Who's to blame for the economy?
It's not just a political question, it's an economic question as well. It is essential that this question be answered because without an answer we won't know what to do to fix it.

 Remember 1999? The federal budget was balanced. The trade deficit was still manageable. The unemployment rate was low, as was the poverty rate. There were plenty of good paying jobs out there. Corporations were making record profits.

 It was also the year that the economy was broken.

"Let's hope we are all wealthy and retired by the time this house of cards falters."
 - email sent Dec. 15, 2006, from one rating agency to another

 For those of you who familiar with my writing, you've probably seen me use the term "Wall Street exists to separate you from your money."

  It occurred to me the other day that I need to justify that opinion. Therefore here is a partial list of reasons why you should keep your money out of the hands of the Wall Street crooks and banksters. This article will not encompass every way that Wall Street steals from average people like you and me, but it might inform you of a few ways that you may not have been aware of.
  As the old saying goes, "Forwarned is forearmed."

  So without further delay, here's a list of ways that you are being robbed, day after day, year after year.

"We march on starvation, we march against death,
we're ragged, we've nothing but body and breath;
From north and from south, from east and from west
the army of hunger is marching."
 - Hunger Marcher's song, 1932

 Hard Times have arrived in America.
A little over a week ago, Milwaukee saw its first food riot (or sorts) in many decades.
  With that in mind I decided to repost a diary that didn't get much attention the first time around.

 Individual economic predictions are usually pretty useless, and predictions of catastrophe are as ubiquitous as rednecks at a NASCAR race. Therefore when I see general doom-and-gloom predictions for the economy I tend to ignore them.

 On the other hand, there is a tipping point. When both official and private sources all over the world that aren't known for being alarmist start screaming "fire!" (or in the case of the IMF, "Think the unthinkable") then it is time to pay attention.

 Before I make a few personal comments let me quote my sources.

 It sure is great being a banker these days.

Let's take the example of Countrywide Financial.
  Today both California and Illinois opened lawsuits against Countrywide for "using misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans they didn't fully understand". Also today, Washington State is moving to pull Countrywide's licenses after it found  "evidence of predatory practices aimed at minorities".
  This is after a year in which Countrywide stock has dropped from nearly 40 to just 4.58.

 What's so great about that? Look no further than Washington D.C. for an answer.

 "I'm very well versed in economics."
  - John McCain, January 24, 2008

 Senator McCain may think he knows a few things about economics, but his latest comments show an increasingly widening gap between reality and his version of reality. This is one of those "Oh. My. God" moments.

 The presumptive Republican presidential nominee regularly asserts that 1.3 million people worldwide ``make a living off EBay.'' He holds up the figure as evidence the world's largest Internet auctioneer is a model for job and economic growth.

 Something tells me that selling beeny babbies on EBay isn't a real economic plan. In fact, the idea of selling used stuff online is some sort of economic model that we should aspire to as a country shows such a complete lack of understanding of fundamentals that it should scare you.

  Around 8 o'clock in the morning on July 5, 1934, shop owners in the mission district of San Francisco were opening for business. Bankers and stock brokers were already at work in the financial district. Construction workers were busy building the new Oakland Bay Bridge.

 Meanwhile, down near the waterfront, a Belt Line locomotive began nudging two refrigerator cars towards Matson Line docks on Pier 30. 1,000 police prepared to square off against 5,000 striking longshoremen in a pitched battle that would last all day long.
  It was the first of two climatic episodes that would forever change the shape of labor unions on the west coast.

  Congress may be still debating a bailout bill, but the bailout of the housing market is already in progress.

 Freddie Mac and its fellow GSE Fannie Mae are now financing more than 80 percent of all mortgages in the U.S., up from 40 percent a year ago.

As lenders rely on Freddie Mac to buy their loans, the company is charging higher prices and increasing market share. Freddie Mac, which has a $738 billion portfolio of mortgage bonds and guarantees $1.78 trillion in home loans, is raising prices next month for the fourth time.

"We are nearly the only game in town, and we think we are going to be able to enjoy that position for a number of years," Piszel said.

 Considering the implied promise of taxpayer backing for these government-sponsored entities combined with the collapsing real estate market, this should scare everyone.
  But it doesn't stop there.

 Just a quick glance at the headlines will tell you all you need to know about high gas prices. Senate Dems aim to stop oil speculators, Stop the oil speculators, These Are the Folks Behind the Price Spike.
 
