Infographic: Seven Graphs That Show Supply-Side Doesn’t Work

Infographic: Seven Graphs That Show Supply-Side Doesn’t Work

By Michael Ettlinger and Michael Linden | August 1, 2012

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See also: The Failure of Supply-Side Economics by Michael Ettlinger and Michael Linden

7 Deadly Sins America Commits Against Its Own People

News & Politics  

AlterNet / By Paul Bucheit

7 Deadly Sins America Commits Against Its Own People

The US terrorizes millions all over the planet... here's what it does to its own citizens.

October 1, 2012  |  

 

 

 

 

 

The list doesn't include our most grievous offenses, those of military and economic warfare against the rest of the world. Sinful enough is our behavior at home.

1. Sin against children

Perhaps "sanctity of life" ends at birth. According to Census Bureaufigures, one out of every five American children lives in poverty. For blacks and Hispanics, it's one out of every three.

UNICEF has reported that the U.S. has a higher child poverty rate than every industrialized country except Romania. We are near the bottom in all measures of inequality that affect our children, including material well-being, health, and education.

2. Sin against the poor

The U.S. poverty rate grew from 11.3% to 15.0%, a 33% jump, in just 11 years. The impact was felt primarily by minorities and women. The median wealth for single black and Hispanic women is shockingly low, at just over $100 (compared to $41,500 for single white women).

Another shock. For every dollar of NON-HOME wealth owned by white families, people of color have only one cent.

Despite the continued economic assault on already-poor Americans, the number of TANF (Temporary Assistance for Needy Families) cases has dropped by 60 percent over the last 16 years.

3. Sin against students

Students at all levels have been losing their nation's support. States reduced their education budgets by $12.7 billion in 2012, and in 2013 the majority of states will be spending even less.

At higher educational levels, Americans are paying much more than students in other countries. Only 38% of college expenses come from public funding, compared to 70% across other OECD countries. While other nations continue to offer free tuition, with the recognition that education leads to long-term prosperity, the U.S. system has become morecorporatized, to the point that expensive programs like nursing, engineering, and computer science have been eliminated to cut costs. The profit motive has blocked the path to academic excellence.

4. Sin against the middle class

The middle class is shrinking. In 2011, according to a Pew Research analysis, 51% of the nation's households earned from two-thirds to double the national median income. In the 1970s it was 61%.

One-quarter of America's workers are now making less than $22,000 a year, the poverty line for a family of four.

Thirty million Americans are making between $7.25 (minimum wage) and $10.00 per hour.

With the transition of middle-class workers to low-income status, entrepreneurship is disappearing. Innovation doesn't come from the upper class. A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. Small business creators come from the hard-working, risk-taking, nothing-to-lose middle of America, but their entrepreneurial numbers are down -- over 50% since 1977.

5. Sin against the common good

A recent Tax Justice Network report placed total hidden offshore assets at somewhere between $21 trillion and $32 trillion. With about 40% of the world's Ultra High Net Worth Individuals in the U.S., up to $12.8 trillion of untaxed revenue sits overseas. Based on a historical 6% rate of return, this is a tax loss of up to $300 billion per year, money that should be paying for the public needs of education and infrastructure.

Tax avoidance is so appealing that 1,700 Americans renounced their citizenships last year. Like Eduardo Saverin, who benefited from America's research and technology and security to take billions from his 4% share in Facebook, and then skipped out on his tax bill.

Inexplicably, some have defended Saverin's actions, apparently failing to recognize one's obligation to pay for societal benefits. A Forbes writer said, "When individuals resist governmental hubris, we should exalt their actions." The American Thinker blog argued that "the U.S. tax code is so oppressive that smart and successful people like Saverin are compelled to renounce citizenship in order to keep more of their own hard-earned wages." Hard-earned, in truth, by the thousands of contributers to his social networking success.

6. Sin against nature

A number of studies show that investment in renewable energy will create many more jobs than the fossil fuel industry. And the investment will likely pay off. A National Renewable Energy Laboratory analysis determined that "renewable electricity generation from technologies that are commercially available today...is more than adequate to supply 80% of total U.S. electricity generation in 2050."

But now the prospect of cheap natural gas is leading us back to a dirty form of energy independence, with a continuing reliance on fossil fuels, and on the fracking technology that despoils our land and pollutes our water. The national commitment and political will needed for the long-term health of our nation is more elusive than ever.

7. Sin against common sense

The deception began, at least in the modern age, with Milton Friedman, who said "The free market system distributes the fruits of economic progress among all people...He moves fastest who moves alone."

This unflagging adherence to free-enterprise individualism is consistent with Social Darwinism, the belief that survival of the fittest (richest) will somehow benefit society, and that the millions of people suffering from financial malfeasance are simply lacking the motivation to help themselves. Social Darwinism is a feel-good delusion for those at the top. Or, as described by John Kenneth Galbraith, a continuing "search for a superior moral justification for selfishness."

A tenet of progressivism is that a strong society will create opportunities for a greater number of people, thereby leading to more instances of individual success. This is the common sense attitude suppressed by conservatives for over 30 years.

5 Obscene Reasons Why Richest Americans grow Richer As Middle-Class Declines

Economy  

AlterNet / By Les Leopold

5 Obscene Reasons Why Richest Americans grow Richer As Middle-Class Declines

The super-rich have learned a new lesson: it is far better to take than to make. 

 

September 28, 2012  |   

 

 

Photo Credit: Shutterstock

 

If you want to see what’s wrong with America take a good look at the nauseating list of the 400 richest Americans – the Forbes 400. While the economy struggled to create jobs, it was another banner year for the super-rich. They increased their collective wealth by a whopping $200 billion, which is more than enough to provide every student in the country with free higher education.
Meanwhile, the median middle-class family – the one smack in the middle of the income distribution -- saw its net worth (assets minus liabilities) drop from $102,844 in 2005 to $66,740 in 2010 according to the U.S. Census Bureau. So while the richest 400 Americans increased their wealth by 54 percent since 2005, the median middle-class family saw its wealth decline by 35 percent. Welcome to the new American math.

It’s not easy to wrap our arms around so much financial fat. The numbers involved are truly mind-boggling. Here’s more new math:

• The richest 400 Americans have as much combined wealth as 25.5 million middle-income Americans. 400 = 25.5 million!

• The average wealthy member of the Forbes 400 is 63,000 times as rich as the average middle-class family. One = 63,000!

• It would take the median middle-class family 82,411 years to earn an amount equal to the wealth of the average person on the rich list. That’s the very definition of financial obscenity.

What do the richest of the rich do?

