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Archive for February, 2017

incomeq
The economic and political game is clearly rigged in favor of wealthy, and its getting worse. This is a recipe for economic disaster, and which has been closely followed by major Wall Street politicians, such as Ron Wyden, Barack Obama, Mitch McConnell, Orrin Hatch, and George W. Bush.

The richest are getting richer, and their doing so quickly, and at the expense of the rest of us. For the most part, control of the levers of political power is how they have gained their money. It’s that simple. The rich control the Republican and Democratic parties, and with them, they control all three branches of the federal government, as well as most state and local governments. And that’s just in the USA.

In early 2016 Oxfam reported that just 62 individuals had the same wealth as the bottom half of humanity. About a year later Oxfam reported that just eight men had the same wealth as the world’s bottom half. Based on the same methodology and data sources used by Oxfam, that number is now down to six.

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There is a reason why the rich, and in particular the super rich, continue to get richer. The politicians of both major political parties work as agents on behalf of their billionaire benefactors, whether its Republicans such as Mitch McConnell, or Democrats like Ron Wyden.

This is why the poorest half (and more) of the world has continued to lose wealth; and the very richest individuals—especially the top thousand or so—continue to add billions of dollars to their massive fortunes. Inequality deniers and apologists say the Oxfam methodology is flawed, but they’re missing the big picture. Whether it’s six individuals or 62 or 1,000 doesn’t really matter. The data from the Credit Suisse Global Wealth Databook (GWD) and the Forbes Billionaire List provide the best available tools to make it clear that inequality is extreme and pathological and getting worse every year.

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As of Feb. 17 of 2017, the world’s six richest individuals (all men) had $412 billion. Just a year ago, on March 1, 2016, the world’s six richest men had $343 billion. They’re the same men today, although slightly rearranged as they play “king of the hill”: Bill Gates, Warren Buffett, Jeff Bezos, Amancio Ortega, Mark Zuckerberg, Carlos Slim Helu (with Larry Ellison jockeying for position). The wealth of these six men increased by $69 billion in just one year.

According to a new report, which can be accessed below, the poorest 50 percent of the population has seen their share of wealth decline. And the richest 500 people own more wealth that the bottom 70 percent.

Six Men Own More Wealth Than the Bottom 50 Percent of the World’s Population–EcoWatch.org

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Student Loans
Student loans are a scam intended to redistribute income from college students to wealthy individual and institutional investors. College students today owe more than $1.4 trillion dollars in student loans, and that figure is getting bigger by the day. Total student loans outstanding exceeded total credit card debt when it hit $1.2 trillion in 2014. Only mortgage debt is greater than student loan debt, but with home values going up, mortgage debt is an investment, whereas student loans have become something of a gamble for a large number of students. (Friedman)

Why do the student loans keep piling up?

About twenty-three years ago, somebody on Wall Street discovered student loans could be securitized. That’s a situation in which investment firms buy student loans from issuers, pool them together, and then issue bonds backed by the loans to wealthy investors. The loan originators earn hefty fees with every loan they sell. The investment firms also obtain a large fee with every bond they sell. (Carrillo)

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For example, a private commercial bank might issue $10 million in student loans at 6 percent interest. A student spends four or five years in college, and then spends ten to twenty years paying off a loan. So that $10 million principal can earn another $10 million in interest or more over the lifetime of the loan. An investment bank might pay $2 million or more for the $10 million in loans from the commercial bank. Then the investment bank will turn around and collect millions in fees from investors for the same loans once they’re bundled together and bonds are issued. The investors might experience a growth in the value of their bonds, so they can sell them, in which case, somebody will get a fee for performing the task. There’s money to be had for all involved in this process, except for the borrowers. (Carrillo)

Most student loans are guaranteed by the federal government. So there’s no risk to investors. It’s free money. The federal government pays the interest on the loans to the investment banks even when the students are still in school. Once the students are out of school, they are required to pay on the interest and the principal to the bondholders. This is how your student loan payments mostly go directly into the pockets of the 1 percent via these bonds. Some of the proceeds go to the service providers.

