A Thousand Words

Debt Is Again Rising to Record Levels - The Gaping Maw Returns

The average consumer is loading up again -

More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out, the New York Post reported Sunday.

Last year, total US consumer debt reached its highest point in a decade, according to a credit card industry observer.

"Now more than ever, families need to work at saving and paying off any outstanding debts," said Howard Dvorkin, a certified public accountant and founder of the credit counseling service Consolidated Credit.

After a few months of reducing credit card debt levels, Dvorkin said, Americans are starting to return to their reliance on debt.

"People made some progress in reducing card debt earlier in the year, but in the last few months, as the stock market started to rise, they started to return to their old ways of charging things," he explained.

In December 2011, the total consumer debt -- which is the combination of non-revolving and revolving debt -- rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers.

Both revolving debt and non-revolving debt increased. Revolving debt, which is credit-card debt, went up by 4.1 percent. Non-revolving debt, which includes loans for cars and education, rose 11.8 percent, the central bank's report said.

The trend -- month to month, quarter to quarter and year to year -- is rising steeply.

The Real Effect
We examined this moral hazard issue back in September -

Remember the talk of garbage assets back in 2008? The initial solution to that issue was essentially a dilution concept in which funds were taken from one group and spread around to "stabilize" another group. This would lead to a better 'capitalized' institution which then wouldn't 'fail'. The problem with this sort of concept is that it doesn't dilute the problem and then the issue evaporates. Rather, the aid is consumed by the troubled assets which begets more troubled assets from the inherent moral hazard. Put simply, you give a shark a meal and he'll go away for a bit, but he's coming back for more later and he will have grown exponentially.

 Looky, looky, the debt shark is back and he has a sparkly new row of teeth. How? "Non-revolving debt, which includes loans for cars and education, rose 11.8 percent..."

Education huh? Now where have I heard that before? Oh yeah, this year's predictions -

The U.S. College bubble begins to pop as longstanding institutions begin to slash their budgets to remain solvent. Some even discuss closing outright. (Start of the "education crisis".) This will be a long recovery as the perception that "education" = "money and success" will be difficult to break.

This is the inherit problem with financing anything. When you don't have to pay now, you can spend whatever you want and have to pay it back and the interest. Of course financial institutions love when you finance because it means that they get a piece of a pie they otherwise wouldn't see. Soon everyone is in on the newest 'game' as the market severely dislocates resources to pursue "profitability".  This is what occurred with the housing bubble, the tech bubble and myriads of others throughout history and is what is propping up the markets right now.

Eventually, someone realizes that they are better off not getting financing and then the rate slows. When this happens, the debt shark starts to suffocate - revenue turns down, positions get cut and liquidity tries to get out "on top". This leads to the bloody debt spiral as the market plunges into a corrective action that dries up all the unnecessary spending. (Who needs a Masters in Liberal Arts to flip burgers?)

Because of this, the debt shark is devious by nature and does not want to accept a downturn. He turns to the victims and pleads his case - 'Hey guys, remember how alive you felt when I was chasing you? We had a system going and need more of this, get back in the water!'

Some will go, some will not. It matters little though because it will not be enough. So the debt shark turns to government force to drive the people back into the water, because 'it has to be this way'. Except this time he wants us to toss our children in the water. We don't really need to go much further as you can rent any semi-decent horror movie to know how this turns out. (Hint - Usually the one guy that doesn't listen gets out alive, if he's lucky. The rest are history.)

Today, the consumer has been coaxed back into the water. He's cautious, but he so misses those awesome beach parties and the water has been cleaned up somewhat since that awful time. But what's this? Is that an arm I see floating over there? And is that a fin that I see....

Update: In case you think this isn't the case here, I present the admitted case of the UK  -

 “The British Government has run out of money because all the money was spent in the good years,” the Chancellor said. “The money and the investment and the jobs need to come from the private sector.”

That's right, the first place we saw the gaping maw...

100,000 Domestic Terrorists? A Look at Compartmentalization

The entity that controls the definitions, controls the outcome -

An L.A. Times report which characterizes the Sovereign Citizen movement as “a major threat” on a par with Islamic extremism infers that “more than 100,00 Americans” are domestic terrorists as a result of their affiliation with the group.

