from Icarus from Turd’s blog………a most excellent comment!

”One of my favorite movies of all time is The Sting.  In the movie, Robert Redford and Paul Newman get together and scam a racketeer named Doyle Lonnegan.  The beauty of the movie as it plays out, is that in the end, Lonnegan doesn’t even know he’s been had.  The theme therefore of the movie is that the best scams, the successful scams, the permanent scams, are the ones where the mark doesn’t recognize he’s been cheated.  That way he doesn’t fight back.  He accepts the loss and moves on.

We as Americans are the mark, and because of a total lack of transparency, and inconsistent data (phony inflation numbers) put out by our government, we don’t even recognize that we are being robbed.  Eventually if nothing is done, we will end up losing our wealth as a nation. We will then accept the losses and move on…because we don’t recognize the scam that is currently occurring, right before our eyes.  Call it the perfect crime if you will. Paul Newman would be proud.

We will accept the loss of our social security purchasing power.  Recently Congress and the Administration have introduced a bill to change the cost of living index social security is based on.  They want to change the cost of living index from the Consumer Price Index (CPI) to a new “Chained” CPI index.  It will “save” us hundreds of billions of dollars over the years.  Where did those hundreds of billions of dollars come from? Those hundreds of billion dollars will come right out of the pockets of those who paid into the social security system for years.  By using the chained CPI they will understate inflation by 3 to 4% a year more than they are understating it today.  Run those numbers out for 30 years, and 30 years from now your Social Security benefit will purchase one third of what it does today.  Now I know that social security has its problems…but they are really small problems that can be solved today if you just lock a few congressmen in a room for 30 minutes.  This letter’s purpose is not to address the current issues with Social Security, only to say that this is NOT an insurmountable problem, if we address the issue TODAY.  Instead of fixing it, they are slowly going to take this benefit away from us, and because we don’t recognize what’s happening…we will accept the losses and move on.  A perfect scam, the mark (us) will never recognize we’ve been cheated.

We will accept the loss of our pensions.  If there is no money in our pensions we will accept their bankruptcy.  Why are they bankrupt is the question we should ask? They are bankrupt because companies, municipalities and states lobbied Congress to allow pension plans to ‘assume’ a rate of return of 8% a year every year for the next 50 years.  This way they didn’t have to put near enough money aside today to cover the plans liabilities in the future.  An 8% return every single year is ludicrous.  To be ‘safe’,  pension plans typically put half their money in bonds, and half in stocks.  If bonds pay 2% (like they are today), then the stock portion must return 14% EACH AND EVERY YEAR to average 8%.  Impossible over the long term, it’s never happened in the past and will never happen in the future.  When the pension money runs out, which they all will, we will assume it is the natural order of things,…..we will accept the losses and move on.  A perfect scam, the mark (us) doesn’t recognize we’ve been cheated.

We accept the current Zero Interest Rate policy (ZIRP).  Interest rates are currently being forced down to zero by the Federal Reserve’s massive buying of long term bonds.  Massive buying of anything causes the price to go up.  When bond prices go up, the interest rates those bonds pay go down.  The market would normally set interest rates in a slow economy at 5%.  The FED has singlehandedly pushed these rates to zero.  In effect  ‘stealing’  5% a year from anyone who has cash in the bank.  Where is this 5% going?  It’s going to the banks of course (the owners of the FED).  They pay you zero percent for your money and then loan it back to you at 5, 8, 10 or even 20% (think credit card debt) and pocket the difference.  Why do we allow this massive theft from savers and retirees?  Because we don’t recognize the scam.  We accept our losses as the natural order of things and move on.  The perfect scam, the mark (us) doesn’t recognize we’ve been cheated.