 Yep, it's pretty clear that all of our energy woes can be attributed to a small group of evil speculators who are driving up the price of gas. They must have made a fortune when the price of oil spiked $16 a barrel just Friday to $139 (an entire barrel of oil was going for $11 in 1998).

 Well, actually...reality is slightly different. In fact, reality is pretty much the opposite of what the media and politicians are telling you.

 A news article came out yesterday that received almost no attention. Yet its significance cannot be overstated to those still hoping for a large drop in energy prices.

 Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude futures rose to records and U.S. regulators started investigating trading, government data show.

So-called speculative net long positions fell to 25,867 contracts on the New York Mercantile Exchange in the week ended May 27 from a record 127,491 on July 31, according to a U.S. Commodity Futures Trading Commission report on May 30.

 Quite simply, this destroys every single sound bite you've heard out of Washington and the mainstream news media over why energy prices are so high.

 If there was ever a sign that the housing market was nowhere near a bottom, this has got to be it. We aren't talking about Detroit or Cleveland here. This is San Diego. We aren't talking about some slumlord's shack. These are new homes.

 Am I pointing this out because it is a great deal? Not even close. This is a clear sign that home prices will fall much further.
  Allow me to explain.

 Billionaire investor George Soros didn't mince words yesterday.

 "This is a period of wealth destruction. The people who make money will be few and far between. There will be a lot more money lost than made.
  "I think this is probably more serious than anything in our lifetime," he says. In short, his feeling is that the United States and Britain are facing a recession of a scale greater than the early-1990s, greater even than the 1970s.

 If it was someone other than Soros that was saying this (someone like me, for instance), you could probably ignore these sorts of warnings. There is always someone who will yell, "The End Is Near!"

 On November 22, 1909, thousands of New York shirtwaist textile workers met at the Cooper Union building to meet with the International Ladies Garment Workers Union’s Local 25 leaders to discuss working conditions and wages. Like most organizations in those days, the ILGWU was led by men.

 Memorial Day in Chicago in 1937 was hot and sunny. On the prairie outside the Republic Steel's Chicago plant the strikers and their families began to gather for picnics. Women were dressed in their holiday best. Children could be seen riding on their father's shoulders.
 Sam's Place was nearby. Once a dance-hall, Sam's was now the strike headquarters. Gradually the families drifted over to where a soup kitchen had been set up and where strike leaders gave speeches from a platform. A group of girls began singing IWW union songs, and the men joined in. Plans were being made for a mass demonstration, despite the rumors that the police had something big planned themselves.
 The day seemed just too nice for anything bad to happen.

 I couldn't help but notice the screaming, above-the-fold headline this week in the SF Chronicle, Homes sales get lift, but lid still on prices. It sounded like nearly two years of a contracting real estate market was coming to an end.

 The long slide in home sales may be nearing an end, but that doesn't mean prices are going to rise anytime soon.
...some people saw last month's unusually big surge as a sign the market may be bottoming out.

Any time the news media uses the term "some people" is a clue.
 As it turns out, the article was not just misleading, it skirted the shaky edge of being an outright lie.
 

 A couple days ago it was announced that border agents were going to install razor wire at the Tijuana border. The symbolism is unmistakable. But that isn't what got my attention. The last paragraph of the article did.

 The southern California area has frequently seen violence between rock-throwing Mexican youths and Border Patrol officers, who respond by firing tear gas and pepper spray to disperse the attackers.

 Rock-throwing youths? That sounds suspiciously like a conflict on the other side of the world. How come I haven't heard about this before?
  So I decided to look a little deeper.

"The enduring picture of the intifada is one of young men and boys throwing stones and rocks at Israeli troops."
 - BBC

   On July 3, 1835, in Paterson, New Jersey, nearly 2,000 textile workers walked off the job. The strike was notable for several reasons.

  For one thing the strikers weren't demanding more money, despite the fact that they only made $2 a week (adjusted for inflation, that would be $44 a week today). Their central demand was an 11-hour day (as opposed to the 13.5-hour days they were currently working), and only 9 hours on Saturday instead of a full day.
  That in itself was significant enough. The first strike in American history to limit hours had happened only 7 years earlier, and was also in Paterson, New Jersey. That strike had been crushed after a week when the militia was called in.

  What made this strike worth remembering was who the strikers were - they were children, aged 10 to 18. Many of them girls.

 The official deficit for 2007 was $248.2 billion. However, our national debt increased by $501 Billion in 2007.
  Meanwhile debt obligations for America increased by $2.5 Trillion last year.