The Wall Street business strategy on this matter has always been simple: Push the federal government to limit federal grants to college students, and expand the student loan program. That’s precisely what has occurred. In 2016, total outstanding student loans represented roughly 7.5 percent of the United States gross domestic product, up from 3.5 percent only ten years earlier. Nearly 43 million Americans are chained to student loan debt, each with an average balance of $30,000. (Wikipedia)

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While the total number of Federal Pell grants has grown in current dollars since 1976, the cost of education has grown faster. In 1976, for example, the average Pell grant paid 72 percent of the maximum expense of attending a public four year college or university. This figure grew to 79 percent in 1979. Nowadays, the average Pell grant is less than half of that, hovering inside the 32 to 34 percent range. (ACE)

This forces many students to borrow money to help finance their higher education, and it also plays straight into the hands of wealthy investors. The interests of those investors seem to coincide with the concerns of many politicians within the federal government and both major political parties. Student loan default rates jumped from 2010 to 2013. Along with other corporate media sources, CNN reported in 2012 that “The percentage of borrowers who defaulted on their federal student loans within two years of their first payment jumped to 9.1% in fiscal year 2011, up from 8.8% the previous year, according to U.S. Department of Education data.” Investors began selling off their bonds, resulting in declining values. Something had to be done to restore investor confidence, and so the federal government doubled student loan interest rates on all new loans from 3.4 to 6.8 percent on July 1, 2013. (Sheehy)

This increased the return on investment while doubling the burden on the 99 percent who take out new loans to finance what is called the American dream, but it’s really becoming the American nightmare. This is rightly called income redistribution. The doubling of student loan interest rates benefited smaller Wall Street investment banks, as well as such Wall Street heavyweights as JP Morgan/Chase and Goldman Sachs. Loan originators and investment companies receive billions of dollars in fees every year from new student loans. Both JP Morgan/Chase and Goldman Sachs are publicly traded corporations. Both corporations are listed among the Dow Jones Industrials, and both keep their stock prices rising, in part, to the securitization of student loans, which benefits their affluent shareholders.

The more interest students are forced to pay, the higher the bonds can sell for, and the more attractive they are to investors, especially since the government guarantees them. (Carrillo) In this way, America’s higher education policies have been legislatively constructed so as to redistribute the income of the 99 to the 1 percent via higher student loan debt.

Wall Street banks also rigged the game even more against student loan borrowers by having the government make it almost impossible to discharge student loan debt through bankruptcy. Students are tied to the debt until it’s paid, or they die. This leaves less money for students to spend when they graduate, forcing them to curtail their purchases, and weakening the economy in the process.

When the US congress and President Obama allowed the interest rate of new student loans to double to 6.8 percent in 2013, the public outcry was so heavily against it that politicians had to reduce student loan interest rates within a year. The burden for students and their families had been too great. The rate was dropped to 4.9 percent in 2014, which was still 50 percent higher than in 2012. (Lobosco)

Bernie Sanders was right when he declared the government could provide free public education to its people. The money is there, and always has been. During the economic crisis of 2008-2009, the federal government and the Federal Reserve gave out tens of trillions of dollars to rich investors, investment banks and hedge funds. Politicians called these actions “quantitative easing” and “bailouts.” (Irvin) See The $26 Trillion Bailout to Save Incompetent but Rich Investors-JohnHively.wordpress.com. If trillions of dollars to bail out the rich are there whenever they need it, why isn’t that money also available when the rest of us need it?

The answer, of course, is simple.

Like many other issues, student loans are a corrupt, financially rigged game that shows how the government acts as a conduit in redistributing income from the 99 to the 1 percent when it doesn’t have to. Just follow the money and you will know who is corrupting your government.