The rich list gives us insight into how wealth is accumulated today. Are the super-rich “wealth creators” who bring new goods, services and jobs to our economy? Or are they “wealth extractors” who cleverly skim it from the rest of us? Here’s the breakdown of the main industries represented by the 400 richest Americans:

Investment	24.0 percent
Media	8.8 percent
Energy	8.0 percent
Food/beverage	7.5 percent
Fashion/retail	5.8 percent
Manufacturing	3.8 percent
Healthcare	3.3 percent

The very first Forbes 400 list, published in 1982, reflects a different economy. Only 9 percent were in finance while 15.5 percent came from manufacturing. But since then our best and brightest have learned a new lesson: it is far better to take than to make.

Why are the super-rich getting richer while the middle-class implodes?

To break out of the 1970s economic doldrums, the economics and policy establishment, including leaders of both parties, agreed on a new model. We needed to build an investment-led economy, they said, by cutting taxes, deregulating industry and creating more labor “flexibility” (which is French for union-busting). Together, they argued, these policies would dramatically increase capital investment, which in turn would lead to innovation, more jobs and higher incomes for all Americans. Here’s what actually happened.

1. Tax Cuts for the Super-Rich

Step by step, the tax code was altered to appease and aid the super-rich. First, marginal tax rates were dramatically reduced on the top brackets, falling from a post-war high of 91 percent in the 1950s to 35 percent today. But the biggest giveaway was cutting the capital gains rate to 15 percent. Since most of the super-rich receive their income in the form of capital gains, this was like winning the lottery, each and every year. That’s how Mitt Romney could pay only 13 to 14 percent on his enormous income. As this chart shows, the tax bite is fading away for the super-rich.

Click to enlarge.

2. Financial Deregulation

Both parties tripped over themselves to assist Wall Street by dismantling nearly all of the critical New Deal financial curbs. Until deregulation, Wall Street was a boring place to work with incomes nearly identical to those with similar education in other sectors. After deregulation it became a gold mine (see chart below). Anti-trust actions to break up big banks no longer occurred. Glass-Steagall (which separated speculative banking from commercial banking) was gutted. Too-big-to-fail casinos flourished (until they crashed) along with ever rising incomes for financiers.

Click to enlarge.

3. Union-Busting

Say what you will about unions, but the fact remains that when unions are strong, the middle-class prospers and the income gap closes. It’s remarkable how the rise of the super-rich and the decline of the middle-class correspond to the generation-long assault on unions. National Labor Relations Board (NLRB) and court rulings combined with new anti-union tactics by employers to make organizing new members more difficult. Also the decline of domestic manufacturing, aided and abetted by rapacious financial engineers, further eroded labor’s base. Until this turns around, the middle-class, as well as the poor, will suffer.

4. The Wall Street Crash and Bailouts

The financial crash devastated the middle-class, largely because its wealth is largely dependent on housing values. When the financial casinos went under, the housing bubble imploded. As the economy nearly came to a standstill in 2008-'09, 8 million jobs vanished in a matter of months, all destroyed by Wall Street’s reckless adventurism. To prevent another Great Depression, Washington bailed out the big banks and hedge funds, but not homeowners. The idea, successfully marketed by Wall Street’s minions in government, was that by saving Wall Street, the economy as a whole would be resurrected. Again, trickledown failed to aid the middle-class as unemployment grew to depression-era levels. Yes, GM and Chrysler received support as well, which kept employment from crashing even further. But Wall Street received most of the booty. No wonder super-rich financiers are prospering.

5. Corporate Money in Politics

As more and more money gushed to the top, more and more money entered into politics and lobbying. The net result was more government goodies for the super-rich. Corporate America, in every shape and form, took effective control of the legislative process so that both parties continued to shower the wealthy with tax breaks, and their industries with direct subsidies. While conservative political theorists sang praises to the all powerful free market, the largest corporate players raided the treasury again and again. And while some complain about the undo influence of liberal “special interests,” the biggest interest of all is business which outspends labor to the tune of $14 to $1…and that was before Citizens United.

Why the Ryan-Romney Plan has zero chance of resurrecting the middle-class

Ryan and Romney are in love with wealth and the few who amass it. As a result, they are fully committed to precisely the same policies that created the obscene wealth gaps in the first place. They want even more tax cuts for the rich, even more regulatory freedom for Wall Street, and even more attacks on unions. If they reinstitute these failed policies, we certainly will see larger too-big-to-fail banks that will gamble and fail, and again grab bailouts from us. All the while, those juicy tax cuts for the super-rich will float over to the Grand Caymans, while average middle-class incomes decline. Maybe before the 2008 crash we could have had a serious argument about the merits of tax cuts and deregulation. But we just lived through a real-life experiment using precisely those policies, and the results are in: This dog don’t hunt.

What will it take to resurrect the middle-class?

Americans don’t begrudge the accumulation of wealth as long as our own standard of living improves and our children have a good shot at doing better. We do not expect to work hard and then watch our standard of living decline, while the uber-rich live lavishly by skimming away our collective wealth.
There is a way out -- but it won’t come easy. It’s a hard road because it runs counter to nearly everything we hear about the economy. Revitalizing the middle class (and lower-income groups as well) starts with one central observation – the private sector on its own will never create enough jobs for all who need them. And without full-employment we will continue to see our incomes stagnate and decline.

Unfortunately, it’s hard for us to trust government in part because we live in a surround-sound world that incessantly blares out anti-big government ideology. As a result, many believe that a government job is somehow less worthy than a private-sector job. But is a teacher employed at a private school somehow more valuable than a teacher in your public school system? Is a private security guard more worthy than a policeman? You can try this kind of thought experiment up and down the occupational ladder and you’ll find millions of jobs that are done better in the public sector.

But that’s just a start for retooling our minds. The biggest breakthrough comes when we finally realize that after a major financial crash, it’s just not possible for the private-sector economy on its own to produce the jobs needed to put our people to work. We’ll be waiting decades to get back to full-employment if we rely solely on private-sector expansion. It won’t expand until demand increases, and demand won’t increase until we expand, not contract, public employment.
If you want to see a vibrant middle-class, then we should be creating vibrant middle-class jobs in the public sector – more teachers, more social workers, more workers rebuilding our infrastructure and weatherizing our buildings. (And yes we can fund private contractors to help out as well.) Instead, we are doing precisely the opposite: we are gutting public employment –about 650,000 good-paying federal, state and local government jobs were eliminated over the past two years, all in the name of debt reduction.
A simple reform

We don’t need to run up debt to put our people to work.

All we need to do is make those who caused the crash pay to clean it up. Here’s a simple reform program that neither party has the guts to implement:
1. A financial transaction tax on Wall Street on each and every trade, especially on risky derivatives.
2. Eliminate the special tax rate for capital gains.
3. Institute a 3 percent yearly wealth tax on anyone with a net worth of $10 million or more.

Collectively this would produce revenues in access of $300 billion per year which could readily create 6 million new public-sector jobs both directly and through contractors. (And if we do it right every new job could be green and reduce our carbon footprint.) Add in a multiplier, and our economy would soon reach full-employment.

