You've Been Bamboozled, Hoodwinked and Lied To! Here's the Proof. What Are You Going to Do About It?

Yes, you've been bamboozled! Hoodwinked! You're
being taken for suckers that not only can't count, but whose memories
have been washed away by threats of swine flu and reality TV shows. Do
not fret, though. What I have is PROOF of the great Banking Bamboozle,
for all to see. Now, armed with this proof, all I need for you is to go out and do something
about it. Don't sit there staring at your screen, thinking "damn, he's
got a point". Send a copy of this proof along with your comments to all
of your elected officials, congressspersons, senators, bankers,
insurers, business partners and the media outlet of your choice. The
other alternative is... Maybe the powers that be have a point and
threats of swine flu combined with the latest episode of survivor and
flowery proclamations of "green shoots" amid 10.2% unemployment is all
it takes to pull the wool over your eyes. We shall see, shall we???
This is a fact and figures packed blog post, complete with a plethora
of downloadable models and references. Please do take the time to read
through it before you return to your daily dose of government
recommended "American Idol"... Yes, my goal is to piss you off! To goad
you into action! To elicit a response.... and it gets worse as you read
on.

I have compartmentalized this rather lenghty, yet interesting (to the
right people) diatribe into major segments. Feel free to skp ahead or
pick and choose the ones which most interest you - or if you have been
freshly unplugged from the Matirx, I suggest you sit back with a good
glass of wine and read through this entire missive:

1. Social mobility: The reason why
   the big banks are being protected at all costs and on the breaking
   backs of the unemployed taxpayer
   
2. The truth behind the Stress Tests and Unemployment
3. The truth behind credit loss assumptions: Where the hell did the stress test numbers come from?
4. The
   Grand Finale: So, what banks are in trouble and how much trouble are
   they in? A very granular and unprecedented look at the weaknesses of
   some of the anointed 19 that you cannot get from anywhere else!

You may have seen bits and pieces of stress test analysis in other
blogs and news sites, but I doubt if you have seen all pieces of the
pie stitched together, as below. You see, many complain about Goldman
Sach's $40 billion of bonuses during a time of near depression, but as
all who bother to even consider have probably summarized - this
government is ran by, and ran for, the capitalist class. If you even
have to ask a question after this statement, you can be rest assured
you are not part of that class that the government truly serves. In
preparation for the social mobility thesis behind the protection of the
banks below, you should download this handy-dandy model that shows  you
(in full detail) where YOU stand
in the grand scheme of socio-economic stratification, or to put it more
simply, how much the powers that be believe CNBC can effect your
behavior (quick registration is required, you may choose the free
option to subscribe) -  Socio-economic stratification model 2008-11-07 13:47:25 156.00 Kb. For
many, going through this model is the equivalent of choosing between
the blue and red pill in the Matrix, literally risking an unjacking
from the network of make believe.

For those who feel you must get
offended when social class is discussed, I strongly suggest you stop
here and watch Cramer scream BUY! BUY! BUY! or otherwise get a solid dose of MSM, mind numbing
programming. For the rest of you who choose to continue reading, you
have just chosen the Blue Pill - prepare to be unplugged from the
Matrix!

Social Mobility: The Reason Why the Big Banks Are Being Protected. Unlike the Jefferson's, We're moving on down!

 Social class is defined (on this blog) as the
amount of control one has over one's socio-economic environment. It is
much more than money, although money is a large component. For
instance, Barack Obama is in a higher class than Robert DeNiro or
Derek Jeter, although Robert DeNiro and Derek Jeter are most
likely wealthier (although that is quite debatable after taking into
consideration the value of Obama's campaign contribution list and
membership database from his social networking site!). Obama's higher
class stems from his ability to exert more control over his
socio-economic environment. The factors that this author uses to
determine class combine (with the associated weights) to create a
"socioeconomic index":

Socioeconomic Index=

(Occupation X 12) + (Income source X12) + (Income X 7) + (Wealth X 14) + (Education X 7) + (Dwelling area X 15) + (Class Consciousness X 7) + (Housing X 12)

As you can see, wealth is the largest
contributor to the class standing, and coincidentally it is the factor
that is the most at risk in this current economic climate. I believe
that there will be a significant entry into the upper middle class by
those who were once firmly entrenched into the upper classes! While
that may not seem like a big deal to many, it is damn big deal to those
who are moving down the ladder. This also means, that there will be
some space for others to move (relatively speaking) up the ladder into the capitalist class. One
man's (or woman's) misfortune is another's opportunity.

