Guest Post: The Rot Runs Deep 2: Don't Call Out My Scam And I Won't Call Out Yours

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Complicity reigns supreme as everyone benefiting from a scam keeps quiet about everyone else's skim lest their own share of the spoils fall under the harsh light of inquiry.

The uncomfortable truth is that America has become a nation of skimmers and scammers. The rot runs deep not just in the upper reaches of the financial and political Elites, but in the bottom 99.5% as well.

America can now be summarized by this phrase: "don't call out my scam and I won't call out yours." In other words, all the skimmers and scammers have become complicit, not just in protecting their own scam from the light of day, but in protecting everyone else's scams, too, lest those who lose their swag unmask someone else's scam in revenge.

Examples of skimming and scamming abound in finance and government. It's almost tiresome to even list examples; fortunately for us, tireless truthseeker "George Washington" has amassed a list of bank fraud and malfeasance (reprinted by the equally indefatigable Barry Ritholtz).

It's easy to skewer the financial and political Elites' abuses of power, but few look at all the rot below. The fraud and embezzlement-riddled mortgage market of the previous decade included not just investment bankers but non-Elite Americans who lied about their income, debt, and other material facts in order to obtain a fraudulent mortgage.

Another "middle class" scam is practiced by public workers nearing retirement. (Please don't claim this doesn't happen, I have first-hand accounts from cousins with 30-year careers in fire and police departments.) Since the pensions are based on the top three years of pay, soon-to-retire workers pile up the overtime to amass much higher pay in their last years. Everyone involved helps make this happen because they expect to pull the same scam when their time comes.

To sweeten the already enlarged pension pot, they then declare (with the seal of approval by a complicit doctor) that their work left them with a disability of some sort (a heart murmur is apparently a favorite excuse) that makes their pensions tax-free. (Millions of "the rest of us" also have heart murmurs. Where's our tax-free pensions?)

In the lower rungs of the social-financial order, claiming disability is high on the list of skims and scams, as evidenced by the astonishing rise in the number of suddenly disabled people once the 99 weeks of unemployment ran out. Food stamps can be applied for online, and despite bolded warnings of severe penalties for misstating facts, it's safe to assume that "fudging the numbers" is unlikely to lead to any investigation or prosecution.

The rot runs deep in every nook and cranny of the nation. Longtime correspondent Kevin K. recently submitted this telling account of blatant scamming. (PG&E is Pacific Gas & Electric, northern California's utility.)

Two weeks ago we stopped by to see the new home a childhood friend bought in an upscale neighborhood. As we were talking he proudly let me know that he was still on the PG&E CARE program (that cuts his PG&E bill in half). It turns out that a few years ago after taking some losses on investments he had a taxable income for the year of ~$25,000. Soon after filing he got a letter (at his ~$2 million home) about the CARE program. He filled it out with his actual 1040 income to see what would happen.


To his surprise he was accepted into the program and his PG&E bills dropped in half (saving him over $1,000 a year). He said he was certain his savings would end when he called to transfer service to the ~$3 million home he just bought, but no one ever asked about his income and he is still in the CARE program. He said he has told a lot of people (that make a lot of money and live in $1mm + homes) about the program who have either lied about their income (there is no system to check) or put the PG&E account in the name of a nanny or cleaning lady to get in the program to save money.

The justification for all this skimming and scamming is always the same: "everybody else is doing it." As noted yesterday, self-service and self-justification are the ultimate American gods that we now worship, but nonetheless the moral disintegration reflected by this rationalization is still remarkable.

There is another dynamic: desperation. Beneath the placid surface of the "recovery," millions of people are desperate and feel that skimming, scamming and lying are their "only hope" to 1) keep what they have 2) gain much-desired upper-middle class perquisites or 3) keep body and soul together and not end up living in a cardboard box.

These dynamics of moral rot and desperation have created a society in which the spirit of the law is blatantly violated but "all is well" as long as the letter of the law has only been scratched. We see this in every level of society, from legalist parser in chief Bill Clinton's obtuse defense, to the classic phrase that the "dancing" (i.e. the fraud and embezzlement) goes on until the music stops, to the disability recipient who "does whatever it takes" to get free money for life.

Expectations are impossibly high. It's no longer enough for the Federal Reserve to issue a $1 trillion injection of financial cocaine to the stock market every year; now the market needs a $1 trillion injection every six months lest it crash.

Parents want their children to join the top 10% and enjoy a security and wealth that is as illusory as the pathway they have been sold: if only you get into an Ivy League university, if only you get a 4.+ grade point average, if only you earn a law degree--yet none of these guarantee anything beyond an enormous expense and a shot at a roulette wheel with too many players and not enough winners.