Works Cited
Friedman, D. (May 17, 2014). Americans Owe $1.2 Trillion Dollars In Student Loans. New York Daily News. http://www.nydailynews.com/news/national/americans-owe-1-2-trillion-student-loans-article-1.1796606

American Council on Education, (ACE) http://www.acenet.edu/news-room/Documents/FactSheet-Pell-Grant-Funding-History-1976-2010.pdf

Merganser Capital Management, Investment Memo http://www.merganser.com/PDF/Memo/2015-Q3.pdf
http://money.cnn.com/2012/09/28/pf/college/student-loan-defaults/

Carrillo, R. (April 14, 2016). How Wall Street Profits From Student Debt, Rolling Stone. http://www.rollingstone.com/politics/news/how-wall-street-profits-from-student-debt-20160414

Irvin, N. (October 29, 2014). Quantitative Easing is Ending, Here’s what it did, in Charts. New York Times. October 29, 2014. https://www.nytimes.com/2014/10/30/upshot/quantitative-easing-is-about-to-end-heres-what-it-did-in-seven-charts.html?_r=0

Sheehy, K. (July 3, 2013). What the Stafford Loan Rate Hike Means for Students. US News and World Report. http://www.usnews.com/education/best-colleges/paying-for-college/articles/2013/07/03/what-the-stafford-loan-interest-rate-hike-means-for-students

Lobosco, K. (June 30, 2016). Student Loan Intereest Rates Are Going Down. CNN Money. http://money.cnn.com/2016/06/30/pf/college/student-loan-interest-rates/

Wikipedia, Student Loans in the United States. https://en.wikipedia.org/wiki/Student_loans_in_the_United_States

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On February 17 2017, the US senate will resume its duties; one of which will be to confirm or reject Neil Gorsuch as President Donald Trump’s choice to be the next US Supreme Court Justice.

Several days ago, the Guardian reported Trump had urged Wall Street Senate Majority Leader Mitch McConnell to eliminate Democrats potential use of the filibuster to stop Gorsuch, which is the so-called nuclear option.

Gorsuch needs sixty out of 100 possible senate votes in order to be confirmed to the post. The nuclear option would eliminate the sixty vote threshold, by instituting a fifty-one vote threshold. The Republicans hold fifty-two seats in the US senate, while the Democrats hold forty-eight. That means eight Democrats must vote to sustain Gorsuch’s nomination, or the candidate will fail. If Gorsuch fails to get sixty votes, the Democrats can filibuster his nomination, putting an end to it, unless the so-called nuclear option is used by Republicans. That’s not going to happen.

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The nuclear option would mean the end of the filibuster in the US senate. The filibuster has been used to ensure a sixty vote majority is always needed to pass any legislation. The result has been years of gridlock. Politicians of both major political parties have abused the filibuster over the years, so as to ensure they can fail to solve the problems that have perplexed the nation, and have a ready made excuse for the folks back home.

Once the sixty vote threshold is eliminated, however temporarily, a simple up and down vote for Gorsuch can take place. However, Republican voters might get a bit angry the nuclear option isn’t being used for their issues. The Republican Party establishment, with control over the white house and both houses of congress, could easily end legalized abortion. That’s what their base wants them to do.

However, doing so would eliminate abortion rights as a wedge issue with which to manipulate the emotions of grassroots Republicans, and divert their attention from other things, such as passing trade treaties that make it easy for US corporations to export US jobs overseas, and redistribute the difference between the older higher US pay and the new lower foreign wages to the 1 percent via higher corporate profits, share prices and surging dividends.

Likewise, the Democratic establishment will not want the nuclear option used. Then they’d need to please the grassroots of their base for a simple up and down vote can occur over numerous issues that conveniently cannot reach the sixty vote threshold. This includes a vote for amnesty of undocumented immigrants. A vote for the Dream Act can occur. A vote for a renegotiated NAFTA can take place. A vote to raise tariffs on US goods manufactured overseas and exported to the United States can occur. A vote to raise the minimum wage would be a great opportunity. A vote to rein in the excesses of Wall Street can be had. A vote to tie CEO compensation to corporate crimes can take place, such as corporate money laundering of Mexican drug cartel money.

