Make sure to follow the discussion with our web presentation.
Read the Web Presentation
Read the web presentation for the 2016 2nd Quarter Wrap Up here! (Click Here)
Read the Transcript
Read the transcript of Wrap Up News Trends & Stories, Part I here (PDF)
Listen to the Wrap Up News Trends & Stories, Part I
The Solari Report 2016-07-07
Read the Money & Markets Notes
Read the notes from this week’s Money & Markets here (PDF)
Listen to the Money & Markets MP3 audio file
The Solari Report 2016-07-07
July 14 – 2nd Quarter Wrap Up News Trends & Stories with Dr. Farrell Part 2
July 21 – Blockbuster Chartology with Rambus/2nd Qtr Equity Overview
July 28 – 2nd Quarter Wrap Up – Productivity, Prosperity & the Popsicle Index
“The Popsicle Index is a quality of life measurement coined by Catherine Austin Fitts as the percentage of people in a community who believe that a child in their community can safely leave their home, walk to the nearest possible location to buy a popsicle, and walk back home.” ~Wikipedia, “Quality of Life”
By Catherine Austin Fitts
Introduction
If you follow the financial and business news, you will hear a rising chorus of voices bemoaning stagnating rates of productivity. After levering up government debt in the developed and developing world, “the debt growth model is over.”
“The debt-financed growth model has reached its limits… There are no shortcuts that aren’t reforms. ~Wolfgang Schäuble, German finance minister, at G20 meeting in Shanghai
That means we have to face fundamentals — rather than ignoring them as we satisfy squeaky wheels with cheap money. Let’s pierce through the veil of economic terms by using a concrete example.
Meet John & Sue Manley
A dairy farmer — lets call him John Manley — is driven out of business by state and federal safety rules concocted by well-funded lobbyists. While listening to Fed Chairman Alan Greenspan attributing his loss to market competition (as opposed to rigged government rules designed to consolidate the food supply into investor controlled monopolies), Mr. Manley attempts to figure out what is going on politically. However, try as he may he cannot get understandable data about government regulation, credit, and spending in his area. He cannot because all attempts, such as Community Wizard or financial statements to make accurate taxpayers information accessible to taxpayers have been suppressed by legalisms, bailouts and physical violence as trillions of dollars disappear.
The lobbyists Mr. Manley is up against have access to that data, even though the corporations they represent barely count as taxpayers as they are able to use off shore corporations and transfer pricing to avoid paying federal taxes.
Giving up on farming, but still wanting to be productive, John Manley starts a trucking business. Unfortunately, the obstacles to raising capital are so prohibitive that he finds himself at a significant disadvantage when competing against large trucking companies.
John’s wife Susan is a teacher. Her state managed pension fund is financing the large trucking companies that he competes with, and at a much lower cost of capital than John must pay for equity capital. Indeed, he and his neighbors have unlimited access to illegal narcotics and legal pharmaceuticals, and can spend their life savings on lottery tickets. However, if his neighbors buy stock in John’s trucking business, everyone could go to jail. That means John cannot afford to invest in the latest technology. With access to Susan’s savings and to state and federal government purchase and contracts, his competitors can. The local bank is not easily making loans to small business. Federal regulators are pressuring the banks in the area to purchase treasury bonds to finance the government.
John stays in business by working long hours for a much lower income with much lower margins.
Susan loses her job at the local school because she will not certify children as disabled. Struggling parents want them certified this way so they can qualify for disability checks to pay for their food and shelter. However, it means the children will be given Ritalin or other central nervous system stimulants paid for with taxpayer dollars. Susan believes such children will be permanently disadvantaged.
Ultimately, after selling their dairy farm in the face of crashing commodity prices and struggling to make ends meet, John and Susan are forced to apply for food stamps. They purchase their food at Walmart, using an EBT card. A growing portion of food is trucked in from corporate farms in Latin America. When they call the support hot line, they speak with someone in Asia working for JP Morgan Chase doing a job that one of them could do. After years of stress and eating food with GMOs and poor nutritional content, Susan becomes sick and goes on Social Security disability.
Meantime, Walmart and JP Morgan Chase stocks are floating on a sea of “EBT Nation.” Indeed, the US banking market is dividing between two groups of people: those who have been burnt by JP Morgan Chase and those still fearlessly doing business with them.
What John and Susan don’t realize is that many of the goods they are buying through Walmart have been subsidized through trade with China and that ultimately, that subsidy is likely to diminish.