Lower Strata	Underclass/Poor
	Working Poor
Middle Strata	Lower Middle Class
	Upper Middle Class
Upper Strata	Lower Upper Class	<-- 20% to 30% of BoomBustBloggers are here, roughly 1,500 of you!
	Higher Upper Class - the Capitalist Class

Social Mobility is the name of the game
in times of severe dislocation - times like we are experiencing now. It
is the endgame of the extant capitalist class to convince the populace,
both by means of government misinformation and disinformation
disseminated through the mainstream media, that the current severe
economic dislocation is over and we are well on the path to economic
recovery. Economic recovery in this sense during this period can also
be read as the cementing of the status quo for the capitalist class!
Everytime a member of the capitalist oligarchy stumbles from its perch
(usually in times of severe economic dislocation), a driven member from
a lower rung on the socio-economic food chain rises to takes its place.
The goal of the capitalist class is to prevent that lower rung member
from rising "BY ANY MEANS NECESSARY!" Hence the "protect the banks at
any cost" scenarios that you see coming from Paulson, Geithner, et. al.
The mantra that you hear being preached by the guardians of the gates
of the Capitalist Class, saying "we barely averted catastrophe!",  "The
demise of XYZ (or GS) bank will bring upon us the end of the World as
we know it", or any other nonsensical drama, is simply propaganda
to frighten the sheeple into stepping in line, lockstep behind the
minions of the Capitalist Class. Banks have been failing for thousands
of years and the world moved on, without so much as a hiccup in the
vast majority of cases. The world will come to an end as we know it
for those members of the Capitalist Class that were closely associated
to any bank that fails, which is why you here the aforementioned mantra
from the minions of the Capitalist Class. Hey, I need for those
underperforming banks to fail - for they are dragging on the
productivity
of this country like some royalty receiving wealth and influence from
birthright rather than from merit or performance, and the failure of
such
institutions will enrich this country by allowing the hybrid vigor of
the true capitalistic producers (as opposed to the rigid caste-like
capitalist class) to move into the capitalist rung on the ladder and
truly produce
value. 

The massive amounts of extremely
valuable, and apparently low cost (relatively) or absolutely free information disseminated from
sources such as BoomBustBlog or ZeroHedge are attempts at equalizing
the effect of the Capitalist Class Oligarchy, thus enabling social
mobility through awareness. You see, when you are on top of the ladder, social mobility
can only mean bad things. For everyone else, it can hold the promise of
better things to come. Once you are aware of
how these things break down, you will see many settings in a different
light. Again, here is the BoomBustBlog class
model (based loosely upon the Index of Status Characteristics) available
for download to anyone interested in delving into this further (quick registration is required, you may choose the free
option to subscribe). See  boombustblog.com_social_class_model v.7.3 156.00 Kb.

Now, on to those Stress Tests!

Let's take a walk through recent history...
Earlier this year, in an attempt to assuage the fear of bank
insolvency, the government issued what amounted to "take home" stress
tests for the big US banks. These tests were known as SCAP (Supervisory
Capital Assessment Program) tests. I have warned about the inaccuracies
of these tests in the spring (see Welcome to the Big Bank Bamboozle and More-on-Reggie-Middletons-Bank-Stress-Testing), but now with the benefit of hindsight
I will systematically go through the aspects of these tests which
SEVERELY overestimated the strengths of the banks in question, with
ample evidence sprinkled throughout.

The Unemployment Figures Used in the Stress Tests Have Proven to be Fantasy, at the Very Best! 

The stress tests assumed a worst case scenario for unemployment to be 8.9% in 2009 (see pages 8 and 9 in  scap_design_and_implementation 06/11/2009,23:08 286.90 Kb). As the facts stand now, the unemployment rate rose from 9.8% in September to 10.2% in October 2009 (see U.S.
Unemployment Jumps to 10.2%, Prompting Obama to Pledge Fresh Measures). The long-term unemployment
rate (including marginally attached job seekers and workers who are discouraged
or part-time for economic reasons) rose from 17% in September to 17.5% in
October 2009. (U.S. BLS)

As you can see, the major driver of future bank credit losses has been
woefully underestimated, and thus the capital requirements of said
banks have been woefully underestimated, among other things. We shall
get to that in detail later on in this missive. For now...