We are at a clear fork in the road: either we create the jobs we need right now by taxing Wall Street and the super-rich, or the rest of us will suffer several decades of stagnation, while the private sector continues to mint a surplus of financial billionaires and a deficit of decent jobs.

Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009).

Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money

ECONOMY

Monbiot.com / By George Monbiot

Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money

A potent myth is being used to justify economic capture by a parasitic class.

September 25, 2012  |  

 

Photo Credit: Shutterstock.com

We could call it Romnesia: the ability of the very rich to forget the context in which they made their money. To forget their education, inheritance, family networks, contacts and introductions. To forget the workers whose labour enriched them. To forget the infrastructure and security, the educated workforce, the contracts, subsidies and bail-outs the government provided.
Every political system requires a justifying myth. The Soviet Union had Alexey Stakhanov, the miner reputed to have extracted 100 tonnes of coal in six hours. The United States had Richard Hunter, the hero of Horatio Alger’s rags-to-riches tales(1).

Both stories contained a germ of truth. Stakhanov worked hard for a cause in which he believed, but his remarkable output was probably faked(2). When Alger wrote his novels, some poor people had become very rich in the United States. But the further from its ideals (productivity in the Soviet Union’s case, opportunity in the US) a system strays, the more fervently its justifying myths are propounded.

As the developed nations succumb to extreme inequality and social immobility, the myth of the self-made man becomes ever more potent. It is used to justify its polar opposite: an unassailable rent-seeking class, deploying its inherited money to finance the seizure of other people’s wealth.

The crudest exponent of Romnesia is the Australian mining magnate Gina Rinehart. “There is no monopoly on becoming a millionaire,” she insists. “If you’re jealous of those with more money, don’t just sit there and complain; do something to make more money yourselves – spend less time drinking, or smoking and socialising and more time working … Remember our roots, and create your own success.”(3)

Remembering her roots is what Rinehart fails to do. She forgot to add that if you want to become a millionaire – in her case a billionaire – it helps to inherit an iron ore mine and a fortune from your father, and to ride a spectacular commodities boom. Had she spent her life lying in bed and throwing darts at the wall, she would still be stupendously rich.

The rich lists are stuffed with people who either inherited their money or who made it through rent-seeking activities: by means other than innovation and productive effort. They’re a catalogue of speculators, property barons, dukes, IT monopolists, loansharks, bank chiefs, oil sheikhs, mining magnates, oligarchs and chief executives paid out of all proportion to any value they generate.
Looters, in short. The richest mining barons are those to whom governments sold natural resources for a song. Russian, Mexican and British oligarchs acquired underpriced public assets through privatisation, and now run a toll-booth economy(4). Bankers use incomprehensible instruments to fleece their clients and the taxpayer. But as rentiers capture the economy, the opposite story must be told.

Scarcely a Republican speech fails to reprise the Richard Hunter narrative, and almost all these rags-to-riches tales turn out to be bunkum. “Everything that Ann and I have,” Mitt Romney claims, “we earned the old-fashioned way”(5). Old-fashioned like Blackbeard perhaps. Two searing exposures in Rolling Stone magazine document the leveraged buyouts which destroyed viable companies, value and jobs(6), and the costly federal bail-out which saved Romney’s political skin(7).

Romney personifies economic parasitism. The financial sector has become a job-destroying, home-breaking, life-crushing machine, which impoverishes other people to enrich itself. The tighter its grip on politics, the more its representatives must tell the opposite story: of life-affirming enterprise, innovation and investment, of brave entrepreneurs making their fortunes out of nothing but grit and wit.

There is an obvious flip-side to this story. “Anyone can make it – I did without help” translates as “I refuse to pay taxes to help other people, as they can help themselves”. Whether or not they inherited an iron ore mine from daddy.
In the article in which she urged the poor to emulate her, Gina Rinehart also proposed that the minimum wage should be reduced. Who needs fair pay if anyone can become a millionaire?

In 2010, the richest 1% in the United States captured an astonishing 93% of that year’s gain in incomes(8). In the same year, corporate chief executives made, on average, 243 times as much as the median worker (in 1965 the ratio was ten times lower, namely 24:1)(9,10). Between 1970 and 2010 the Gini coefficient, which measures inequality, rose in the United States from 0.35 to 0.44: an astonishing leap(11).

As for social mobility, of the rich countries listed by the OECD, the three in which men’s earnings are most likely to resemble their father’s are, in this order, the UK, Italy and the US(12). If you are born poor or born rich in these nations, you are likely to stay that way. It is no coincidence that these three countries all promote themselves as lands of unparalleled opportunity.

Equal opportunity, self-creation, heroic individualism: these are the myths that predatory capitalism requires for its political survival. Romnesia permits the ultra-rich both to deny the role of other people in the creation of their own wealth and to deny help to those less fortunate than themselves. A century ago, entrepreneurs sought to pass themselves off as parasites: they adopted the style and manner of the titled, rentier class. Today the parasites claim to be entrepreneurs.

References:

1. The Ragged Dick series.
2. http://www.nytimes.com/1985/08/31/world/in-soviet-eager-beaver-s-legend-works-overtime.html
3. http://www.ipa.org.au/sectors/northern-australia-project/publication/2081/let%27s-get-back-to-our-roots
4. Mike Lofgren uses this term in this fascinating article:http://www.theamericanconservative.com/articles/revolt-of-the-rich/
5. http://www.motherjones.com/politics/2012/09/full-transcript-mitt-romney-secret-video
6. http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
7. http://www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829
8. Emmanuel Saez, 2nd March 2012. Striking it Richer: the Evolution of Top Incomes in the United States (Updated with 2009 and 2010 estimates).http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
9. Joseph Stiglitz, 2012. The Price of Inequality. Allen Lane, London.
10. Lawrence Mishel, Jared Bernstein and Heidi Shierholz. The State of Working America 2008/2009. Economic Policy Institute, cited by Joseph Stiglitz, as above.
11. http://krugman.blogs.nytimes.com/2012/05/23/was-greed-good/
12. OECD, 2010. Economic Policy Reforms: Going for Growth. Chapter 5, Figure 5.1.http://www.oecd.org/tax/publicfinanceandfiscalpolicy/45002641.pdf

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George Monbiot is the author Heat: How to Stop the Planet from Burning. Read more of his writings at Monbiot.com. This article originally appeared in the Guardian.

Tax-Free Capitalism

Tax-Free Capitalism

by Robert Hunziker / September 19th, 2012

The wealthy capitalist elites are at war against taxes!

This undeclared war is so substantive that its consequences have undermined the ability of major governments to provide social services to ordinary citizens, and it is a direct cause of unsustainable, mushrooming governmental deficits. While the wealthy elite have experienced an once-in-a-lifetime boost in income and inordinate wealth creation, major governments have been experiencing once-in-a-lifetime operating deficits and unprecedented debt-to-GDP ratios. These phenomena are a consequence of one another.

