Have yourself a merry little depression…
But seeing the way they work together…and where they seem to be headed…we’d prefer a depression.
The idea of the world’s authorities is not to solve the debt problem, but to make it larger. One bank goes bust; they get a bigger bank — a central bank — to bail it out. One country goes broke; they get a bigger country to bail it out.
The US bailed out its financial sector. Europe has had trouble getting together to bail out its fringe nations. But gradually, in fits and starts, the pieces are coming together. We will all bail each other out. Then, we will all be bailed out. Together.
We need to act “as collectively as possible,” says Lagarde.
She means that we all have to accept more debt…in order to prevent depression. That is, all the feds’ horses and all the feds’ men are supposed to make sure that 1) stock holders don’t lose money…2) bankers don’t go broke…3) speculators don’t get wiped out…4) business executives don’t lose their jobs… Daily Reckoning readers will note, with a wry smile, that these are precisely the things that OUGHT to happen.
Which also happens to be what a depression would accomplish… It’s why we have depressions…and why we need them. They don’t have to be long, drawn-out disasters. They can be short and sweet. But they have to get the job done.
On the other hand, let us look at what all this collective, depression-preventing action is accomplishing. In a word or two, it is protecting the insiders at the expense of the outsiders. That is, it is doing what government always does. But it is doing it in a particularly galling way. Here’s the latest on what the insiders are up to, from the Guardian:
Revealed: huge increase in executive pay for America’s top bosses
Exclusive survey shows America’s CEOs enjoyed pay hikes of up to 40% last year — with one chief executive earning $145m
Chief executive pay has roared back after two years of stagnation and decline. America’s top bosses enjoyed pay hikes of between 27 and 40% last year, according to the largest survey of US CEO pay. The dramatic bounceback comes as the latest government figures show wages for the majority of Americans are failing to keep up with inflation.
America’s highest paid executive took home more than $145.2m, and as stock prices recovered across the board, the median value of bosses’ profits on stock options rose 70% in 2010, from $950,400 to $1.3m. The news comes against the backdrop of an Occupy Wall Street movement that has focused Washington’s attention on the pay packages of America’s highest paid.
Three of this year’s top 10 earners come from the healthcare industry. Top earner John Hammergren at McKesson, the world’s largest healthcare firm, made $145,266,91 last year — most of it from stock options.
2010 was a great year to lose your job as a CEO. Four of the 10 highest paid CEOs were retired or departing executives. Ronald Williams, former head of Aetna, a health insurer, exercised 2.4m options for a profit of $50.4m. Aetna’s stock price declined by 70% from when Williams assumed the role of CEO in February 2006 until his retirement. At pharmacy chain CVS, Thomas Ryan made a $28m profit on his options. During Ryan’s 13-year tenure as CEO, CVS Caremark’s stock price decreased almost 54%.
Omnicare’s Joel Gemunder retired last August and received cash severance of $16m, part of a final-year pay package worth $98.28m.
Interesting, no? Many of the top earners are in the zombie health care industry. It is a zombie industry because it is so heavily controlled, subsidized, and protected from competition by the zombie government.
In our way of seeing things, no CEO is worth $145 million. Or even $1 million, for that matter. But that’s what you get in a degenerate pseudo-capitalist system.
Meanwhile, the average working man — who has no clue about the whys of it — is getting pretty chuffed.
“$740 billion pay gap threat to US recovery” says The Financial Times. That amount is the money that would have gone to US working people if they had maintained their share of national income at post-war average.
The FT is scratching its head, trying to figure out how the economy can recover when the people who do the buying have so little money. According to its figures, the average worker would have $5,000 more this year alone, if wages were still at 63% of national income. Instead, they have sunk to only 58% of national income…with more going to the bosses and stockholders.
For his part, the working stiff is less concerned with what it means to the economy and more concerned with what it means to him:
“Like a lot of Americans, I’m pretty ticked off,” said an Occupy Wall Street protestor. “It’s not that there are rich people. It’s that the people with a lot of money over the past few decades have rigged the system so that there’s not a fair chance to anyone anymore.”
He’s right. The system is rigged. Probably not the way he thinks. But rigged nonetheless.
The feds rigged it. They turned America’s leading business sectors into zombie-controlled, value-destroying industries. They turned the nation’s money into an ersatz currency. And they pushed the country’s middle class households in debt holes they find it difficult to climb out of….
And then, when the whole degenerate system was ready to come crashing down…they bailed out the debt-mongers…and propped up the whole corrupt system with $29 trillion in money that didn’t belong to them.
A merry little depression would have been so much better.
“Poor America…” writes a French friend. “It’s not the land of the free anymore. Now, it’s the land of slaves.”
The FATCA law (Foreign Account Tax Compliance Act) will force banks across the globe to collaborate with the IRS. An explanation of the huge repercussions this legal precedent will have on banks and banking clients.
Once FATCA — Foreign Accounts Tax Compliance Act — is enacted on January 1, 2013, banks worldwide will find themselves subject to the American tax administration bureau known as the IRS (Internal Revenue Service). Adopted in March, 2010, FATCA is a facet of the broader Hiring Incentives to Restore Employment (HIRE) Act which is designed to promote employment opportunities in the United States. In order to finance the HIRE Act, fighting tax evasion is even more in the spotlight than it has been in the past and Washington wants to use its political clout to get its message across this time. What this really means is that foreign banks — or FFIs (Foreign Financial Institutions) — will be obliged to conform to a long series of procedures designed to identify US Persons (US citizens & Green Card holders) subject to American taxes. This naturally concerns American citizens but likewise extends to American nationals’ foreign spouses. However, the long arm of the US administration will even be going so far as to include foreigners residing outside American borders, some of whom may have never even set foot on US soil. This is due to the fact that non-American banks will be obligated to report portfolios which include American assets even if they belong to foreigners with no ties to the US.
“We used to be so happy when we got to the US,” said another European. “We felt we could breathe more freely. The country was so big…so prosperous…and so open.
“That was what I remember from about 20 years ago. But now it is quite different. I dread coming to the US. We came through US customs in Atlanta a few weeks ago. My wife had a half-eaten sandwich in her bag…which she had forgotten about. They put us in a special room and treated us like we were criminals. It was ridiculous…and humiliating.
“But there’s always something. Someone is always yelling at you. Everything is illegal or forbidden. It just doesn’t seem like the same country it was a few years ago. So, we only come here when we have to for business reasons.”
The defense authorization bill that Congress passed and President Obama had threatened to veto will soon become law, a fact that should be met with public outrage. Human Rights Watch Executive Director Kenneth Roth, responding to Obama’s craven collapse on the bill’s most controversial provision, said, “By signing this defense spending bill, President Obama will go down in history as the president who enshrined indefinite detention without trial in US law.” On Wednesday, White House press secretary Jay Carney claimed “the most recent changes give the president additional discretion in determining how the law will be implemented, consistent with our values and the rule of law, which are at the heart of our country’s strength.”
What rubbish, coming from a president who taught constitutional law… Sadly, this flagrant subversion of the constitutionally guaranteed right to due process of law was opposed in the Senate by only seven senators, including libertarian Republican Rand Paul and progressive Independent Bernie Sanders.
for The Daily Reckoning