We have not yet mentioned what narcotics are doing to John and Susan’s opportunities in the local economy and the price at which they sold their home and land. Since the local drug gangs swept their local town with home invasions, John and Susan have had to arrange gun carry permits, put new locks on the door and make sure their children do not go out alone, and certainly never at night. As the drug gangs are protected by regional enforcement networks, the Manleys are livid anytime the federal government promotes gun control. If the federal government is concerned about guns, why not stop supplying the local drug gangs with drugs and guns? Or stop arming themselves — there are now over 200,000 federal bureaucrats authorized to carry guns.
Indeed, one wonders what the laundered money has to do with the lower cost of capital enjoyed by Walmart and JP Morgan and the deep pockets funding the lobbyists for the Latin America farming business. Meantime, the Mexican drug cartels are moving north.
A review of the financial press notes a number of developments. The US establishment is congratulating Silicon Valley and the business elites for using information systems to increase productivity at companies such as JP Morgan Chase and Walmart. Thanks to federal regulation on health care records and Obamacare, Silicon Valley hopes to engineer more than $1 trillion out of labor costs. The immediate consequence is that hospitals and doctors across America are now caught in a nightmare of unreliable, expensive systems and time consuming IT procedures. John and Susan’s health care costs have increased significantly. They are lucky, several of their neighbors lost their health care when they were moved to part-time status at a chain restaurant.
Congress is merging the Social Security disability fund into the Social Security trust fund because money is flying out the door to fund widespread unemployment that does not show up in the unemployment statistics. The US death rate is rising, with drug related deaths contributing. Health care costs are exploding, closely correlated with the deterioration in the food supply and the growth of drug use. Congressmen warn that the Social Security trust fund is insufficient, and we should raise the retirement age.
John and Susan are growing increasingly concerned about whether they can count on Social Security or Susan’s pension fund which experienced significant losses on mortgage fraud and is experiencing falling yields in the investment portfolio.
The Real Nitty Gritty on Productivity & Prosperity
In short, this mirage of “productivity” — much of it designed to ensure politically connected centralized monopolies win — is financed with skyrocketing government debt issuance, central bank bond purchases and a wide variety of drains on the time, income and assets of the general population.
It’s not real, it does not work, and we can only hope the game is up now that that “debt growth model” is over.
It’s time to review what has happened and what to do about it. First and foremost, the world is full of John and Sue Manley’s who are highly productive people. We need to unleash them from the “slow burn” that is destroying their productivity. Second, time is of the essence. Not only is the debt growth model over, developments in the second quarter of 2016, including Brexit, have rung the bell: we are shifting to a multipolar world. The future of the US dollar as the primary global reserve currency is now in question.
2nd Quarter Wrap Up: Four Parts Throughout July
Our 2nd Quarter Wrap Up will be presented throughout July in four parts:
- News Trends & Stories: For the next two weeks we will chew through the top news trends and stories with Dr. Joseph Farrell. This coming week in Part I, we will look at Economy and Financial Markets and Geopolitics, including a serious discussion of Brexit. Brexit is a clearly the story of the 2nd Quarter.
- The following week in Part II, Dr. Farrell and I will cover the Science and Technology and The Big Questions. Make sure to check our web presentation for the complete listing of News Trends & Stories for the 2nd Quarter.
- Financial Market Roundup: In the third week, we will combine a written Blockbuster Chartology from master technician Rambus with Catherine’s Equity Overview. Make sure to check our web presentation for the complete round up of financial market charts on June 30.
- Productivity, Prosperity & the Popsicle Index: Finally, our big theme. How do we blast through the Orwellian BS about productivity coming out of folks like Alan Greenspan? How do we get down to what needs to be done to integrate dazzling innovation with real human productivity and prosperity? We will post our discussion of the “real deal” on productivity and prosperity in our final week.
We Never Give Up!
At Solari, we never give up on the notion that genius can serve humanity as a whole. Indeed, our calculations indicate that the monopolists will be wealthier when it does. It’s simple – free markets create far more wealth than fascism. Secrecy designed to protect national security ultimately creates privileges which destroys the very society the secrets were meant to protect.
As I have said many times before, now is not the time in the history of our people for a failure of imagination!
We will have an abbreviated Money & Markets next week, so post or e-mail your questions for Ask Catherine.
Talk to you on Thursday!