Governments cannot collect taxes on money that is vacationing offshore in numbered or imitation/pseudo/sham bank accounts!

The major accounting firms of the world are the prime movers & shakers; i.e., the feeder system, of tax-free capitalism.

The American Institute of CPA’s (“AICPA”) does have a Code of Professional Conduct, Article II Section 53.04 stating: “All who accept membership in the American Institute of Certified Pubic Accountants commit themselves to honor the public trust.” Well, well, well… time, and again, this trust has been tested and broken; e.g., Enron and the entire 2007-08 financial meltdown nightmare, but honestly, one has to wonder who’s left to pay dues to this forlorn organization.
Tax dodging is one of the largest businesses in the world according to a landmark study entitled “The Pin-Stripe Mafia: How Accountancy Firms Destroy Societies,” Austin Mitchell (MP, UK House of Commons) & Prem Sikka (University of Essex), Association for Accountancy & Business Affairs, United Kingdom, 2011:

All over the world tax revenues are under relentless attack from a highly organized tax avoidance industry dominated by four accountancy firms: Deloitte & Touche, PricewaterhouseCoopers, KPMG, and Ernst & Young  (the combined gross global annual revenues of the major accountancies of the world are $95 Billion, making them the 54^th largest economy in the world.) They employ thousands of individuals for the sole purpose of undermining tax laws, which does not create any social value, but enables corporations and wealthy elites to dodge corporate tax, income tax, National Insurance Contributions (NIC), Value Added Tax (VAT) and anything else that might enable governments to improve the quality of life… The loss of tax revenues is a major cause of the current economic crisis that is inflicting misery on millions of people.

Over the past few decades, coincident with the advocacy of Supply-side economics, commenced under President Reagan, it has become increasingly fashionable for capitalists to cheat governments by hiding money offshore.  One would think the Supply-side economic tenets of cutting taxes for the rich would be enough for them, for example, in America the top marginal tax rate has been cut from 70% under LBJ, whose presidency experienced the strongest annual GDP growth rate since WWII, to 35% today, but no, once the elite got the taste of more and more non-taxable income levels (they also achieved cuts in capital gains, dividends, and estates), it turned into an epidemic, and they simply can not get enough! In spite of Supply-side taxation windfalls for the super rich, they have migrated like swarms of locusts to offshore tax havens to avoid taxes altogether. The money fever led them to it!

And the authorities know all about it!

According to a recent extensive study (July 2012) conducted by James Henry, former chief economist of McKinsey & Company, the wealthy elite have up to $32 Trillion stashed away in offshore tax havens. This is twice the size of the U.S. economy, and remarkably, the James Henry Analysis excluded ownership of tangibles like RE, yachts, fancy cars, and entire islands (metaphorically speaking, those hidden assets comprise the largest economy in the world… a tax-free economy… a pure libertarian nation-state.)

The American Sustainable Business Council, Washington, D.C. claims:

Offshore tax havens provide cover for banks, hedge funds, and corporations to shift taxable income from the United States to tax havens for the sole purpose of escaping taxation. Tax haven secrecy allows wealthy Americans to hide assets, helps companies manipulate their finances, and fosters the casino economy.

A U.S. Governmental Accounting Office study found that at least 83 of the top 100 publicly traded corporations use offshore tax havens, as directed by their public accounting firms.

The egregiousness of this massive fraud against governments is almost impossible to comprehend because the numbers involved are beyond the bounds of normal rational thinking. For example, similar to the enormous debt burdens of trillions-upon-trillions carried by many democratic capitalistic countries, the numbers involved in tax avoidance are so large as not to register within one’s consciousness, but to put it into some kind of perspective, consider this: One trillion seconds of ordinary clock time equals 31,546 years, and thirty thousand years ago there was an Ice Age, and it was then that Neanderthals ceased to exist (one school of thought claims Cro-Magnons exterminated the Neanderthals.) Extrapolating the numbers further: 32 Trillion, which is the amount stashed away in offshore accounts, takes us back one million years in clock time. The enormity of the crime of offshore tax avoidance takes us back to when humans first started using fire. Wow!

Isn’t it despicable that this crime of the century isn’t the ‘first order of business’ for governments around the world, but come to think about it, the U.S. Congress is filled with elite multimillionaires… So?

Speaking of which, America had no compunction whatsoever about sending U.S. Marines into Iraq based upon bogus WMDs. How about U.S. Marines raiding offshore banks to collect Wealth Taxes of 20% of total assets from FWMDs (Financial Weapons of Mass Destruction)? But… this time it’s not bogus! What’s more harmful to the integrity and security of American society:  Offshore terrorists or offshore bank accounts?  Maybe it’s deadlocked.

“The simple fact of the matter is this: tax breaks for Big Oil, corporate jets, and companies that send jobs overseas have the practical effect of raising taxes on everyone else. That’s not right. That’s not smart. That’s not fair. And it’s high time we do something about it,” according to Congressman Chris Van Hollen (D. MY) who is co-sponsor of legislation to close offshore tax loopholes: Stop Tax Haven Abuse Act (H.R. 2669), which bill, as of 3/21/2012, has been referred to 12 separate committees for consideration. Also, Senator Carl Levin (D. MI) is the sponsor of Cut Unjustified Tax Loopholes Act (S.2075), which was assigned to one committee February. 7, 2012; however, will the bills ever get out of committees?

“Taxes are not just numbers in spreadsheets,” says Joseph Rotella, owner of Spencer Organ Company in Waltham, Massachusetts, who spoke at a Public Interest Research Group (“PIRG”) forum: “Taxes provide the revenues that pay for roads, bridges, public safety, public schools, public transportation and other infrastructure and services my business and my customers count on. We need to stop the tax haven abuse that lets big corporations avoid paying their fair share and gives them an unfair advantage in the marketplace.”
According to Forbes Magazine:

For people who think that they can still zip off to Panama or Switzerland to avoid paying taxes, think again. Beverly Hills, Calif.-based international tax lawyer Gary S. Wolfe says that while countries such as the Caymans do not impose taxes, that does not apply to U.S. citizens or residents. ‘The mistake that Americans make is that they go offshore and think that they don’t have to pay any taxes,’ he says. ‘The reality is that U.S. citizens are taxable anywhere in the world.’

In fact, taxes follow the passport of U.S. citizens even after expatriation because, assuming one gives up a U.S. passport, it can still take up to ten years before the U.S. no longer has jurisdiction over U.S. taxable income.