The stress test assumptions worst case scenario was off by 130 basis
points for 2009 and we are currently in uncharted territory since we
pierced the worse case scenario for the entire prediction term of the
assumption period (the 10.2% number was for October and we are trending
sharply higher).

Even the Federal Reserve was more pessimistic shortly after the
government agreed to let most banks pay back TARP and allegedly
"passing" the stress tests. Despite this, last minute epiphany they
were still significantly too optimistic. The U.S. Federal Reserve
estimated unemployment at 9.2%-9.6% for Q4 2009 and 9%-9.5% for Q4
2010, off by up to a full 100 basis points, but still better than what
they allowed the banks to project losses with.

More data tidbits before we move on:

• Reggie Middleton said, "I told you so" when this farce first got started: More-on-Reggie-Middletons-Bank-Stress-Testing
• The Job Openings and Labor Turnover Survey (JOLTS): The job openings rate in
  August 2009 was unchanged at 1.8%. The number of job openings has declined 50%
  since the peak in June 2007. The hires rate at 3.1% is at a low and the
  separation rate remained at a record low of 3.3%. (U.S. BLS) This implies that
  job losses in recent months have slowed mostly due to lesser layoffs while
  hiring is still subdued.
• Economist Michael Feroli, JP Morgan: The August JOLTS report shows that the
  number of unemployed/underutilized workers per job vacancy rose to 10.9 in
  August 2009. The continued increase in this ratio will put downward pressure on
  wages. The Beveridge curve (showing the inverse relationship between the vacancy
  rate and the unemployment rate) derived from the JOLTS survey is consistent with
  a rising natural rate of unemployment. (via the October 9, 2009 report 'Bad News
  and Good News in the August JOLTS)
• Going forward, the economy needs 100,000-150,000 job creation per month to
  employ the growing labor force, and over 200,000-250,000 job creation per month
  to recover the jobs lost during this recession. The jobless recovery might
  therefore keep the unemployment rate high for a few years.
• Professor Brad Delong, University of California Berkley: The increase in the
  unemployment rate during this cycle has been much greater relative to the
  contraction in real GDP, implying that Okun's Law is broken. (via Macroblog;
  07/23/09)
• Dr. Nouriel Roubini: All elements of total labor income--jobs, hours and average
  hourly wages--are under pressure, which will impact consumption in the coming
  months. The unemployment rate in late 2009 will be higher than what was assumed
  for 2010 in the adverse scenario of the banks' stress tests. This will lead to
  further delinquencies on loans and securities and lower-than-expected recovery
  rates. As people with mortgages lose their jobs, they will have severe
  difficulties servicing their mortgages. (07/02/09)
• Bridgewater Associates: "Normally, labor markets lag the economy because
  incremental spending transactions are financed via debt, stimulated by interest
  rate cuts. But as long as credit remains frozen and in a deleveraging
  environment, job growth becomes an important leading, causal indicator of demand
  and other economic conditions. The deterioration in labor market will continue
  because companies' profit margins are so deeply damaged (amid the slowdown in
  consumer spending and credit crunch) that a little bounce in growth won't do
  much to alter their need to cut costs." (via Thoughts from the Frontline;
  05/15/09)
• Bloomberg reports that the increase in temporary work hiring may foreshadow an increase in permanent hiring (see Temp-Worker
  Increase May Foreshadow Return to US Job Growth Nov. 6 ...).
  There is another way of looking at that though. Mary Daly, Bart Hobijn
  and Joyce Kwok, Federal Reserve Bank of San Francisco: Given relatively
  lower temporary layoffs and greater increase in part-time workers, the
  "level of labor market slack would be higher by the end of 2009 than
  experienced at any other time in the post-World War II period, implying
  a longer and slower recovery path for the unemployment rate. When the
  economy rebounds, employers will tap into their existing workforces
  rather than hire new workers." (06/05/09)
• Senior Economist Edward S. Knotek II and Research Associate Stephen Terry,
  Federal Reserve Bank of Kansas City: A banking crisis coinciding with a
  recession and recent rends in the labor market suggest that "unemployment  will
  recover much more slowly from this recession than past episodes of severe
  recession may suggest." (08/13/09)
• Professor Edmund Phelps, Columbia University: The non-accelerating inflation
  rate of unemployment (NAIRU) may rise above the current 5.5% to 6.5% or 7%. (via
  Bloomberg, May 26, 2009)
• OCED: The significant increase in unemployment during the recession and in
  the long term will lead to an increase in structural unemployment by 2010 and
  beyond. (06/09)

The truth behind credit loss
assumptions: Where did the stress test numbers come from? They came
from the guys that were actually being tested. It's the world's largest take-home test!