We will accept inflation destroying our purchasing power, and the decline in our standard of living.  The massive inflation of the Carter years was brought on by an increase in money printing to cover the government’s liabilities of the early seventies.  In particular the growing war on poverty and the Vietnam war.  When prices started to go up, WAGES FOLLOWED.  A self-fulfilling feedback loop was created back then.  Prices up, wages up.  Wages up, prices up.  It was extremely difficult to break this cycle.  Today prices are going up, but wages are not (wages are down 8% versus inflation since 2000).  The reason?  The inflation numbers put out by the government are bogus.  They say current inflation is 1.7%.  Anyone believe that one?  I don’t, but employers sure do, therefore salaries are stagnant.  The expected inflation caused by massive money printing is not being fed by the wage increase feedback loop.  Can you imagine anyone in today’s economy going in to their Boss and demanding an 8% salary increase (which is the inflation rate today as measured using 1980 methodology) when the government is stating that real inflation is only 1%?  Because of the misstating of inflation, wages are actually declining in real terms and the current ‘growth’ of the economy is grossly misrepresented.  Joe Sixpack can’t understand why he’s getting further and further behind.  Since he doesn’t fully understand why he’s struggling as never before, he accepts the losses as the natural order of things and moves on.  Another perfect scam, the mark (us) doesn’t recognize we’ve been cheated.

That brings us to the current markets.  We hit all-time highs almost daily this month.  Why?  Because the market goes up on bad news and goes down on good news.  Why is that?  Let me explain. Market participants recognize that the markets are going up simply because the FED is pumping the banks, and the markets, with massive amounts of money (liquidity).  The FED loans the banks newly printed money at 0% interest and then encourages the banks to deposit the same money back at the FED bank.  The FED then pays them 1/4% on the money they just loaned to them at 0%.  (Let me get a few trillion of that sweet deal!) The banks make a small profit, and then take that money and use it as collateral to purchase stocks.  If the economy is going badly, the FED will keep up the money printing going….therefore the banks will buy stocks and the markets will continue to rise.  If things start to go too smoothly, the FED might stop printing, the banks will stop buying stocks, and the markets will go down. Bad economy, market up.  Good economy, market down.  It’s bizzaro land out there.    Keep in mind that the too big to fail banks have NO RISK by investing in stocks.  If stocks go up they make money.  If stocks go down, the FED will bail them out….again.  Heads I win, tails I win.  A great deal if you can get it.  We can just look at the market action last week when Ben Bernanke spoke.  In his semiannual report to Congress he began with a statement saying that the FED will continue to print money in the basement, and the market (as measured by the Dow Jones) immediately went up 100 points.  At the end of his remarks he hedged, saying that if the economy continues to get better, the FED would consider tapering, or cutting back, on the money printing.  The markets responded and went down 150 points.  This is solely a FED liquidity driven market.  It is driven not by fundamentals, but by money printing by the FED…and the big money knows it.  The scam here is that by keeping bond interest rates at zero, Bernanke is FORCING savers to hunt for returns.  He is FORCING retirees to go into the much riskier equity market to get some type of return.  When the markets inevitably decline, as they always do.  Those same retirees will lose a boatload of money because they were FORCED to take on way too much risk.  They will accept their losses as the natural order of things and move on (in poverty).  The perfect scam, the mark won’t recognize he’s been cheated.

The banks, and the corporate interests on Wall Street own this country.  “We The People” have long ago abrogated our responsibility to keep the politicians in check and serve the population at large.  The politicians now serve their money masters, the big Wall Street contributors.  You can call it legalized bribery, because that’s what it is.  These guys are wicked smart however.  They are raping the public for the benefit of the big moneyed interests, and the public doesn’t even know it’s happening!  Unfortunately we are all Doyle Lonnegan now.  Our selfishness, arrogance, and indifference has closed our eyes to what is really happening, and has allowed the big moneyed interests to take control of both political parties…..we have allowed them to put on the scam of the millennium, to pillage all of our assets eventually, and it’s the perfect scam because we don’t even recognize it.”

Sorry if it’s somewhat off topic.  I thought you might be interested.

Icarus

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