP, cruelly referred to the program as homeowners “foaming the runway” for the distressed banks looking for a safe landing. Neil Barofsky, former special inspector for TARP, has written a book exposing the fraud, entitled “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.” Barofsky is a Democrat and contributor to Obama, but was so appalled by what he encountered that he went public with the scandal.
Of the $46 billion in federal aid directed to distressed homeowners under TARP, only 10 percent has been distributed. One of the programs, which allocates $2.7 in TARP funds to encourage lenders to write down or eliminate second liens when refinancing, has not helped a single homeowner.
What a mess! I know people complain about our two-party system, but at least we don’t have to deal with this kind of electoral chaos!
Greece is today starting a three-day race against time to form a viable coalition government which could ultimately decide the fate of the euro.
The centre-right New Democracy party will try to ally itself with other parties backing the international bailout after a narrow election victory over the left eased fears of a sudden exit from the single currency.
The euro rose and European stocks opened higher after yesterday’s vote.
[...] New Democracy party leader Antonis Samaras pledged to move swiftly to form a government, telling supporters: ‘There is no time to waste’.
The once-mighty Socialist PASOK party, now reduced to third place, indicated it would support Samaras but had not yet decided whether to join the government or just offer parliamentary backing.
‘The people spoke yesterday and gave a clear mandate to pro-European parties to co-operate and fight the battle to keep the country in the euro,’ the daily Kathimerini, Greece’s biggest daily newspaper, said today.
‘By tomorrow, the country needs to have a government of the widest possible acceptance with politicians and technocrats. PASOK must support such a government,’ it added.
In deep recession, crushed under its huge public debt and facing rising social tensions, Greece faces a daunting struggle to restore its battered economy and the new government may face a renewed wave of protests once it takes office.
The radical left SYRIZA bloc, which had promised to tear up the bailout deal signed in March with the European Union and International Monetary Fund, scored strongly in the election and promised to continue its opposition to the painful austerity measures demanded of Greece.
Welcome to the real-world consequences of the Socialist Welfare State: eventually, you run out of other people’s money and collapse under the weight of astronomical debt and unsustainable demands.
In Greece, there hasn’t been a run on the banks….yet. But Greek citizens who are still lucky enough to have money left have taken to withdrawing all their cash and either stashing it at home (where they’re at risk of being robbed) or in a safety deposit box (where a failed bank may shut down and refuse customers access).
Already one in 10 Greeks is dependent on shelters and soup kitchens. Millions more are dependent on friends, relatives, and the overburdened welfare state. Thousands of Greek children have been abandoned by parents who can no longer afford to feed them.
And this is all BEFORE the stuff REALLY hits the fan.
A day before the Greek D-Day, which was unexpectedly punctuated with a surprising last-minute Greek victory in Euro2012 over Russia, sending the country into the elimination rounds (a Greece vs Germany game would be quite interesting) which may have rekindled patriotic spirits just enough to boost Syriza’s chance that little bit more, the Greek bank trot, which was a jog some days ago, has surprisingly not metastazied into a full blown sprint. And with an all too real possibility that Greece may leave the Eurozone in as little as 24 hours, this is somewhat unexpected: after all taking physical possession of electronic money is merely a free put on the return to the Drachma, and currency (and debt) devaluation. On Monday it may simply be too late. Surely, most locals have figured this out.
Spiegel reports: “Joanna Stavropoulos is not proud of what she has done. “I had a guilty conscience when I withdrew my money from Greece,” says the 43-year-old. Of course she knew what would happen if everybody does the same: Greece’s banks would be threatened with collapse. But she says she had to think of her two-month-old daughter, Josephina, who is currently asleep on Joanna’s shoulder. Increasing numbers of Greeks are following Joanna Stavropoulos’ example and emptying their accounts. They are afraid that Greece may leave the euro zone and return to the drachma…. Stavropoulos is one of the few people who know very well what this scenario would look like in concrete terms.. She has also lived in Zimbabwe, where three-digit inflation destroyed the currency. Joanna is sure that Greece could face the same thing if it returns to the drachma. “My country is going downhill,” she says.” And yet instead of taking the cash and converting it into something of real value, what has happened is that the €50 billion now hidden in various homes has led to a surge in home burglaries. As a result, Greeks are forced to worry not only about their currency returning, but about being robbed. End result: take the cash, but park it back at your bank: “Many customers have left their money in the bank itself, Christiana says — but in a safe deposit box rather than in their accounts. “It’s currently impossible to find a free safe deposit box in a Greek bank,” she says.” We wonder what happens when these same people try to access their “safe deposit boxes” should the entire banking system collapse. Then again, nobody said a currency union disintegrating was a logical, rational and orderly process…
[...] In retrospect, the threat of robbery may pale in comparison with the consequences of a coordinated global bank holiday:
Even a cosmopolitan woman like Joanna Stavropoulous has been overwhelmed in her attempts to come up with the right strategy. In 2010, as the signs of Greece’s economic crash intensified, she moved her savings to a Spanish bank. Then Spain’s economy got into trouble. She moved her money back to Greece — until the next bout of bad news. She has paid more than €100 ($125) in bank fees alone, she says, due to the constant movement of her money.