Rather than accept that the postwar boom based on cheap abundant oil, industrialization and globalization is over, and the financialization bubble of the past 30 years cannot be re-inflated, we continue to maintain unrealistic expectations of an economy with structural imbalances, rising friction and declining surpluses.

It is no surprise that economic hardship leads to increases in crime and social unrest. The wave of instability resulting from economic decline has repeated throughout history, a process described by the seminal book The Great Wave: Price Revolutions and the Rhythm of History. In this sense, moral rot is to be expected as economic surpluses vanish and entire economies must live within means that have shriveled for structural reasons.

Can an economy that has become dependent on lies, misrepresentation, "fudging" of numbers, fraud, embezzlement and a multitude of skimming and scamming operations escape the moral and financial black hole it has created? The self-evident answer is "no."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
francis_sawyer's picture

 "It's no longer enough for the Federal Reserve to issue a $1 trillion injection of financial cocaine to the stock market every year; now the market needs a $1 trillion injection every six months lest it crash."


So when it get's to a trillion every day will my gold be worth anything?

Michael's picture

I think this calls for something stupid be done on somebodies part at the Republican National Clusterfuck Convention.

Murray Energy Miners Allege They Had To Give Up Pay To Attend 'Mandatory' Romney Rally (AUDIO)

I figured out why they use the words "Conspiracy Theory".

It's the excuse they make for you to get you out of doing your own homework and look the other way.

When you hear the words "Conspiracy Theory" used by them, you should run as fast as you can to the commuter and Google search the topic their talking about. It's very easy.

mirac's picture

Old Chinese proverb...No investigation?  No right to speak!

Dr Benway's picture

Summary of article:


Skimming scamming scum, we all have become

Gringo Viejo's picture

You lie, I'll swear to it.

MillionDollarBoner_'s picture

"They" like it when you skim and scam. That way you will do everything you can to stay under the radar.

"Good boy. Now sit...sit!"

Same reason drugs are so readily available to teenagers...

vinayjha's picture

Economy is dependent on Fed free money, which i guess any reaches to people. It goes in stock market.

prains's picture

sounds all greek to me

Dr. Engali's picture

Every once in a while a blind squirrel finds a nut and a statist actually posts an article that is worth reading.

NotApplicable's picture

Notice how he missed calling out his own scam of statism while harping on all of the scams it induces/produces.

Dr. Engali's picture

Yes I did. I was going to edit my initial commentary to mention that but somebody quicker to the draw beat me to it.

malek's picture

I actually have no idea on what grounds you are calling Charles H. Smith a statist.

Care to explain?

adr's picture

I don't like fudge. Maybe that is why I don't partake in scams.

There are a ton of people that fake eligibility for the HEAP program. I'm a little sick of paying $200 a month to heat my house in the winter. Maybe I should divorce my wife so we can still live together, but her $10k a year would let us get on almost every single assistance program there is.

As I said, The United Scams of America.

madcows's picture

let her get knocked up by 7 different guys and you can really rake it in.  get her some rent assistance, food assistance, heat assistance, a car, cell phone, unemployment, EBT, day care assistance and Disability.

Tinky's picture

In spite of frequent criticisms from commenters, Hugh-Smith is actually very good at distilling and reporting the fundamentals of the collapse that we are experiencing.

NotApplicable's picture

Yet he always fails to connect them to his fundamentals to the ones underlying them, statism.

I'll bet it wouldn't take two or three Rothbard books for him to complete the logical exercises, but as the earlier True American Show post discussed, it's more comforting to live the lie, up until the instant it isn't.

eurusdog's picture

It's hard to bitch about Greece when we are well on our way to the same fate!

madcows's picture

I'd say we're WAY ahead of them.  They should be bitchin about us.

CH1's picture

It's hard to bitch about Greece when we are well on our way to the same fate!

Who's WE???

I never joined anything.

TrustWho's picture

Could not agree more....

How can good people fight a corrupted system? When the law serves corruption, choices are limited. As I wrote in Santelli's counterfeiting article:

If you want to legally counterfeit, got to be a member of Fed club,

If you want to legally steal, got to be member of TBTF bank club,

If you want to legally practice organized crime, got to be member of US/state justice clubs,

If you want to make a fortune from legal bribery, got to be member local/state/federal legislative/executive/judicial clubs.

Sorry to see the morality of our leaders be corrupted by money, but just what happens once you cross the line and become a Banana Republic.

