Accountability;The path of recovery

"Restoring responsibility and accountability is essential to the economic and fiscal health of our nation." ~ Carl Levin  
“It is wrong and immoral to seek to escape the consequences of one's acts.” ~ Mahatma Gandhi  
“A body of men holding themselves accountable to nobody ought not to be trusted by anybody.” ~ Thomas Paine

As I look back to our recent "Great Recession", it is disturbing the lack of accountability from those who wrecked our economy. What is more troublesome is that those who did the damage are still in charge and the American people has not awaken to this reality and take action. As a reaction to the problem, the American people got together and bailed-out the same banks and financial institutions that caused the financial crisis and replaced 63 Democrats with a like number of Republicans. My question to you is, Are things any better now?

Not until we accept responsibility for our actions. we will see true recovery. Otherwise, we will be given an "illusion of prosperity" and we will continue making the same mistakes repeatedly and never find the solution to the problem. We will continue switching from democrats to republicans back to democrats (you get the point) and never solve the problem. Is it possible that all this emphasis on the "illusion of recovery" is only intended to keep us quiet in preparation for the upcoming elections? Why is congress given up on addressing the current fiscal problem we have and postponed it until after the elections? How is that possible?

The stock market has shown signs of recovery from the low point of 2007, so everyone seems to be happy. The stock market closed over 13,000 points, so what! Why not publish how are we going to get out of this mess? Why not focus on matter that are important to us; employment, savings rate, health issues, education, etc. Why continue talking how the "health of the stock market"? Have you received the benefits of the stock market recovery? Let me ask you then, why is it that the stock market has recovered and every news stations and financial papers seems to focus on this point and fail to focus on the unemployment problem we still have.


It seems that our unemployment rate is hovering around 8 to 8.5 percent. You may cheer and say, RECOVERY!!!, let me ask you how is this figure calculated? Something that we are not told is that the calculation does not include, 1) those who have stopped looking for a job, 2) those that are under-employed, nor 3) those who accepted salary cuts to keep their current jobs. Are we really recovering from the recession? If so, why are more people now in food stamps than before 2007? To add more salt to the injury, the taxing system seems distorted. The New York Times when it pointed out that the top 400 taxpayers who earned $250 million on average in 2005 paid income taxes at a 17.2 percent rate. That rate is lower than that of a family making between $50,000 and $75,000 a year, which is 17.4 percent. It is a continuing outrage that under our tax code some of the wealthy pay a lower percentage of taxes on their income than the middle class.

"little people" pay taxes. We know life is unfair, but that doesn't mean the "little people" have to allow their government to continue to oppress them. ~ Leona Helmsley

The Invisible US Great Depression

According to Al Lewis on The News Hub, we’re actually in a depression right now, but most people don’t see it. One out of seven Americans are on food stamps – if they weren’t getting cards in the mail every month, you’d see them in soup lines. Millions of home in foreclosure or bank owned and you don’t know it, because the banks aren’t releasing them to the market. Watch the video below.

SEC Stops $15 Million Investment Scam

The Securities and Exchange Commission (SEC) announced fraud charges and an emergency asset freeze against a Denver-based company and two Colorado residents for allegedly carrying out a $15.7 million Ponzi scheme that dragged in more than 120 investors nationwide. The SEC alleges that Michael J. Turnock and William P. Sullivan II sold promissory notes to investors with the promise of annual returns of up to 12 percent, but actually paid the returns with funds from other investors.

The two sold the notes through Bridge Premium Finance LL, which purported to be an insurance premium financing company. They claimed the funds from the notes would be used to make short-term loans to small businesses to enable them to pay their up-front commercial insurance premiums, and assured investors that the business was doing well and that their funds were 100 percent protected through collateral. However according to the SEC, Bridge Premium has been unprofitable; its obligations to noteholders far exceed its assets; and it has been paying investors back with other investors' money since 2002. In addition, Turnock and Sullivan withheld from investors that Bridge Premium has not been profitable in any year since at least 1998, and has lost more than $3 million during the past five years. In May 2012, Bridge Premium owed investors more than $6.2 million, yet its insurance premium loan portfolio totaled less than $250,000 and its assets totaled less than $500,000.

A Global Gold Standard

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan (1966)

It is clear by now that deficit spending is simply a scheme for the confiscation of wealth. It doesn’t matter whether that deficit spending is in the name of providing benefits to certain people in society or depriving certain people of benefits. It is still confiscation whether done in the name of aggression or in the name of benevolence. It seems that Mr. Greenspan knew all along that there is no safe way of protecting wealth other than gold. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.

Money is the common denominator of all economic transactions. Money serves as a medium of exchange; it is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving. Can paper money backed by thin air do that?

It is amazing that the same man who was quoted above became the "US Chief Officer of Plunder" aka Chairman of the Federal Reserve. He is also known as “The Maestro” by his admirers in the media. However, lately his popularity has lessened as his policies have been linked as the source of our current economic problems. Maybe he should have preached his original principles during his tenure as a Chairman of the Federal Reserve rather than become a puppet of the State and a part of the problem. 

Investors Yank Another $5.68 Billion from U.S. Equity Funds

Outflows from U.S. equity funds show no signs of letting up, according to the latest statistics from the Investment Company Institute. For the week ended Aug. 1, investors pulled an estimated $5.68 billion from funds that invest long-term in U.S. equities, more than twice the $2.13 billion they withdrew the week before. Since the beginning of the year, U.S. stock funds have lost more than $64 billion in outflows.

Bond funds took in estimated inflows of $5.07 billion, down 12% from the $5.76 billion inflow a week earlier. Of the $5.07 billion, $3.94 billion went to taxable bond funds with the remaining $1.13 billion going to municipal bond funds.

Overall, mutual funds logged a lousy week, losing an estimated $1.19 billion in outflows, a sharp reversal from the previous week's $3.50 billion inflow.

The weekly fund flow estimates are derived from data covering more than 95% of industry assets, according to ICI.  The statistics cover long-term mutual funds, those the ICI defines as investing in long-term instruments.

If you think that money market funds are just another checking account...

Many investors when they close their equity positions and need a place to park their cash, they do not use their checking account. Most of them will sell their stocks and let their stock broker place the proceeds into a money market fund. Nothing wrong with that if you are aware the risks associated with this type of account. Many investors when they receive their monthly investment statement and look at the allocation of their investment portfolio and see "cash" they assume their money is parked in a low risk account similar to a checking account but better since it holds high-quality short-term commercial paper that almost never defaults and gives them a higher yield than checking.

However, that assumption can lead you to some frustrations later when you see your "cash" dwindling. If you review the account information of your money market fund you will notice that the fund is investing in some disturbing things such as European bank debt. However, you may think that you can get your money out with a mouse click, right? After all it is like a checking account and it is your money.

You may be for a surprise. The US Fed recognizes the potential weakness of the money fund system and is considering withdrawal limits on money market funds.On July 19, the Federal Reserve Bank of New York said it supports limiting some types of money-market fund withdrawals in a bid to protect those funds from suffering the equivalent of a bank run. Interesting!

Many things that have been sold to us as "risk-free", may after all not be so "risk-free". Money market funds must be reviewed and you cannot assume that it is "like a savings account" with no or little risk. Many things that we were told that were sound investments need to be re-evaluated. Banks can no longer be trusted to be "too big to fail", Corporate America cannot be trusted to properly compesate us for our labor, governments do run out of money, and even the all mighty dollar stops functioning as a store of value.

What will happen next? Will our government impose control over our retirement accounts?