On several occasions, I have released
research that explicit details the default rates, and as an extension,
the loss and recovery rates behind residential mortgages in most states
in the US (by combining the default rates with the Case Shiller data) -
see "the open source mortgage default model", the downloadable, open source default and loss rate model (free registration required):  Revised SCAP Assumptions Public Open Source Version 1.1 2009-05-18 15:15:47 1.21 Mb and "Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets" (these
links are must read items - they contain megabytes of government
sourced, empirical loss data that directly contradicts what was offered
in the SCAP tests). The aforelinked document is also available as a .pdf for download (with additional commentary) after a free registration:  BoomBustBlog.com's Realistic Recast of SCAP 2009-05-12 14:52:09. Much
of this info came directly from the NY Fed and the FDIC, hence it was
readily available to the Federal Reserve and the Treasury as well.
Despite this, the SCAP tests used much more optimistic numbers than the
NY Fed's own findings, and the results are becoming apparent as I type
this.

Reference Fannie Mae's recent credit losses - Fannie’s Draws From Emergency Treasury Fund Reach $60 Billion ...Then there is evidence of further distress at other mortgage insurers: AIG Taps U.S. for $4.2 Billion to Help Restructure ILFC, Mortgage Insurer.

Ambac Insurance Unit May Be Put in Receivership, JPMorgan Says 

(JPM is a year and a half late. I told you this back in 2007, see Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion and Follow up to the Ambac Analysis) and on the consumer finance front Consumer Credit Declines More Than Forecast as American Job Losses Persist.

This is a must read document for anyone who has bothered to venture this far into the blog post (registration required to download):  BoomBustBlog.com's Realistic Recast of SCAP 2009-05-12 14:52:09.
It was generated using data culled directly from the NY Fed's and the
FDIC websites. I have created an open source model of this data for all
to use at their discretion (registration required to download):  Revised SCAP Assumptions Public Open Source Version 1.1 2009-05-18 15:15:47 1.21 Mb

Here are a few key excerpts...

Geographic breakdown of Alt A loans

 

Source: New York Fed

I have warned about Alt A loans in the beginning of the year - see  The banking backdrop for 2009.
As of April 30, 2009 there were nearly 2 mn Alt A loans outstanding,
each with an average balance of $321,293, representing $651 bn (down
from $658 bn in March 2009) of total Alt A loans (avg FICO score of
705). California with 43.8% of total Alt A loans (avg FICO score of
709) had the largest share of Alt A loans followed by Florida (9.4% of
total Alt A with avg FICO score of 700) and New York (5.6% of Alt A
loans with avg FICO score of 704).

Is there collusion amongst the banks to drive up the prices of Toxic Assets? 

Last
year, the government offered a public/private investment program that
used taxpayer funds to assist private investors in leveraging up to
purchase toxic assets off of bank balance sheets. I made immediate, and
public, note that this program was rife with possibilities of collusion
amongst the banks and loopholes ready to be abused. I even created a
model for congress to peruse which detailed a few of the possibilities.
See (free registration required): 

 PPIP full model, with collusion and implied leverage 2009-03-26 01:00:41 202.00 Kb.
Miraculously, within months, toxic asset prices started floating
higher. Hmmm! I am not saying outright collusion did occur, but it
really does smell fishy. 

For those of you want to know what the
stress tests results of the big banks were if they used the NY Fed/FDIC
official loss data, I have run the numbers for you. It doesn't look
very pretty in some cases. This content is paid subscriber-only,
except for the two links that have public-lite and public excerpt
included! Let's walk through the PNC free data, in light of how
misleading their latest quarterly report was (see For those that didn't notice - Reggie Middleton on PNCl Q3-09 Results and then be sure to read At What Point Does Accounting Gimmickery Become an Outright Lie? Let's Ask PNC).