I know all banks, all lawyers, all judges, all legislative people are not corrupt, but the good people inside these institutions must bring light to their corrupted peers. If not, they are corrupted by association.

LOOKING FOR SOLUTIONS? Tyler has an excellent solution with this transparency, but I would bet the corrupted people in power would like to shut this site down. Just speculation on my part....

Fish Gone Bad's picture

How can good people fight a corrupted system?

Conflicts of interest abound.  We see it everyday, and everyone falls victim to it.  Some are better at it than others.  Perhaps it is really time to just go "all in" and stop complaining.

CH1's picture

How can good people fight a corrupted system?

Don't fight it. Leave it!

Walk away from the slave game and start building a better world.

Bartanist's picture

The solution is clear. Break the status quo by creating infighting between the complicit corrupt parties.

taketheredpill's picture

Complicit doctors?  Who would do this because...they hang out with the patient...they get a kickback from the patient...

I believe the padding the pension part but I gotta call BS on the doctor part.  One doctor, a doctor of a friend of a friend, ok, but not a lot of doctors.  Cui Bono.



_ConanTheLibertarian_'s picture

Almost anyone would become corrupt if it there would be a lot to gain. I would.

The libertarian solution would really make this much less of an issue. Take away the incentives and let people thrive.


Seasmoke's picture

same reason why other MLB players and even owners didnt call out players who were known steroid users.....if you aint cheating, you aint trying

dolph9's picture

Nice article.

I think the scams have a long way to go, as is evidenced by all the actions taken since the crash.

Scam until you die is the American way of life.

tao-seeker's picture

The Master Says: Eligibility creates liability just the way that entitlement creates obligation. The Great Laws of the Universe are inescapable.

The inferior man is not ashamed of unkindness, does not shrink from injustice and if no advantage beckons, he makes no effort, unless intimidated, he does not improve himself. But this is good fortune for the inferior man, because if made to behave correctly in small matters, he will be careful in large ones.



Hermit here, just passing through on my journey seeking wisdom and integrity.

madcows's picture

It's not an omnibus unless there is something in it for all of us.

JLee2027's picture

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."

- Ludwig von Mises

Monty, since we are governed by idiots, I'll take Door #2.


hampsterwheel's picture

The other way to look at this is to go "Gault" ... the only way freedom will once again even have a chance isn't through the ballot box and ObamNey... it will be by a classic default, denying the liquidity that runs the machine... it will be hard to put a TSA screener on every corner when cities are collapsing all around us in default - so I say the more the better - grab all you can grab - better yet use the ill gotten gains to buy physical silver (double short the US government) - we all know its going down, so might as well make it happen now.

Dina Strange's picture

Good article. Every day when i hear people whining about President Obama and corrupt markets, i think, have you looked in the mirror lately...coz the picture of self reflection is ugly.

LMAOLORI's picture

Dina Strange " Every day when i hear people whining about President Obama and corrupt markets, i think, have you looked in the mirror lately...coz the picture of self reflection is ugly."


I agree that picture of self reflection is VERY ugly but it should be noted President Obama is the head of the entitlement class both at the top and the bottom...

''A fish rots from the head down''

Top Rot - a rotting of the upper part of a plant is symptomatic of various diseases

Shigure's picture

+1 "A fish rots from the head down"

Also, if there is an advantage in cheating, it puts honest people at a disadvantage and the bad drives out the good

LMAOLORI's picture



Debt is Slavery - They owe their soul's to the company store (in this case the company is the U.S.A.) 

 "Sell not virtue to purchase wealth, nor Liberty to purchase power."

Hondo's picture

There are many of the public pension that have eliminated over-time when calculating pension benefits.  The hardest plans to make those changes are the fire and police plans (especially ones that are administered at the local level instead of the state level).  IMO public officials let this happen to get votes from the union members of the plans.

AnAnonymous's picture

'Americanism' is just a ghost built on the bubble of nothing.

'Americanism' has been running the way depicted in the article since 1776, July, 4th.

The solution: pouring the shit produced by 'Americanism' on a third party so they endure the negative consequences instead of the 'american' middle class.

Third parties have proven so far resilient. The self evident answer thus is not that self evident. As were not the american 'truths' written out in the declaration of independence...

'Americanis' can for some time, long time, escape the consequences of 'Americanism'

Colonial Intent's picture

And yet it's the number one destination for immigrants, with all its faults.

Its a multicultural melting pot that is held together by an ideal devoid of race or religion, this ideal may have become corrupted but it still beats the political monoculture of china or russia.

Katrina damaged its global reputation but its just down not out.

Think of the next election, repubs pissed at the expanded govt controls passed under bush and dems pissed at obama for not reversing them.