The Republican and Democratic establishments, which are the major corporations, Wall Street executives, and billionaire investors who control the politicians of both political parties, will not want to see an aroused Republican base demanding simple majority votes on issues dear to their hearts, and which have been carefully cultivated by the corporate media. That would be against the financial interests of the establishment members. So, too, would the nuclear option be against their interests.

Like the conservative news media outlets, these issues are things the Guardian editors dare not mention. The Guardian is regarded as a liberal newspaper, and so the aim of the story is to raise the interest of liberal readers. However, the first duty of any editor is to edit and omit all news stories with a view to what the news ought to be, and that is closely related to the second duty of an editor, which is to never offend advertisers. The advertisers in major media news outlets are largely politically and financially powerful corporations. The loss of their advertising dollars would be a sharp blow to any news media outlet, such as the Guardian. The Guardian editors must walk a tightrope; keep liberals reading, while pleasing major corporate advertisers.

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So expect the Democratic establishment to come up with at least eight Wall Street senators willing to vote for Gorsuch to avoid the nuclear option. Expect Wall Street Senator Ron Wyden to be the first to cross the aisle on behalf of Gorsuch to avoid raising the hopes of Democratic and Republican voters everywhere once the nuclear option appears.

 

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How things have changed! Back in the 1960’s, Rachel Carson’s book Silent Spring warned about the human health dangers caused by insecticides. Industrial pollution ensured that US lakes and rivers caught fire. In 1970, conservative Republican US President Richard Nixon signed the legislation creating the Environmental Protection Agency (EPA). The EPA’s job was to clean up the pollution. The result is that much of that US industrial pollution has been exported to China, India and elsewhere.

US business leaders have long chafed under the chains of the EPA. The more pollution these folks are allowed to create, the more profits their corporations earn, the higher corporate share and bond prices rise. So big business has conspired to takeover the EPA, so as to bend the rules to their favor.

Scott Pruitt, a loyal servant of the profit needs of big oil now heads the EPA. President Franklin Roosevelt once said that businessmen had made certain that government had become an appendage of their profit making before he took office. Pruitt is now in position to ensure the EPA does not do its job in the USA. So expect human health considerations to be shunt aside in favor of the profit desires of big oil and Koch Industries, because as Attorney General of Oklahoma, that is precisely how he defined his job, as you can see from the video above.

Most of the politicians governing the US today are among the most corrupt in world history, and that includes US corporate apparatchiks, such as Mitch McConnell and Ron Wyden.

Think about this. Nixon is considered to have been one of the most corrupt president’s in US history. He was a man who’s crimes were considered so great that he was forced to resign from his office. Yet he ignored the advice and bribes of his corporate sponsors to create the EPA. And the crimes he committed pale in comparison to President Bush lying us into war, or to embroil us in the Iran-Contra scandal.

Something has gone terribly wrong with the USA since Nixon. Crimes are committed by people in high office, and there is no concern for punishment, because the criminals are in charge of the white house, the senate, the US house of representatives, and the US supreme court. There’s no one to answer to for ones crimes in government nowadays. The US government is rotten through the core with corruption.

Yet, there is an economic hurricane just around the corner. When that hits, we’ll be able to clean house, like FDR did in 1933. Get ready.

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President Trump signed his newest executive order, rolling back the insanely weak Wall Street regulations balled up in a piece of legislation called Dodd-Frank.

This legislation does almost nothing to regulate Wall Street. However, no doubt, protests will erupt around the globe over essentially nothing. That’s because the big banks are merely acting as front companies for their much larger hedge funds, which are nearly completely unregulated investment companies. So yes, the front companies are weakly regulated by Dodd-Frank.