The article, entitled ‘Sovereign citizen’ movement now on FBI’s radar, frames the belief that “the U.S. is essentially under martial law,” along with support for reintroducing the gold standard, as political views indicative of violent extremism.

The report quotes Mark Potok of the Southern Poverty Law Center, who in one fell swoop demonizes “more than 100,00 Americans” as domestic terrorists.

“This is a movement that has absolutely exploded,” said Mark Potok, a senior fellow at the Southern Poverty Law Center, a nonprofit organization based in Montgomery, Ala., that tracks domestic terrorists and hate groups. More than 100,000 Americans have aligned themselves with the sovereign citizens, the center said.

The Real Effect
The more the decision making process is separated, the more control is possible. Let's look at how this practically functions:

Assume for a moment that we have ideologies A, B, C and D. By seizing control in the early stages of a revolution, the movement ensures that only ideology A and B are represented, thus eliminating the viewpoints of C and D. The leaders of A and B then issue guidelines and regulations (we need order don't we?) that ensure that the debate is framed only in the groundwork of these two contentious extremes which may be in fact, opposite sides of the same coin. A will then take the 'left' and B takes the 'right', thereby compelling all future actions and decisions to fall in that intentionally limited framework. Anyone from the C or D camp attempting to join the discussion is met with immediate derision (Sanotrum to Paul in the latest debate) as being too 'out of touch' to participate.

Working groups are then formed that issue further guidelines, we'll call them A1 and B1. These groups are generally made up of individuals of like mindset to the main group, if not the same people. These groups often take the name 'committee' or 'association' to remove the stench of bureaucratic contamination.

Of course, these groups need funding, so A steers funds towards A1 and B steers funds towards B1 to do 'the work of the people' which primarily consists of issuing documents and opinions that support the position of the main group and vice-versa. It is at this point that the primary discussion shifts to the differences between A1 and B1's opinions expressed in their statistics and papers. Of course this continues to filter down into the next strata, A1a which also issues reports supporting A1 and so on.

The net result of all this labor becomes an exhausting, continual discussion on the minutia of the most precise myopic point that the lowest group, say A1a4e6, has to offer. In the end, the correct answer is not to participate in this discussion at all, but to bring in a differing point of view, say C.

It is this process that we see creating the article referenced above. The Southern Poverty Law Center is nothing more then a bureaucratic arm of the elite, rubber stamping their agendas and providing degrees of denial when questioned. (i.e. - Obama's not saying that these people are terrorists, the SPLC is. Obama is just doing his duty by following the 'experts' opinions.) We see this continually especially in the areas of budgets when a majority legislative or executive branch will form a committee who, upon completing research, comes back with the same opinion of the majority! Now this is not to say this always the case, just the vast majority of the time.

In this specific case, the SPLC identifies those that disagree with the dominant groups A and B as being 'extreme' and 'dangerous' because they might take some sort of action that results in the collapse of the AB paradigm. To this extent, they are absolutely correct as the American populace does present a current and dangerous threat to the paradigm precisely because AB want to systematically slaughter the CD paradigm and its adherents!

Declassified: Massive Israeli manipulation of US media exposed

US Citizens Assassinated, Where Does the "Authority" End?

It's 'your body' right? Right....

A high ranking Pentagon lawyer argued Wednesday that US citizens accused of having ties to terror groups can legitimately be targeted for assassination.

In a speech at Yale Law School, Jeh C. Johnson, the Defense Department general counsel, also said that US courts do not have the right to review such cases, or pass judgment on decisions taken by the Executive branch on such matters.

“Belligerents who also happen to be U.S. citizens do not enjoy immunity where non-citizen belligerents are valid military objectives,” said Johnson.

The Real Effect
One has to admire the sheer determination that these vermin possess. Once again, we find ourselves up against a brick wall, with a literal gun pointed at our heads with the government trying to argue that in effect, they are the sole determiners of 'right', 'wrong' and the laws of this nation. Let's go back a few hundred years and look at some of the laws and documents that created their so-called power -

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed...

Oh my, that's scandalous. Remember OWS? Why was that important? Simply because the governed were simply stating that they no longer consent to being governed in the fashion that they were. And the 'powers' were revealing themselves as the despotic, tyrannical thugs that they truly are. Naturally, the thugs are quick to hoist up the founding documents to reassure us that, yes, they do believe in such things. Yet the left hand and right hand of the authorities seem to be acting in concert contrary to what the mouth is saying.