Nevertheless, a new breed of wealthy elite, the Transnational Class (reference: Towards A Global Ruling Class? Globalization and the Transnational Capitalist Class, William I. Robinson and Jerry Harris, Science and Society, Vol 64, No 1, Spring 2000.), who look down with disdain upon the masses, are not in the least concerned about the consequences of utilizing tax havens. Their haughtiness is expressed by a disregard for national borders and against the strictures of nation-states. They truly believe the world is their oyster and consider themselves exclusive members of a worldwide community of like-minded wealthy elites, not beholden to any sovereign, and because they express themselves in a worldly manner, their allegiance extends no further than to their rich compatriots. It is probable they do not view tax havens as anything other than a parking place for money or assets whilst they travel the globe, meeting their ilk at fancy restaurants, or sumptuous resorts, or a brunch with Bono at locations where price alone blocks out the rest of the world. Furthermore, assuming they are caught cheating, they’ll pay the fine, instructing their legion of accountants and attorneys to “settle” the issue.  This is reality in today’s world, leaving the middle/working classes to fend for themselves and for their slowly regressing respective governments, which are similar in many respects to the film Blade Runner’s tension between past, present, and future which is high-tech and gleaming (Tokyo) in some scenes but decayed (Detroit) and old  (Buffalo) elsewhere.

The very fact that such a huge amount of money is stashed offshore, and the whole world is fully aware sends a portentous message that the elites behind the offshore accounts control the message; they control who can or cannot do anything about the problem, and furthermore, they do not consider it a problem at all. Rather, it is a logical conclusion to their earned right for achievement in society. Their contempt for the masses of people comes from a belief that personal merit occasioned their rise to wealth and power, and this is true. Most of the new rich did not inherit their wealth. They earned it.  Meritocracy is their creed, not equality and fraternity. They have turned the national motto of the French Revolution liberté, égalité, and fraternité on its head. If you do not ‘achieve’ in life, then you do eat cake, but Queen Marie Antoinette did not say, “let them eat cake.” Radical agitators who were trying to turn the populace against her attributed the phrase to her in 1789, and their plan worked beautifully as she lost her head on the guillotine to the executioner Charles Henri Sanson at Place de la Révolution, where tens of thousands of citizens stood by quietly, until the blade dropped, and then, they cheered and danced.  Meanwhile, and while holding onto their heads, most of the aristocracy of Paris had already fled the city. Their overt pretensions of lifestyle finally did them in, and their families’ homes were looted, losing fortunes. They did not have offshore accounts to hide wealth… like today’s elite.  In this sense, things do change over time.

What may or may not change in November is the presidency of the United States, and millions of middle class Americans will cast votes for Mitt Romney, who is the Poster Boy for Offshore Bank Accounts and for the wealthy elites.  In this arena, Romney has Obama beaten hands down, but frankly, it is difficult to visualize average middle class families with Romney posters staked in the front yard. It seems so incongruous!

During the Republican presidential debates, Newt Gingrich remarked, “I don’t know of any American president who has had a Swiss bank account.” But, Mitt closed his Swiss bank account. However, he does have accounts in the prototypical tax havens of the Caymans, the Bahamas, and Luxemburg. Thus, it should come as no surprise that unlimited funds are readily available to finance his pathway to the White House.  The wealthy elite need somebody in charge who can veto H.R. 2669 and S. 2075 should the bills make it out of committee!

Robert Hunziker, a former hedge fund manager, is a professional independent negotiator for worldwide commodity actual transactions and a freelance writer for progressive publications as well as business journals. Mr. Hunziker earned an MA degree in economic history at DePaul University/Chicago, and he resides in Los Angeles. He can be contacted at: rlhunziker@gmail.com. Read other articles by Robert.

This article was posted on Wednesday, September 19th, 2012 at 8:00am and is filed under Capitalism, Tax.

America’s Descent into Poverty: Why the GOP and Romney is the Problem and Not the Solution

United States

America’s Descent into Poverty 

By Paul Craig Roberts

Institute for Political Economy

Saturday, Sep 1, 2012

The United States has collapsed economically, socially, politically, legally, constitutionally, and environmentally. The country that exists today is not even a shell of the country into which I was born. In this article I will deal with America’s economic collapse. In subsequent articles, i will deal with other aspects of American collapse.

  Economically, America has descended into poverty. As Peter Edelman says, “Low-wage work is pandemic.” Today in “freedom and democracy” America, “the world’s only superpower,” one fourth of the work force is employed in jobs that pay less than $22,000, the poverty line for a family of four. Some of these lowly-paid persons are young college graduates, burdened by education loans, who share housing with three or four others in the same desperate situation. Other of these persons are single parents only one medical problem or lost job away from homelessness.

Others might be Ph.D.s teaching at universities as adjunct professors for $10,000 per year or less. Education is still touted as the way out of poverty, but increasingly is a path into poverty or into enlistments into the military services.

Edelman, who studies these issues, reports that 20.5 million Americans have incomes less than $9,500 per year, which is half of the poverty definition for a family of three.

There are six million Americans whose only income is food stamps. That means that there are six million Americans who live on the streets or under bridges or in the homes of relatives or friends. Hard-hearted Republicans continue to rail at welfare, but Edelman says, “basically welfare is gone.”

In my opinion as an economist, the official poverty line is long out of date. The prospect of three people living on $19,000 per year is farfetched. Considering the prices of rent, electricity, water, bread and fast food, one person cannot live in the US on $6,333.33 per year. In Thailand, perhaps, until the dollar collapses, it might be done, but not in the US.

As Dan Ariely (Duke University) and Mike Norton (Harvard University) have shown empirically, 40% of the US population, the 40% less well off, own 0.3%, that is, three-tenths of one percent, of America’s personal wealth. Who owns the other 99.7%? The top 20% have 84% of the country’s wealth. Those Americans in the third and fourth quintiles–essentially America’s middle class–have only 15.7% of the nation’s wealth. Such an unequal distribution of income is unprecedented in the economically developed world.

In my day, confronted with such disparity in the distribution of income and wealth, a disparity that obviously poses a dramatic problem for economic policy, political stability, and the macro management of the economy, Democrats would have demanded corrections, and Republicans would have reluctantly agreed.

But not today. Both political parties whore for money.

The Republicans believe that the suffering of poor Americans is not helping the rich enough. Paul Ryan and Mitt Romney are committed to abolishing every program that addresses needs of what Republicans deride as “useless eaters.”

The “useless eaters” are the working poor and the former middle class whose jobs were offshored so that corporate executives could receive multi-millions of dollars in performance pay compensation and their shareholders could make millions of dollars on capital gains. While a handful of executives enjoy yachts and Playboy playmates, tens of millions of Americans barely get by.

In political propaganda, the “useless eaters” are not merely a burden on society and the rich. They are leeches who force honest taxpayers to pay for their many hours of comfortable leisure enjoying life, watching sports events, and fishing in trout streams, while they push around their belongings in grocery baskets or sell their bodies for the next MacDonald burger.
The concentration of wealth and power in the US today is far beyond anything my graduate economic professors could image in the 1960s. At four of the world’s best universities that I attended, the opinion was that competition in the free market would prevent great disparities in the distribution of income and wealth. As I was to learn, this belief was based on an ideology, not on reality.