Click any of these graphics to enlarge...

 

 Notice the amount of leverage that PNC is using if one were to use the
NY Fed and FDIC data in lieu of what PNC has proffered through their
take home test.

As you can see from above, there is a
significant difference between what the government's SCAP tests reveal
PNC will lose and what the government's NY Fed and FDIC call sheet data
says PNC will lose - a very significant difference. Solely as a result
of looking at this chart, one should be willing to demand a second
round of considerably more stringent stress testing.

 

If one were to granularly break down the foreseen losses to PNC's portfolio using the government data...

As
you can see, going through each major loan category in PNC's books
reveals a much LESS optimistic scenario than ANY portrayed in their
SCAP take home test results...

In an act of near unprecedented
generosity, I have included the PNC valuation along with the Blackrock
contribution in the free PNC lite public download below (in
alphabetical order). 

---

Subscriber content that reveals what the
banks truly require in terms of capital and cushions and the
actual rate of losses to come.

 Goldman Sachs Stress Test Professional 2009-04-20 10:06:45 4.04 Mb

 Goldman Sachs Stress Test Retail 2009-04-20 10:08:06 720.25 Kb

 MS Simulated Government Stress Test 2009-05-05 11:36:25 2.49 Mb

 MS Stess Test Model Assumptions and Stress Test Valuation 2009-04-22 07:55:17 339.99 Kb

 PNC SCAP Results recast using FDIC and NY Fed data - Pro 2009-05-15 07:31:21 455.37 Kb

 PNC SCAP Results recast using FDIC and NY Fed data - Retail 2009-05-15 07:30:25 395.18 Kb

 PNC Stress Test Pro 2009-04-13 02:10:17 3.11 Mb

 PNC Stress Test update - Professional 2009-04-21 15:55:56 3.00 Mb

 PNC Stress Test Retail 2009-04-13 02:11:08 323.51 Kb

 PNC Stress Test update - Retail 2009-04-21 15:53:52 777.50 Kb

 PNC stress test write up - public lite 2009-07-27 02:37:11 995.30 Kb

 Sun Trust Banks Simulated Government Stress Test 2009-05-05 11:37:13 1016.17 Kb

 JPM Public Excerpt of Forensic Analysis Subscription 2009-09-22 14:33:53 1.51 Mb

Comments

[Anonymous]

When the bottom falls out completely, the sheeple will eventually hit the streets in anger and rage (Example: G20 Summit) - The militia will mow them down, with various means: Sound frequency technology that has the capacity to break your eardrums, literally. Gas, pepper spray, or the old fashioned way - with a big stick.

There IS an effective system to handle this world crisis. Although not for the stupid -easier to comprehend than this website. View:

ZEITGIEST ADDENDUM

Yes, it does take time but anything worthy take some effort.
I Said to my best friend, my gosh, you must see this video. She stated, " OH, I am well informed and I know what's going on." She kept on insisting her knowlegde. Finally, after weeks of me saying,"You think you know -look at this! Finally, I got her to look. Well, she said, I thought I knew, BUT I DID NOT KNOW ALL OF THIS! JUST LOOK AT THIS AMAZING VIDEO BY PETER JOSEPH.

[agrotera]

We are all with you on this, thank you Reggie!!!

[UltimateRuler]

The preservation of the financially elite was worked out in 1913 off the coast of Georgia and called the creation of the Federal Reserve.
    The shift of wealth back to the present day members is well on its' way thus the smoke and mirrors routine of the press and government. The AIG debacle and the fact that they are still operating today is evidence enough to to assure anyone that something ain't quite right with this whole scenario of banks and stress tests and to big to fail scenarios. Is it any wonder that we're down to only two major banks in the country today and that they are JP MorganChase and Goldman Sachs?
  The only variable that's changed is the emergence of similar vast reservoirs of wealth in other areas of the world that are new competition to the Fed members. Do I see global warfare on the horizon as the elite clash with their huge masses of sheeple?

[kita27]

ps that arogant anonymous guy bashing ZH sounds like a G,Sachs worker drone. Hmmm, 'get a job and get a life, kooks'. Equating a job with having a life sounds a little contradictory to me. Go back to your hive little honey bee slave and leave the intellectual enquiries to rational people who are not overcome with emotional feeling toward their queen bee oppressors.