When her daughter was born, Stavropoulos paid €12,000 for the birth, a sum that is not considered unusual in private Greek clinics. Now, she has barely any money left. She has now invested the last of her savings in foreign currency, hoping that they will hold their value if Greece returns to the drachma.
Yet the most ironic moment in the Greek denouement will come when fractional reserve lending collapses onto itself:
Stavropoulos and her friends have a new strategy to deal with their daily expenses. “We charge everything to our credit cards,” she says. If the Greek banks fail, they won’t be able to collect the outstanding debts, she argues. “If they want to mess me around, I will do the same to them.”
In other words, Greece is now America, where the vast majority of people also live on credit alone, and have taken up the following motto when dealing with banks: “you pretend to be solvent, we pretend to have money.”
At the end of the day, it is all just one big global monetary circle jerk, only this time in reverse, as the snake of fractional reserve banking has finally started to eat its own tail. With people spending money they don’t have, and in debt to their eyeballs to a banking system that itself is just as insolvent, is there any wonder that nobody really panics any more over daily threats the grand reset is finally coming?
They’ll still be in denial as the Welfare State and global economy collapses around them. There are none so blind as those who refuse to see.
According to the Senate Budget Committee Republicans, America is wracking up debt faster than our EU counterparts:
Today’s European debate isn’t about governmental austerity, it’s about governmental reality. Ultimately, the argument is not whether governments can keep trying to stimulate their economies, but when their creditors will quit financing it. Somehow, Europe’s governments, teetering on tilting economies, have missed this point; we can only hope that Washington hasn’t.
We are witnessing a prolonged domino-effect among the world’s economically intrusive states. It began over two decades ago with the fall of the USSR and communism across Eastern Europe. Now the dominoes are falling into Western Europe — Greece, Portugal, Spain, and Italy, all are threatened with economic collapse.
By now, the obvious should be axiom: A state cannot run an economy and a state-run economy cannot sustain its state. The more of its economy a government consumes, the less productive its economy becomes. And the more dependent its subpar economy then becomes on its government.
This vicious cycle creates a widening gap between what the government promises and what its economy can deliver. The government resorts to spending more, while its economy responds by producing increasingly less of the revenue needed to finance the government’s increasing spending.
The only reconciliation possible between the over-demanding government and its under-producing economy is borrowing. Once this pattern becomes firmly and deeply established, the conclusion becomes inevitable. Political oppression — as in both former and current communist countries — can temporarily extend the contradiction, but it cannot extinguish it.
What do Europe’s economic experiences portend for the U.S.? Obama will (hopefully) lose the 2012 election because of his incompetence and the state of the U.S. economy. Republicans will control government for the next two years. They will suffer the same fate as politicians who favor austerity in Europe if they try to enforce austerity, to cut spending here.
Politicians, even Republicans, are self-interested people, and will prefer to stay in office rather than be removed. So they, too, will choose to ignore economic reality. Especially when Democrats and their lapdogs, the MSM, loudly depict every austerity measure, every spending cut, as hard-hearted. Whatever enthusiasm exists when Republicans gain control will soon dissipate when polls show the unpopularity of austerity with voters.
But austerity will surely come. Economic reality must set in. Voters, given the choice between politicians who promise to reduce or eliminate benefits (such as Social Security) and politicians who promise to increase, or at least not reduce, benefits, will vote for increases. Eventually there will be no money (taxes, borrowing, or printing) left with which to produce and distribute benefits. Economic realityand unsustainability will do what politicians refuse to do.
Is our only hope what our Founding Fathers saw as a legislature doing what’s best for the country rather than themselves, and then going home? Does this mean that Tea Party-backed candidates, who don’t listen to Democrats or the MSM, and who recognize economic reality, should be the only ones we support?