Congress, acting on this erroneous belief in free market perfection, deregulated the US economy in order to create a free market. The immediate consequence was resort to every previous illegal action to monopolize, to commit financial and other fraud, to destroy the productive basis of American consumer incomes, and to redirect income and wealth to the one percent.

The “democratic” Clinton administration, like the Bush and Obama administrations, was suborned by free market ideology. The Clinton sell-outs to Big Money essentially abolished Aid to Families with Dependent Children. But this sell-out of struggling Americans was not enough to satisfy the Republican Party. Mitt Romney and Paul Ryan want to cut or abolish every program that cushions poverty-stricken Americans from starvation and homelessness.
Republicans claim that the only reason Americans are in need is because the government uses taxpayers’ money to subsidize Americans who are unwilling to work. As Republicans see it, while we hard-workers sacrifice our leisure and time with our families, the welfare rabble enjoy the leisure that our tax dollars provide them.

This cock-eyed belief, on top of corporate CEOs maximizing their incomes by offshoring the middle class jobs of millions of Americans, has left Americans in poverty and cities, counties, states, and the federal government without a tax base, resulting in bankruptcies at the state and local level and massive budget deficits at the federal level that threaten the value of the dollar and its role as reserve currency.

The economic destruction of America benefitted the mega-rich with multi-billions of dollars with which to enjoy life and its high-priced accompaniments wherever the mega-rich wish. Meanwhile, away from the French Rivera, Homeland Security is collecting sufficient ammunition to keep dispossessed Americans under control.

Source: Institute for Political Economy

Why the U.S. Drought is Hitting Harder Than Most People Realize

The Market Oracle

Why the U.S. Drought is Hitting Harder Than Most People Realize

Commodities / Agricultural Commodities Sep 06, 2012 - 09:14 AM

By: Money_Morning

 

Chris Martenson writes: This is an important update on the U.S. drought of 2012 and its impact on food prices, water availability, energy, and even U.S. GDP.

Even though the mainstream media seems to have lost some interest in the drought, all of us should continue to be aware of it since its ramifications are far-reaching.


As we discussed in this report, it's all connected to a larger pattern of exponential growth that is simply no longer sustainable. At stake is nothing less than the traditional American way of life.

This monumental drought has already led to sharply higher grain prices, increased gasoline costs (via the pass-through of higher ethanol costs), impeded oil and gas drilling activity in some areas (due to a lack of water), caused the shutdown of a few operating electricity plants, temporarily reduced red meat prices (but will also make them climb sharply later) as cattle are dumped in response to feed- and pasture-management concerns, and blocked and/or reduced shipping on the Mississippi River.

All this and there's also a strong chance that today's drought will negatively impact next year's Winter wheat harvest, unless a lot of rain starts falling soon.Hurricane Isaac certainly helped, but didn't go far enough.

Further, there will be a definite impact to U.S. GDP, which could add to pressures (excuses?) that the Fed may use to justify additional quantitative easing (QE) measures (otherwise known as 'printing more money').

Here's an in-depth look at why the U.S. Drought of 2012 is far from over...

Bigger Than Expected Crop Losses

Certainly the number one story around the U.S. drought centers on its impact on grain production, specifically corn and soybeans. In a minute we'll discuss the other impacts, but we'll start with the one that has the greatest potential to cause both suffering and strife over the coming months (and possibly years), especially for those on limited budgets.

In 2011, the U.S. reaped a corn harvest of some 314 million tons. In 2012, the USDA has estimated a harvest of 274 million tons - a shortfall of 40 million tons - despite record acreage being planted.

While the USDA has been steadily reducing their crop estimates, practically with every passing week, it seems likely that the USDA remains behind the curve today, as it has been every step of the way. A different source for information comes from the Pro Farmer Midwest Crops Tour, which is coming in slightly under the current USDA estimates:

Crop Tour Points to Sharper Drought Impact on Soy, Corn

Aug 21, 2012

Initial reports from the closely watched Pro Farmer Midwest Crop Tour suggested more crop damage than expected from the drought, raising the potential for diminished soybean production this fall and sending futures sharply higher.

The disappointing crop reports from scouts touring fields on the Pro Farmer crop tour in states such as Ohio and South Dakota make it hard to believe soybean yields will reach current U.S. government crop projections, said Don Roose, president of advisory and brokerage firm U.S. Commodities in West Des Moines, Iowa.

The market is in the "watch and worry" mode on all fronts as shrinking crop forecasts will further tighten supplies already projected to dwindle to precariously tight levels in 2013, Mr. Roose said.

On the annual Pro Farmer tour, analysts and investors walk corn and soybean fields in seven Midwestern states over four days to assess prospects prior to the fall harvest. Pro Farmer is an agricultural advisory firm. The Pro Farmer tour, which wraps up Thursday, reported diminished potential for the soybean crop in both Ohio and South Dakota.

The crop tour doesn't estimate soybean yields, but it reported an average 584.9 pods per 3-foot-by-3-foot square area in South Dakota, down 47% from a year ago. In Ohio, scouts reported soybean counts at an average of 1,033.72 pods per 3-foot-by-3-foot square area, down from 1,253.2 pods a year ago.

Soybeans entered their critical growing phases in recent weeks, and the crop has benefited in some regions from recent rains across the eastern Farm Belt.

Meanwhile, scouts with the Pro Farmer Midwest Crop Tour on Monday reported an average estimated corn yield in Ohio of 110.5 bushels per acre, down from the tour's estimate of 156.3 bushels a year ago. In South Dakota, tour scouts reported an average yield estimate of just 74.3 bushels per acre, down from 141.1 bushels a year ago.

While commodities traders and agronomists have braced for weeks for the prospect of a crop decimated by drought, the estimates were lower than many had expected.

The summary here is that the Pro Farmer Tour is reporting crop yields to be 2% - 3% lower than current USDA forecasts, which is a big deal when it comes to food. We're talking a few tens-of-millions-of-bushels' difference.

The somewhat sour note in this unfolding drama is the fact that 40% of the nation's corn crop goes to ethanol producers, which means that food will be burned in the nation's auto fleet instead of helping to keep prices down for consumers and animal feed. Another 40% goes to animal feed (chicken, cattle, hogs, etc.), and the remaining balance goes to direct human consumption.

However, the ethanol mandate is a congressional requirement for our fuel blenders, so they do not have a choice in the matter. It would literally take an act of Congress to even temporarily suspend the ethanol requirement - and in an election year, that's just not going to happen, given the powerful constituencies invested in preserving that mandate.

Of course, higher input costs will ripple through the entire chain, so perhaps Bernanke will get the inflation he seeks, although it won't be the one he wants. The inflation he wants is simple monetary-driven inflation. The inflation he will get is nothing more than a supply/demand mismatch.