[kita27]

You cant have capitalism in a classless society, and the world is submersed in capitalist ideology so of course this is a class issue. Always has been. Socialism is for the elite only.

[Anonymous]

Revelations of wrong doing are not affecting necessary change. The reason is that the Oligarchy and all its members are beyond the law. In effect, the U.S. no longer enforeces laws regarding the financial super-structure and protecting ordinary Americans. When citizens recognize that no law protects them, they ultimately take the law into their own hands. It is the history of the world. We are approaching that stage.

[Anonymous]

so this is where all of you leftist romantics congragate. I thought you all died in your 6th year of underdrad at Berkeley. you're all a bunch of delerious kooks masturbating yourselves into frenzy of victimhood. power to the people! go get a job and build a life.

[Anonymous]

what a load of crap. I thought all of you leftist romantics died in your 6th year of underdrad at Berkeley. you're all a bunch of delerious kooks. go get a job and build a life.

[Bolweevil]

I learned something, thank you Mr. Middleton.

[Anonymous]

Reggie - like your stuff, but you are not the only one to point many of these things out, don't go all Keith Olbermann/OReilly bombastic on us "I've got an exclusive" (interview with someone on five other channels) , just keep up the info and education.

Your contribution is greatly appreciated and every angle of anlaysis showing how corrupt this is helpful

Besides, I think the Malcolm X quote more appropriate than being hoodwinked and bamboozled is his thing on the monkey on your back...The more we think of these guys as parasites, sucking the lifeblood of us, their hard working and innovating hosts, to their unproductive segmetned bodies, the more clear our agenda becomes.

[ratava]

I don't like you. You write like some sort of Prechter/Weiss e-mail newsletter charlatan.

[ToNYC]

But, how do you really feel avatar in reverse? Listen very carefully, this newsletter sucks, don't try it again! Charlatan now, charolastra later.

[Jim in MN]

Sir Reggie is no charlatan.  He is a Don Quixote of spreadsheets.  This particular post may not quite measure up to its own stated goals (the rabbit hole is twisty indeed) but you should take in his body of work and then see what you think. 

I find him a...necessary addition to the blog ecosystem.  His lightsaber has a fine tip on it most days.

[Mark Beck]

In regards to:

"Social mobility: The reason why the big banks are being protected at all costs and on the breaking backs of the unemployed taxpayer"

I just wanted to mention that CIT was not "protected" in the end. Even after receiving $2.33B of TARP money. I think, now that Ben B. believes systemic risk has passed, more will be unprotected.

[Reggie Middleton]

CIT is not a big bank. When JP Morgan and Goldman are "unprotected" then we can talk.

[duckweed]

eggzactly! what he said...

[You Cant Handle...]

Excellent work, Reggie.

[Anonymous]

Blue vs red pill. Your essay is in error. You take the red pill to be unplugged from the Matrix.

[Anonymous]

I can verify that. I saw that in the intro and immediately could not trust the rest of the presentation.

[Heroic Couplet]

Logic sez to me to keep an eye on the newly elected Republican governors in Virginia and New Jersey.  I want a day by day count of how many jobs are created in Virginia and New Jersey before the 2010 elections. 

[duckweed]

wake the eff up? jesus! this is not about right vs. left anymore. that whole thing is only a smokescreen to keep your ego (it's feeling of superiority over another) happy so you can sit on your hands and ignore who is really raping you in broad daylight.

[Anonymous]

Only a fool would believe the jobs created or not in Virginia or New Jersey between now and the 2010 elections would have anything to do with Dem versus Repub governors.

Neither party has any solutions at the moment. Both are in the pocket of the financial elite.

[naiverealist]

I have always been intrigued by the term "law and order", specifically "order".  I was raised thinking that this term meant only keeping chaos out of the physical environment, but I have since learned that this was directed toward maintaining "social order", namely, the elites (i. e. America's "royalty") on top, and the unwashed masses on the bottom, with the striving middle class trying to separate from the lower class and striving toward the unobtainable upper class.  This became apparent when I realized that America was not a classless society.

Appreciate your work, Reggie. 

