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August 7, 2010

Issue 108  -  Unsustainable

Sometimes you see something that a friend or family member is doing that immediately strikes you as crazy.  I have a co-worker that is deep in debt and yet they are going on vacation by using a credit card.....yes, crazy.  This is the society we have become where NOTHING is postponed, where gratification is instant, and if it isn't now, it isn't.  This has been propagated by our own government, with the Federal Reserve supplying the fuel and it WILL end.  Our government is the poster child for spending what it doesn't have.  I work for the government and in the places I frequent, I haven't seen more building and construction in the last twenty years.  Yet, the government claims that sacrifices must be made.  Does this list of recently passed earmarks sound like sacrifice:

The Pig Book Summary profiles the most egregious examples, breaks down pork per capita by state, and presents the annual Oinker Awards.  All 9,129 projects are listed in a searchable database on CAGW’s website   Examples of pork in the 2010 Pig Book include:

  • $465,000,000 for the alternate engine for the Joint Strike Fighter;

  • $5,000,000 for the Presidio Heritage Center in California;

  • $1,000,000 for Portsmouth Music Hall in New Hampshire;

  • $400,000 for the USA Swimming Foundation in New Jersey;

  • $300,000 for Carnegie Hall in New York City;

  • $250,000 for the Monroe County Farmer’s Market in Kentucky;

  • $200,000 for the Washington National Opera in the District of Columbia; and

  • $206,000 for wool research in Montana, Texas, and Wyoming

Yeah, we're sure "cutting it to the bone" aren't we?  Opera house?  Farmer's market?  Where is the discipline?  Where is idea that the people's money should be safeguarded.  That they have a DUTY to do the right thing and not what feels good or get's them re-elected?   There are hardly any "honest" congressional members, just hucksters and charlatans .  How about Guantanamo Bay?  How much did that cost us?  Oh, by the way that's closed now isn't it?  It's not?  Mmmmm.....maybe I heard the president wrong:

Guantanamo Bay's $2 Billion Price tag

— By Elizabeth Gettelman

| Thu Jun. 10, 2010 5:00 AM PDT
 The Washington Post recently got ahold of an itemized receipt of DOD spending at Guantanamo, one that confirms both the runamokery of contracting excess and the Bush adminstration's oversized expectations for the Cuban outpost. The notorious detention center, Don Rumsfeld's "least worst place" for terrorists now imprisons 181 detainees (down from a high of 680) and was ordered closed by President Obama last year. But the bulk of the Pentagon's spending was done by then, set in motion in early 2002 when of the prison was added to the century-old naval base.

The grand total for base renovations, when operating costs and outlays for the top-secret Camp 7 are considered, is estimated at around $2 billion, which puts the per prisoner tally right now at about $11 million per prisoner. Even just considering the $500 million in capital expenditures detailed in the Post that's still $2.8 million per prisoner. True, the military personnel stationed at the base should be comfortable and not feel completely isolated on the 45 square-mile swath of island where Gitmo is based. But at the same time, the cash thrown down suggests an extravagant expansion and the investment in Guantanamo Bay as the crown-jewel HQ in the US's War on Terror.

There are legit, if high, construction costs, like $2.6 million for a road stretching 8-miles along the fenced and mined perimeter of the base (bordering Cuba), $18.2 million for a hospital, and $2.9 million for a psych ward. But some of the expenditures seem comically excessive and characteristically overpriced. Some particulars:

KBR's bill for building prison facilities: $169 million (not including bonuses)

Courthouse complex: $13 million

Baseball and football fields: $7.3 million

27 playgrounds:* $3.5 million

A heretofore empty sleeping quarters for visitors attending military commissions: $2.2 million

KFC/Taco Bell building remodel: $773,000

Starbucks coffee house (and ice cream shop) building remodel: $683,000

An unused go-kart track: $296,000

"Club Survivor," an abandoned volleyball court: $249,000

Marquee welcome signs: $188,000

*There are only 398 kids under 18 at Gitmo right now, that's a playground for every 15 kids. Playgrounds are awesome and all but how could there ever be enough people on base, playing with their kids at the same time, or even playing without kids, to warrant 27 of them?

 So the base has all sorts of amenities now. And if the prison is indeed closed we'll still have our naval base in Cuba, but it likely won't be crowded with military personnel. So what do we do with the courthouse, the coffee house, the playgrounds? Fewer people will use them or we'll find a reason to stock the base full to enjoy the surroundings. Or maybe the military can set up vacation packages for the curious to tour the base: stay in the sleeping quarters, witness a mock tribunal, visit the prison, wear orange...

It's not a very tasteful idea, but Americans are suckers for a good prison tour. And maybe we could send classes there on field trips so we could all, you know, learn a thing or two from our past transgressions.

Gee, that was a great use of taxpayer's money, huh?  You see, this is all to keep the trains running.  There is no NEED to spend this amount on Gitmo, it's just a WAY to spend money.  Money must continuously be injected into the system to keep it from imploding.  Need more proof?  How about an embassy that's as big as the Iraq.  Oh yeah, we're pulling out of there REAL soon, trust us:
The largest embassy EVER.  Almost 3/4 of a mile long?  I'm sure Obama is getting ready to put a stop to this and close it down.  Why do we need an embassy bigger than the Vatican?  Because we AREN'T leaving, that's why.  We also have this delightful news to deal with:

Social Security in the red this year

Social Security will pay out more this year than it gets in payroll taxes, marking the first time since the program will be in the red since it was overhauled in 1983, according to the annual authoritative report released Thursday by the program's actuary.
I thought it was in the black until MUCH later in the future?  Isn't the date for problems supposed to me in 2025?  Wait, not so fast.  Treasury Secretary Geithner has words of encouragement:

And while Social Security cash flow will likely head back into the black for a few years after that, starting in 2015 it looks to stay in the red for the long haul, the trustees said in their annual report.