Still, the USDA has a handy calculation for estimating the future impacts:

U.S.'s inferior corn crop has supply-chain ramifications

Aug 13. 2012

The USDA has provided considerable information about how the drought's effects were likely to percolate through the economy. Because of a smaller-than-expected corn crop, the USDA said it can make the general prediction that "we will see impacts within two months for beef, pork, poultry and dairy (especially fluid milk). The full effects of the increase in corn prices for packaged and processed foods (cereal, corn flour, etc.) will likely take 10-12 months to move through to retail food prices."

The USDA has a formula for predicting changes in the rate of inflation caused by gains in prices at the commodity level: if the farm price of corn rises 50%, retail food prices rise by 0.5% to 1% as measured by the Consumer Price Index (CPI).

The price of September corn futures from mid-June until early August advanced 55%, meeting the USDA's criterion for a measurable increase in the CPI Lapp presented a more extreme scenario than the USDA. He predicted that the damage to the 2012 corn crop will translate into a food inflation rate of 4% to 5% in 2013. In his view, the dollar cost of the drought already was $30 billion, which accrued rapidly over the summer.

"This is a cost that somebody has to bear," Lapp said. "Some price hikes are fairly quick and others take a while."

He said high feed costs will have to be absorbed by producers, who will likely liquidate part of their cattle and swine herds and poultry populations. At the retail level, the drought's effects will translate into narrower margins - and expected higher prices - for processed food and soft drink manufacturers among others.

Lapp offered his opinion that legislation that has effectively required 40% of the corn crop be used in making biofuels has made everything worse.

"The situation has been aided and abetted in a negative way by the biofuels mandates," he said. "Shame on us for having mandated so much to corn ethanol" without creating contingencies for a bad crop year.

Because corn is the base unit for so many things (especially in the form of high-fructose corn sweetener), and because it's a primary feed component for finishing cattle and raising chickens and hogs, it tends to have a pretty decent impact on food prices.

However, it takes time for those price hikes to work through the system. So it will not be until 2013 sometime that we really begin to feel it in the U.S. And for the rest of the world that lives more directly on grains? They're not as lucky. The price hikes hit them almost immediately.

It looks like the harvest in Russia will be below expectations as well:

Russia harvest forecasts cut as drought hits crop in east

Aug 20, 2012

(Reuters) - Two leading Russian agricultural analysts cut their forecasts for Russia's grain harvest on Monday after harvest data from two drought-stricken eastern growing regions reduced the outlook for the overall crop.

SovEcon narrowed their grain forecast to 71-72.5 million metric tonnes (...)

The government's official grain harvest forecast is 75-80 million tonnes, of which 45 million tonnes could be wheat. The government has put this season's exportable surplus at 10-12 million tonnes, a level seen by traders as an informal cap on exports.

The government has tried to reassure markets there will be no repeat of August 2010, when Russia's government shocked markets with a snap decision to ban grain exports when the scale of losses from major drought became clear.

The government has indicated that protective tariffs could be an option, though only after the end of the calendar year.

But traders widely expect limits to be imposed in some form, perhaps as early as November, after heavy exports in the early months of the season showedRussiacould hit the 10-12 million tonne mark sooner than January.

Russia is still officially projecting 75-80 million tonnes but may only get 71 tonnes. If the projected exportable surplus is 10-12 million tonnes, but Russia actually harvests 9 million tonnes less than their hoped-for projection, then its exports will have to decrease to plug that gap.

Here's the kicker: Russia has already exported a good deal of that amount. That is, the prospect of another Russian export ban this year is quite realistic. If we get one, then we can expect a repeat of the turmoil in the grain markets that we saw in 2010.

But there's another much more fundamental reason why we can expect higher prices going forward.

Need for Even Higher Prices

The good news is that there's still plenty of supply to carry us through to the next harvest. However, demand is going to have to go down some, and the way we accomplish that is through the price mechanism.

Right now, physical grain traders are saying that prices are too low and that unless they rise, we're going to run out of grain before the next harvest. Obviously, that's not truly going to happen - increasing scarcity will cause prices to rise until current demand levels are reduced.

Fall in corn price disguises real picture

Aug 20, 2012

Corn prices surged this monthto an all-time high of $8.4375 a bushel on the back of the worst drought in the US in nearly half a century. But prices have since fallen roughly 5 per cent. The impression is the rally has run out of steam.

This is far from the real picture. Prices need to rise again - probably setting all-time highs - to dampen consumption that is running ahead of supply.

If demand does not slow down, silos will be all but empty before the next harvest arrives in late 2013.

On paper, the balance sheet for corn supply and demand published by the US Department of Agriculture seems good enough. But in practice, the numbers look a bit shaky. The agency, whose figures are closely watched by the market, first estimates supply and, after that, adjusts the demand data to maintain a minimum level of inventories.

This time the USDA is asking for monumental rationing on the demand side. For example, US corn feed and export demand will need to drop to their lowest levels in nearly 20 years.

The USDA is also forecastinglower ethanol production- and thus corn demand. Ethanol output has fallen, but not nearly enough. Worse, therise in wholesale petrol pricesback above $3 a gallon means that ethanol producers are profitable again, even when paying record corn prices.

Corn is now trading just above $8 a bushel - but traders in the physical market say that prices need to rise to $9-$10 to force demand down enough to meet the consumption levels anticipated by the USDA.

The retreat in corn prices over the past couple of weeks has given inflation watchers a false sense of security. The market should not relax, however. More food inflation is just waiting around the corner.

The idea here is that the cash market will have to lead the futures market higher, an odd situation because it is usually the other way around. With so many hedge funds now playing in the commodity space, one explanation is that they are simply playing paper games with each other - those playing the short side will get a lesson in the importance of keeping one eye on reality.

A truly shocking event would be if the U.S. ever gets to the position of limiting exports of corn or even soybeans. That is a very unlikely proposition to consider, but if the silos get drained because we have dysfunctional markets that saw fit to keep prices bizarrely low while our free trade agreements allow the too-low grains to be exported, threatening domestic supplies, then that possibility notches up a little bit.

Dairy, Meat, and Even Higher Gasoline Costs

While it is clear that basic grain prices are heading higher, the knock-on effects into other soft commodities are a little less clear, but are definitely still important to consider.

The most obvious of these are higher grain feed costs that will hit both livestock and dairy producers especially hard:

The withering crops are translating into higher feed costs for livestock producers. "This is different than anything I've ever experienced," said Kent Pruismann, who raises cattle and hogs on a farm in Sioux County, Iowa, and saw his costs for feed jump by 20% in July.

The higher corn, soybean and wheat prices will reach food makers, exporters and eventually consumers. Drivers already have seen fuel costs climb because of higher prices for ethanol, a corn-based fuel that is blended into gas. The drought also has reignited the debate over whether ethanol production is a drain on global food supplies.

(Source)

Some are already turning to, shall we say, other means to keep their herds fed:

Kentucky cows eat candy instead of corn

Aug 14, 2012

LOUISVILLE, KY (WAVE) - When you think of cattle feed, you probably don't think of candy, but due to the drought that's exactly what one farmer chose to do.