[Ruth]

Thanks Reggie, my only question is how many bottles and would you suggest straight booze?  I will promptly distribute and act accordingly!  Great work as always!  God Bless ZeroHedge and all who lingers here!

[duckweed]

too many are never enough!

[HayeksConscience]

Reggie, thought provoking piece.  Thanks. 

I would suggest "On the Road to Serfdom" by none other than Frederick Hayek (in addition to the others mentioned above).

Unfortunately, we have the government we deserve.  It's up to us to change it.  (As you correctly point out).

[Narcolepzzzzzz]

Welcome to Kleptocracy.

Government of the elite, by the elite, for the elite.

[Steak]

Thank you X1000 Mr. Middleton.  You have pulled together a profoundly useful document.

[Rainman]

The students created the first stress test knowing what the answers had to be. Now there can be no makeup test or most students will fail it without an assumption of < 8.9 .....which would further test the boundary of believeability one more time.

So this is an official confidence game that is going very badly. All forward employment assumptions are null and void. And it all translates into TARP II anyway........assuming a big leg up on the debt ceiling after this pesky health care fiasco is firmly in the bag.

[Anonymous]

a clue about what is happening reggie can be found out by yourself very easily. just take a walk down a street in crown heights....then you will find out who is in charge real fast....you are a new york guy, you know what i am talking about....what to do about it? well you tell me...

[mrhonkytonk1948]

Mostly over my pay grade, but the whole Thorsten Veblen thingy with graphs does resonate.

[Anonymous]

There's a lot of great information here, but with a lot of formatting errors it seems. And, is it me, or is the "Grand Finale" missing?

I agree with the other commenters that if you had organized this as more of a narrative that a lay-person could understand, along with figures, references, and exhibits, it would be a lot easier to forward.

Still thanks for the information and your hard work

All the besy

[rcostello]

Yes this entire facade was perpetrated to protect the wealth and power of the "capitalist class". If "W" and his cronies, through bail outs, did not do so we would certainly be at Civil War based on economic lines. Currently President Obama is the "Negotiator in Chief" between the wealthiest 1% and the working classes, trying to keep the masses placated while protecting the asses of the "capitalist".  And you wonder why ammo is so hard to find....TO ARMS MY BROTHERS TO ARMS!!!

[Anonymous]

what a load of crap. I thought all of you leftist romantics died in your 6th year of underdrad at Berkeley. you're all a bunch of delerious kooks. go get a job and build a life.

[Sqworl]

Thanks Reggie...:-)

[Commander Cody]

Reggie:

With all due respect, the format of your article does not easily translate into information that can be forwarded, read and understood.  Providing a succinct analysis with supporting data is the ticket.  I don't see it, but maybe it is just me.  By the way, I think that anyone who cares about their situation and who feels responsible for it already knows we have been lied to and raped by our government and the big banks.  The rest of the population just doesn't care and won't since they do not feel responsible.

The Commander

[SV]

Reggie - I think Commander may be on to something with a PDF version of this.  It would allow easier forwarding.

Where Commander is missing the point of your righteous article is that the answer is SIMPLE, the proof needs some explaining.  Most everything the Sheeple buy into is proof-by-assertion.  Unfortunately that doesn't help us get out of the bamboozle.  It needs to be understandable by a 5th grade math, but I don't know if it can get there.  Keep on keepin' on.

[Anonymous]

Hes the first Macro Investor to sound like Billy Mays and Jess Jackson.

http://www.linkedin.com/in/reggiemiddleton

I think that Reggie is the Bamboozler.

Honestly, What the hell happened to journailistic integrity on Zero Hedge?

[duckweed]

unmask yourself anonymous, then let's talk about integrity.

[Anonymous]

haha, yes, however identity and integrity are two different beasts, and the absence of identity does not preclude integrity. Therefore, lets talk about integrity without qualifiers.

Do you duckweed, support and therefore defend Reggie Middleton? And does my lack of identity detract from my analysis of Reggie?

Call me anon, call me whatever you wish, I find Reggie's analysis trash. Your analysis of me seems to follow suite.

I call you duckweed trash.

What is wrong with this site? Who is managing for value up there? Who is saying lets take this ZH and change the world, and not just lets post bullshit and conspiracy theories.

Will you sell Zero Hedge? Two years from now, I doubt you have anything of value. Make an offer.