And that is where we end up today, with the literal argument that 'In order to protect you, we must kill you.' Where the 'rights' of the state, end up trumping the originator of those rulers, the individual.

The astute among us then come to the logical question of - 'How can an all powerful body that is taking my rights, protect them?'  Then, throw in a little research and they come to the following observation

Or perhaps the more contemporary version -

Eventually, the state finds itself in the unenviable position where it has to claim that God is in fact dead and they are the long sought after Creator. A position that The Real Effect has been arguing existed, since its inception.

The Grasshopper Generation Revisited

Feel bad for the poor, poor snowflakes because they won't get to 'live their dreams' -

Like 78 million other U.S. Baby Boomers, Symons and her husband had the misfortune of approaching retirement age at a time when stock market crashes diminished their 401 (k) nest eggs, companies began eliminating defined benefit pensions in record numbers and previously unimagined technical advances all but eliminated entire job descriptions from travel agent to telephone operator.

At the same time, companies began moving other jobs overseas, to be filled by people willing to work for far less and still able to connect to the U.S. market in real time.

The Real Effect
I love the Boomer topic because to me, it illustrates the sheer insanity of the world we live in. (Yes, yes, I know snowflake, you're different.) Here are just a few of the more outrageous snippets of this:

"I always have the feeling that I have to prove my value all the time."

Yes, that is called competition or business.

The oldest ones, Lawler says, aren't retiring, and more and more the youngest members of the generation ahead of them aren't either. It's no longer uncommon, he says, for people to work until 70. 

Poor, poor you. What do you mean you can't just become a consumer at 55 and live HALF of your life without producing?

"People who would have normally been out of the workforce are still there, taking jobs that would have gone to what we now call the unemployed," he said.

And now we begin to see the type of poisonous thinking that's thoroughly infiltrated this generation. You see, according to them, the pie is only  X big and the 'elderly' need to retire so that they can 'get theirs'. It's those selfish, greedy 'over 30' somethings that took it from them. But them?

With unions no longer in a strong position to fight for benefits like pensions, with jobs disappearing or going overseas, and with Gen. Xers and even younger Millennial Generation members coveting their jobs, Lawler warns this is no time for boomers to quit and allow the skills they've spent a lifetime building to atrophy.

"My advice is above all don't retire," he says. "If you like your job at all, hold onto it. Because getting back in in this era is essentially impossible."

 Here's a hint, offer something that people need or want and not what you think you should be doing and you will be gainfully employed. Yes, it's not going to be a professional poker player or something else like that, but garbage collector is a respectable and decent paying position.

Like many boomers, the 60-year-old acknowledges he didn't put enough aside when he was younger.

"There were times when the money was really rolling in," he says of his old business. "But somehow retirement wasn't really in the forefront of my thinking then, so saving for it wasn't an automatic thing."

Exactly. Most Boomers had this idea of how the world was supposed to work that ran completely contrary to the laws of physics.

• Work? They should be guaranteed massive incomes and pensions. 
• Stuff? That should be provided via trade agreements and produced by slave labor in foreign countries.
• Money? That should be available via ever-increasing loan agreements that can be repaid with new ones.
• Family? That's built for you. Your job is to make them, their job is to take care of you. 
• Houses?  One? Noooo, we need 2, 3 heck 10 investment properties.
• Value? If those houses ever decline in value, it's not their fault, it's the markets fault. Or Obummers. Or that dude Buuuuush.
• Rights? You got no right to tell me to do anything, including fraud. However, I have a right via democracy to collude with my neighbors to paint your house pink if I feel it will enhance my property values.
• War? We got the right to kill anyone, because we're better.

What absolutely gets me is that these positions are becoming absolutely indefensible aside from claiming some sort of divine right. For instance, we have a right to bomb Iran because they might attack us. However if they were to attack us, we would claim self-defense. Which is it? Is a country sovereign and entitled to self-defense in the vein of 9/11 or is Pakistan all wet when they insist that we have to stop targeting their weddings with soulless drones?

You see all of these things once again gets back to our theme for the year -

Are we responsible for our own actions?
This question becomes the fundamental litmus test for most every action and decision in the future.