At Mayfield's United Livestock in Western Kentucky, owner Joseph Watson feeds his herd second hand candy.

Watson started feeding his cattle the candy because corn prices were so high.

He mixes the candy with an ethanol by-product and a mineral nutrient. He monitors the daily intake and said the cows have had no real health issues.

Yes, the higher grain costs are going to hit everything from big cattle feedlot operations to my own two-bags-a-month chicken-feed usage.

However, it will be the cost of and even lack of hay that will really create some big problems later this year. The drought not only harmed the range and pasture lands, forcing greater use of stored hay to offset the decline in forage, but it put a huge crimp in this year's hay production:

Drought Cripples Hay Feed Industry

Aug 19, 2012

Widespread drought has scorched much of the pastureland and hay fields needed to sustain cattle herds in the U.S., forcing many ranchers to find feed alternatives or sell their animals early into what has become a soft beef market.

The shortage has led to higher hay prices, with some farmers saying they have to pay two to three times last year's rates.

Despite farmers setting aside more land to grow hay this year, they are still producing a lot less because of the drought, according to a recent Department of Agriculture estimate.

The harvest of alfalfa, generally considered to make the best hay because of its high nutrient levels, is forecast to be the worst since 1953, according to the USDA.

Pasture grass and hay are what most cattle are fed for the roughly two years they live before being slaughtered, but the drought is threatening to starve the animals.

Illinois rancher Steve Foglesong said that most years he could graze his cattle from spring through November on verdant fields that are now brown, buying them hay bales only in the winter. This year, he and his animals have their eyes on withered corn plants.

"It may not have any ears on it, but it makes pretty good cow feed," he said.

John Erwin, who owns 20 acres of land in Shelbyville, Ill., said he is having trouble growing alfalfa hay, but demand is strong for what he can produce.

"I'm getting calls from ranchers as far away as Wyoming," Mr. Erwin said. "They're desperate."

He said he has been offered $250 a ton for his hay, nearly double the $130 a ton in a non-drought year. His fields didn't produce any hay in July.

A doubling of hay prices is obviously going to create quite a bit of economic hardship for many farming operations, which tend to be marginal profit businesses even when everything is going well.

Here's another view on the hay situation:

spoke with Caldwell [of Indiana horse rescue] and a number of other horse-rescue organizations around the country by telephone this week. The relentlessly hot dry weather, amplified in many areas by wildfire, has been devastating to farmers, ranchers and other horse owners.

"Everybody is using their winter hay now. The pastures are destroyed and they probably won't recover before winter," said Caldwell. "The price of hay has doubled, and the availability is down by 75 percent."

Caldwell is somewhat sanguine about his own lot, but not optimistic about what lies ahead.

"Today the problem is not nearly as bad as it's going to be," he told me. "It's terribly bad today, but it is going to get a lot worse."

(Source)

The drought has done some very serious harm to the nation's hay supply that goes beyond the economics of higher hay costs. First there's the supply of the hay, and then there's the relatively poor quality of hay that was taken from non-irrigated, drought-stricken fields. All in all, it's not a good situation.

To add a bit more difficulty into the situation, it turns out that drought-stricken silage and even the corn itself can be harmful to animals:

Drought makes corn dangerous for livestock

Aug 16, 2012

COLUMBIA, MISSOURI, U.S. - Tim Evans, an associate professor of veterinary pathobiology and toxicology section head at the Veterinary Medical Diagnostic Laboratory at the University of Missouri College of Veterinary Medicine, Columbia, Missouri, U.S., warns U.S. farmers and livestock producers that drought-damaged corn plants can pose a risk to animal health.

"During severe drought conditions, corn plants, especially those heavily fertilized with nitrogen, can accumulate a chemical called "nitrate'," Evans said.

"This chemical can be very harmful to animals, especially cattle, if they eat corn plants or other vegetation containing too much nitrate. Eating plants with too much nitrate can cause damage to red blood cells, resulting in lethargy, miscarriage, and even sudden death."

Evans says that in normal conditions, corn crops typically absorb nitrate into only the lower 12-18 inches of the stalk, which does not have to be fed to animals. However, during severe drought conditions, high concentrations of nitrate can accumulate in the upper portions of the stalk, which cattle and other livestock often eat.

Evans also says that many naturally growing plants and weeds in grazing pastures can accumulate nitrate during drought conditions, as well. These plants include many types of grasses and some weeds, which animals might be forced to eat because of limited pasture or hay available as forage for livestock.

The key here is that nitrates are safe below 2,000 ppm but toxic above 15,000 ppm, and the levels found in the stalks and how high it travels are a function of whether enough rain fell to allow the plant to take it up. Much of the corn crop was so desiccated that the plants could not even manage to draw up this nutrient, and therefore it is safe as a feed product.

While it's hard to get a read on at this early stage, there are enough warning signs here pointing to much, much higher grain, food, and meat prices in the future. The worry is whether there will even be enough feed to sustain the animal populations through the Winter and Spring. Given the damage to the harvestable corn, a lot of it is going to be turned into silage

Many ranchers and farmers are faced with a horrible choice here. Saving their herds may be economically unsound or even impossible where hay and safe silage are not available, and so they are selling their herds, one of the most heart-wrenching decisions anyone could have to make.

So many are doing this that recently the price for cattle has dropped, as everyone is selling into an increasingly soft market. My advice is to enjoy these low meat prices while they last, because the next stage of this story involves much higher meat prices.

The problem with understanding just how bad the hay situation might (or might not) be is that there are no national statistics collected that could tell us whether or not there's even enough hay available to sustain the current commercial and recreational livestock populations.

The Importance of Positioning Yourself

So, with all of these repercussions building during the current drought - to which there's yet no end in sight - what can you do today to minimize their impact on your budget and lifestyle?

Part II: Positioning for the Drought's Aftermath looks at the likeliest outcomes in food prices, food availability, energy prices, and macroeconomic consequences (of which there will no doubt be many from this drought). We have a national food distribution system that runs significantly on a just-in-time basis, which leaves it vulnerable to price and inventory shocks when there are supply disruptions. The reduced water levels caused by the drought are handicapping electrical power generation in growing regions in the country; electrical thermal plants are the number one biggest user of water in the U.S.

The global financial markets are similarly tenuous these days, as resources are already taxed in trying to stimulate the moribund U.S. economy and dig Europe out of its massive credit woes.

This is one of those moments where taking simple, prudent steps now can have an outsized effect on preserving your quality of life.The groundbreaking video I just recorded with the excellent team at Money May Press also addresses the heart the problems written about here.

It focuses on steps we individuals can take to decrease our vulnerability to the myriad of problems that threaten very our way of life. You can see this report by clicking here.
Source :http://moneymorning.com/2012/09/06/why-the-u-s-drought-is-hitting-harder-than-most-people-realize/

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