Have no fear! Like many executive orders, this one is illegal. It takes an act of congress to repeal Dodd-Frank. Then the president can sign the legislation repealing the law. Apparently, Trump doesn’t know this. He’s beginning to appear as ignorant on constitutional matters as President George W. Bush (the worst president in US history, and most likely the most corrupt and dumbest, as well) and the childlike naivety of President Ronald Reagan, who may have been suffering from Alzheimer disease during much of his presidency, at least according to his son, Ronald. I could also point out that when Reagan came on national television about trading arms for hostages with Iran he could say, “I don’t remember.” He sounded like a liar, or a person suffering from the disease. Anyway, back to the main point.

We’ve been played by both major political parties on the authenticity and legality of executive orders. They are not mentioned in the US constitution, so no president has such powers. But the leaders of both major parties make certain not to let the public know this.

So don’t blow too much steam over Trump. He’s either foolish, or he’s playing a role to maintain the support of those who put him in office. He’s big on theatrics, so it’s possibly the latter.

Look to the future. Trump is a one-term president because he’s coming along at the wrong time and the wrong place in history.

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Texas and Kansas are the homes of low taxes, low wages and fewer regulations. California is the state of high taxes (especially on the rich), high wages and more regulations. According to conservative economic gospel, Kansas and Texas should be outperforming California.

However, the reality is the opposite. California easily outperforms Kansas and Texas and any other states that are low tax, low wage, and fewer regulations. Robert Reich explains why in the video above.

On the other hand, Minnesota is a higher tax state than Wisconsin. Guess which one is performing the best. You bet. It’s Minnesota.

Forbes magazine listed Minnesota No. 9 in its 2014 ranking of best states for business, even though it had a higher tax rate than Wisconsin. In this same ranking, Wisconsin rated number 32.

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President Donald Trump has attacked the H1B Visa program, and high tech executives are after his hide for it.

The H1-B visa is supposed to allow US companies to import foreign workers for up to three years if there are insufficient US workers to fill positions. However, that’s not how it has worked.

US corporations regularly import guest workers via the H1-B program to replace their US workers, and they pay their foreign workers less than their US workers. In effect, the US government is allowing the H1-B program to lower US wages, which increases profits and share prices. We all know Wall Street and several billionaires call the shots of both major political parties.

The US high tech workers at Southern Edison, Toys R Us, Disneyland, Intel, the University of California and hundreds of other companies have seen their jobs vanish as foreigners have taken their place. Click Computerworld for another article on this. In many cases, the US workers have been forced to train their replacements.

Once Trump declared his opposition to the H1-B Visa program, high tech spokespeople all over the US declared there was a shortage of US high tech workers. This, of course, was a lie. But the US news media, both conservative and liberal, gleefully went along with the lie.

According to the Economic Policy Institute,

1 “The flow of U.S. students (citizens and permanent residents) into STEM fields has been strong over the past decade, and the number of U.S. graduates with STEM majors appears to be responsive to changes in employment levels and wages.
2 For every two students that U.S. colleges graduate with STEM degrees, only one is hired into a STEM job.
3. In computer and information science and in engineering, U.S. colleges graduate 50 percent more students than are hired into those fields each year; of the computer science graduates not entering the IT workforce, 32 percent say it is because IT jobs are unavailable, and 53 percent say they found better job opportunities outside of IT occupations. These responses suggest that the supply of graduates is substantially larger than the demand for them in industry.” Economic Policy Institute–Guest Workers high skill labor market analysis

The H1-B visa program has been used to keep US high tech workers unemployed and high tech wages down. They’ve been kept down since the “inception of the program.” The program is likely why wages for US high tech workers have been stagnant in real terms since 1990.

Even if you don’t side with President Trump on any other issue, even if you absolutely hate his guts, side with him on this issue.

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