"The improving economy is expected to result in rough balance between Social Security taxes and expenditures for several years before the retirement of the baby boom generation swells the beneficiary population and causes deficits to grow rapidly," Treasury Secretary Tim Geithner said.

Riiiiiiigggghhhhhhttttt.......this ponzi scheme is going to get better in 2015?  Excuse me while I laugh.  Ok, I'm back.  Our tax cheating secretary is telling us that the situation is going to get better.  For some reason I don't really believe him.  Do you?  I suppose housing is going to get better in 2015 too.  Just not now:

Fannie Mae: Home Prices To Decline Into Next Year

Home prices will decline into next year, Fannie Mae said Thursday, reversing earlier projections that the housing market would stabilize this year.

This whole facade of deceit and misdirection is fooling less and less people.  Eventually, the rubes will be so few that the tide will turn and the switch will flip.  Iceland collapsed with virtually no warning.  We could do the same.  I expect it.  So do the powers that be as they go to more and more desperate means: (from
Forget Instarefi: Here Comes Instaloanforgiveness

Submitted by Tyler Durden on 08/05/2010 08:10 -0700

As if the main rumor of the prior week, that the government was going to automatically push rates on all mortgages down to market rates (which as of today hit a fresh record low of 4.49%) was not enough, today James Pethokoukis reports that the latest iteration in the "let's make Fannie and Freddie broker than ever" rumor mill is that the "Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth." As readers will recall, we highlighted a few days ago that the number of underwater mortgages is at least 14.7 million (and likely far more), and amounts to just about $770 Billion in underwater equity. In other words, if the rumor is true, the US taxpayers are about to subsidze over three quarters of a trillion in underwater equity (and bail out banks on the hook for over $2 trillion in impaired debt).
There is no indication if the "instarefi" plan contemplated by Morgan Stanley and Merrill Lynch has been scrapped, but what is certain is that the two plans target two very distinct beneficiary groups: the former plan would mostly benefit middle and upper class mortgage holders who are likely preoccupied to bother with a 200-300 bps refi differential. The loan absolution plan, on the other hand, focuses squarely on the poorest 15 million US households of society. While it is distinctly possible that Obama, in all his economic lunacy, will pass both plans, his advisors have likely done the math and are now convinced which way the negative IRR to the taxpayer will be greater: that is certainly the plan that will be undertaken.
Wow, so now the do gooders of our populace, those who didn't take crazy chances, those who didn't think they could get rich by flipping unbuilt homes, and those who pay their mortgages on time are going to get the shaft one more time.  This whole "socialist" movement makes me ill and to think that those in charge are dead serious about implementing this nonsense.  They know NOTHING!  They are scrambling around and grasping at straws.  I mean, my god just look at what they've passed in the "health care" bill:
I know this hard to read, so here is a pdf link.  This was constructed by Congressman Brady and he claims he left stuff out!  I'm feeling better already. Even if this chart is exaggerated, there is still no way in the world that a system like this is going to save money or improve health care.  No way.  This type of nonsense is becoming more obvious to everyone.  Here is a chart and context of small business owners expectations:
Most of the decline in the overall index came in the Future Expectations Dimension of the index, which measures small-business owners' expectations for their companies' revenues, cash flows, capital spending, number of new jobs, and ease of obtaining credit. The dimension fell 13 points in July to -2 -- the first time in the index's history that future expectations of small-business owners have turned negative, suggesting owners have become slightly pessimistic as a group about their operating environment in the next 12 months.


It is pretty remarkable that the expectations have went negative!  This is a first for the index.  Small businesses are HURTING big time.  Just look around.  Major companies have been much more able to weather the storm due to a strong overseas presence and a much more open line of access to credit.  I'm in the process of trying to buy a house to flip.  The financing was totally opposite of what I thought would happen.  I tried to get local small banks, who were familiar with the area and real estate market, to give me a loan.  They wouldn't.  That simple.  Don't even bother to come in to talk.  So where did I find financing?  Where is the money coming got it, the government entities, Fannie and Freddie.  The government is now the TOTAL market in EVERYTHING.  Every other entity is an afterthought. To show how pervasive this is around the world, I was listening to the Planet Money podcast and it was a story about Haiti.  Small businesses, even outstanding ones, don't have access to credit.  Why?  The banks are lending to the government instead.  Why take a chance lending to 50 small businesses when I can lend the same amount to one entity?
Speaking of intervention and control, the gold and silver markets continue to be rigged beyond belief.  Over the last week all commodities went way up as the dollar sunk, except gold and silver.  What are the odds of that happening?  This chart helps explain it a little:  (from GATA)
This shows the rates that the major banks charge to lease silver from them.  Each color represents a different term.  Notice that they pay YOU to lease silver for 6 months or less?  Now YOU can't do this because YOU don't have a deal with the bullion banks.  They do this knowing that the leaser will immediately sell the silver, thereby, lowering prices.  That's the ONLY reason this makes any sense at all.  Silver is the buy of the century at these levels and someday will take off like a rocket.  Make sure you've got your seat on the deck.
I'll close this week with a video that was done with super high fidelity cameras.  The images they capture are stunning.  Have a great week!