Now this is not to say that Boomers alone are responsible for every injustice that has visited this world in the last 30 years. Rather it is to say that they have a predilection to  engage in some of the most absurd pie-in-the-sky, rainbow spouting unicorn, head-in-the-sand nonsense that has ever existed. It is as if they never graduated from preschool.

For instance, let's pretend we have a cake. The question is, should we eat it now or later? A typical sane person would say the following -

    If I eat half now, I can eat the other half later.
Or
    I'll save it all when I'm really hungry.
Or
    I ate all my cake, I am now hungry and sad.

Many Boomers, if applying this to cake, would come to the same level of thinking. But if you were to apply this same line of thinking to anything above this, suddenly this hideous phrase "ought to" starts to enter the equation.

     I used all my money when I was young, but I ought to be able to live, so democracy will 'fix' it.
Or
    I don't like the way that country operates, they ought to be like us, so we'll bomb them.

The real boot to the head comes later when this same line of thinking is used against them using the exact same criteria. There is literally some absurd disconnect that occurs at this point as the elderly tantrum kicks in.

   You can't take my house! I pay taxes.
Or
   You can't lay me off! I worked here 30 years!

In these situation you literally end up in situations where these people genuinely think you can have your cake and eat it too. We saw this in the hysterical screaming that the group engaged in when 'The 2008 Crisis' hit. 'We must bail out the banks or we're doomed!' became the cry. Iceland proved otherwise. Yet here we stand just 4 years later with most adopting the position that while bailing out the banks was the wrong thing to do, we just had to do it. We see this same thinking lining up for the 2012 elections with people consistently jettisoning good policy just to 'get rid of Obama'. Funny, I thought the name carried a lot less weight then the policies.

At this point, one is left with only one supportable conclusion -
....they're out of their collective minds!

Jacob Hornberger on civil liberties, the Constitution, and the War on Terror

George Takei on the Japanese internment camps during WWII

Company Paid Millions of Non-Existent Money to Protect Buildings

Now this is a curious expenditure for a government that is talking about austerity -

...Vendtech-SGI, LLC, of McLean, VA, landed a contract worth more than $311.5 million to provide about 600 guards to protect approximately 200 different posts at more than 130 separate buildings in the states of Iowa, Kansas, Missouri and Nebraska, according to a DHS notice posted online on Feb. 14.

The same day, another firm, Master Security Company, LLC, of Hunt Valley, MD, was awarded a $43.1 million small business set-aside contract by the same DHS office to protect two facilities in Suitland, MD, and one each in Seabrook and Camp Springs, MD.

Both contracts were issued by the Federal Protective Service.

The award to Vendtech envisions approximately 1,000,000 hours of basic service, 100,000 hours of “temporary additional service” and 40,000 hours of emergency security services, says the DHS award notice.

The agency intended to award a one-year base contract, with four one-year options to Vendtech.

“The required class of security guard services is Guard II, and the Government requires a mix of fixed and roving posts assignments, providing interior and exterior coverage, with some posts requiring 24/7 coverage,” explains the DHS notice.

The Real Effect
I'll capitulate upfront that I know little of the details of such a posting, but I find the numbers to be absolutely captivating. Let's look at the math on this for a moment:

$311.5 million / 600 guards = $519,166.67 per guard. Let's be generous and say that each guard make $50 an hour, given a standard 40 hour workweek,  that equates to a salary of $104,000 a year. For a security guard. Is this Robocop? But let's go even further! Subtract your cost of $104,000 from your revenue of $519,166.67 and you have a profit of $415,166.67 or 80% of your revenue!

If we wanted to look at this just in hours, the cost comes out to $273.25 per hour of provided coverage!!!.

Now obviously this is all back of the envelope type stuff that doesn't take into account things such as overhead, pensions, things like that. But I am willing to venture up front that these guards are NOT making $50 and hour and the real cost is something more like $35 - $40. Roll the numbers around in your head for a while. Does this seem reasonable to you that a company should be making 500 - 800% markup on guarding buildings?

Personally to me, it's not even a question of if it should be making this kind of dough on our dime, but why, we the citizens, permit this? Perhaps an even more relevant question is - What is the government expecting that they are committing a half billion dollars to guarding buildings?

Government debt explained (in a few minutes)