[jules from aus]

everyone has PROOF

hell, most of any worthwhile blogging lives because of PROOF

but it ain't worth a dime in a nation of blubbery TV zonked and psychologically overwhelmed Ma and Pa citizens trying to keep their families just functioning

- hell, just learning to save again is enough for the attention span at the moment

nice try Reggie though please, a little more method in your madness next time - (seemed like a needed a map key or book on symbology) - and please leave the paid subscription baits for the banner ads - we're all meant to be saving man...

[Voluntary Exchange]

Fellow Humans:

I quote Hans-Hermann Hoppe:

“A state, in accordance with generally accepted terminology, is defined as a compulsory territorial monopolist of law and order (an ultimate decision maker). “

(“On the impossibility of Limited Government and the Prospects for a Second American Revolution”

http://mises.org/story/2874)

In those rare moments in history where a group of people have won their freedom and attempted to preserve their freedom for future times and generations they have resorted to various means to try to preserve it, as history records: monarchy, democracy, oligarchy, and so on up to the 18th century when a minority of Americans tried using a republic with strictly limited powers as granted in a constitution. Any such endeavor that grants a territorial monopoly of law and order must ultimately fail. (Failure in the sense that it must sooner or later cease to be efficacious in preserving life, liberty and property of the people in general and become a tool of plunder by the few against the many).

To be brief: the characteristics inherent in a monopoly of this sort ultimately create the conditions for that failure. The natural laws that govern human action will always lead to this failure, given the starting condition of monopoly that meets the above definition of a State. Its being as such a monopoly, over time, will naturally attract the minority of individuals who consider taking from others through force or fraud a preferred survival strategy. The early stages of their aggressions take on various forms of deception that have become more sophisticated though history, leading of late to central banks, fiat currency, grants of economic and business privileges and so on. In earlier ages religion was often used but that trick is wearing a little thin by now. Eventually as the non-parasitic class becomes aware of the nature of the deceptions and how it has been enslaved, (and eventually it always will happen given the human power of reason, learning and communication: hence the state's perpetual war against reason, learning, and communication), the system enters into its final stage that America is quickly approaching: overt despotism, and open aggression, being unable to exploit by deception any longer.

Many American Colonists reasoned that they needed some kind of minimalist state in order to survive in a world populated by other aggressive states, not at that time in history being aware of how a strictly voluntary system of exchanges amongst individuals and groups could arise and long endure to solve the primary needs of individual and group security and justice. As is always the case, along side such individuals were those who viewed aggression and deception as a preferred way of life and saw the forming of a state as their opportunity. The dynamic of these two forces, the subsequent struggles that ensued, in the formation of and subverting of the United States is a fascinating study, or as is often said: “ the rest is history”.

For those who want to understand how to form a viable, strictly voluntary contractual society may I suggest they study Ludwig Von Mises, Murray Rothbard, and Hans-Hermann Hoppe as a good starting point.

We are at a very exciting moment in human civilization. The State and its thus empowered despotism has never been so vulnerable in known human history. The understanding of how to end the “State” and what to replace it with is well developed. Once the appropriate manifestos/declarations ( I suggest “the Manifesto of the free” as a possible title) are properly formulated and globally communicated in a readily digestible form we could see the rapid, total collapse of State-ism similar to the mostly non-violent collapse of Communistic Eastern Europe and the Soviet block. Given an intact internet This could sweep the planet in a matter of weeks or months.

To put it simply, for we who wish to be FREE, the foundation has been staring us in the face since the beginning of civilization:

VOLUNTARY EXCHANGE.

To all the States of the world and their allies, let the proclamation sound: All those who initiate aggression or use fraud are declared illegitimate. Your system rests upon that which cannot and ought not to endure. You will no longer be obeyed or served. You who have lived by plunder will plunder us no more. Make restitution and go in peace, or face the consequences of open aggression against your moral and just teachers.

Friends, it is high time that we figuratively fight like “warrior poets” and win our freedom! Let those who stand with me against aggression openly declare to each other”

“I AM FREE!”.

[Anonymous]

Reggie Middleton--

http://www.amazon.com/Writing-Well-30th-Anniversary-Nonfiction/dp/006089...

Buy yourself a copy please. Please?

[Anonymous]

+1 - The main reason I've skipping most/all of Mr. Middleton's numerous posts on ZH.