Its a demographic thats growing.

Just my two cents,

RopeADope's picture

The current lack of fraud investigation and prosecution by government agencies brings to mind the Ed Meese DoJ which quashed multiple investigations as they had a chance of uncovering illegal activities by high placed individuals in government. It is probably not a stretch to say this is the primary reason why we have not seen federal investigators doing their job in the past 10 years. Even if the fish is currently rotten at the head only any federal investigation team will lose out on valuable on the job training as they are currently not keeping up with current criminal methods due to pressure from above.

DavidC's picture

Yes, but this IS a recovery, right?


Radical Marijuana's picture

At some point, one must break through the Bizarro Mirror World, rather than continue to try to navigate according to accepting how everything looks in that mirror.

Runaway fiat money made the value of everything become a fetish. The basic ways that we understand everything else in the universe are energy laws, and general systems theory.  It is possible to understand human society and money systems in those ways too ... BUT, EVERYTHING IS BACKWARDS WHEN WE DO!

The "rot" goes deep into the philosophy of science! (& In a technological society, the philosophy of science is a very important thing.) Our basic understanding of living things is that they are entropic pumps. Groups of human beings in a civilization become one vast integrated entropic pump. Most of economics is running around to find the fuels to keep our fires burning. Since thermodynamics blends into information theory, as mathematically continuous, the basic ideas of measurements and money, and so forth, all track back to energy laws and general systems theories.

When the entropy equations were being developed, an arbitrary minus sign was inserted at the beginning, so that their values for power and information would be expressed as positive numbers, rather than negative numbers.

That arbitrary minus sign reversed the true meaning of all power and information, which is that they are ALL inherently negative values.

The fundamental concept that I use is SUBTRACTION.

After relatively subtracting anything from the Whole, we then have boundaries to that thing, across which energy must be conserved.  Therefore, from the basic idea of relative subtraction (i.e. from the operation of all human language to name things and understand our world) there then follows the idea of ROBBERY.

Scientific understanding of society should be based on those ideas of SUBTRACTION AND ROBBERY. Human societies are ALWAYS organized systems of lies, operating organized robbery.

Thus, the problem with an article like this is that it becomes more and more cynical, without finally shattering the Bizarro Mirror World of impossible ideals and false fundamental dichotomies. It reverts to what I call being a "reactionary revolutionary."

The spiritual way out of the trap of language is the ancient mystical way: everything we "know" is necessarily a relative illusion. Everything we "know" actually has a negative value, not a positive value. After we separate ourselves, or others, from the Whole, then us and them must be always engaged in robberies to live. After we relatively subtract ourselves or others from our environment, everything we do is necessarily acts of robbery, to take what we need to survive.

Social conventions have created a host of arbitrary distinctions between good and evil, whereas, a better scientific understanding is that there are no good guys, only different kinds of bad guys.

I repeat, a good analysis of reality ALWAYS results in perceiving organized systems of lies operating organized robberies.

Thus, the problem with this article is that is still keeps some impossible small percent out of that system, whereas, there is 0% that are not necessarily living through some system of organized lies and robbery.

We should break through the Bizarro Mirror view of reality based on false fundamental dichotomies! We should stop being cynical about impossible ideals, and start to understand why those ideals were always impossible to ever actually exist in the real world.

The spiritual way is always there, from ancient mysticism, to escape from the trap of language. However, as long as we define anything, as long as we measure anything, then everything thereafter must necessarily be built as systems of lies and robberies.

Thus, this series of articles is interesting in that it attempts deeper and more thorough analysis and understanding. However, in the end it still collapses back to false fundamental dichotomies. The paradox of having our physics and biology advance through paradigm change after paradigm change, but still having political science based on the old-fashioned biggest bullies' bullshit social stories, keeps on getting worse and worse.

People tend to superficially understand the frauds of the banksters, and how, therefore, everyone is being sucked into the black hole of those frauds. However, they then tend, in the last few percent of their article, after doing mostly good historical analysis of the real situations, to collapse back to the impossible ideals and false fundamental dichotomies, when proposing their "solutions."

At some point, we need to reverse our understanding of those "black holes!" Lots of good physics has been doing that, but almost nothing like that, which I am aware of, exists in the social world of monetary theories, and their corresponding human bahaviours.

The theoretical solutions are to become better wolves, not better sheep. The solutions are to become our own banksters. The solutions are to become our own central banks. The solutions are to negotiate better death and debt controls, within better murder and money systems, in which we accept the basic premise that everyone must necessarily operate some system of organized lies and robbery in order to survive.