Everything Is Not What It Seems

I have been urging my readers to leave Babylon the Great since the beginning of this blog. I have been pointing out that our culture, our economics, our politics, our religion, and really our whole society, is a scam. You are being played. It is like the lyrics to the theme song of my 9 year old daughter's favorite sitcom, "Everything is not what it seems." 

I do run a risk by saying things like that. The risk is that you will think that I think I am better than you. Remove this thought from your mind. I too am being played. I too am deceived by the system. 

We all, to borrow a phrase from the Apostle Paul about the next life, see through a glass dimly. We see the problem, the deceptions and half-truths. Maybe I see things more clearly, but maybe not. Each of us is blinded in our own ways. As that great philosopher Madonna once sang, “Your eyes only see what you want them to see.” I am just as susceptible to this as anyone. 

Ultimately all the corruption we see in “Babylon” has an origin. 

Here is how the apostle Paul said it in 2 Corinthian 11:14 referencing false religious leaders:

They’re a sorry bunch—pseudo-apostles, lying preachers, crooked workers—posing as Christ’s agents but sham to the core. And no wonder! Satan does it all the time, dressing up as a beautiful angel of light. So it shouldn’t surprise us when his servants masquerade as servants of God. But they’re not getting by with anything. They’ll pay for it in the end.

But I can say that if you do not think about these things you too will pay for it in the end. You will end up a part of the system that will collapse. 

Revelation 18 tell us: 

Get out, my people, as fast as you can,
    so you don’t get mixed up in her sins,
    so you don’t get caught in her doom.
Her sins stink to high Heaven;

God has remembered every evil she’s done. 

Metaphorically speaking, Is this the world you see? Yes, think about these things, and get out, metaphorically, as fast as you can before it is too late. 

If you don't see things quite the way I do, are you sure you are seeing correctly? I have already admitted I too am subject to bad vision. And there is no Lasik surgery for this malady! The only real solution for this kind of bad vision is the spirit of God. 

Look at this video. Your eyes can be deceived. Are you deceived right now? Or are you a part of the lifelong process of leaving Babylon? 

Argh

Boehner wins! At least that seems to be the consensus of this article.

House Republicans, already worried about possible primary challenges in 2014, are pleading to keep that number below $1 trillion, even if it is by a hair. Still, they know it’s likely to come in a shade higher. The safe bet is just over $1 trillion for the final number. A bit less, and that’s a notable win for Boehner.

 Why do I say argh?

The first reason is that this is not a tax increase. It is a 3 trillion dollar tax cut. The Bush tax cuts are due to expire next year. This means 4 trillion in revenue over 10 years. (They spread everything they do over ten years to make the changes sound larger than they are.) But now the tax cuts will be extended, unless you are wealthy. These tax increases are already baked into the CBO (Congressional Budget Office) deficit estimates, so the deficit will go up over the next 10 years by 3 trillion.

Argh.

I won't even mention the fact that the CBO has ever unrealistic assumptions about economic growth.

Argh.

What about spending cuts? Apparently they come later. Here is a quote from the article:

“A lot of the big entitlement savings comes in the 10-20 year budget window, not the next 10 years,” a Democratic aide said. “Everybody will need to get on board understanding that. Paul Ryan and the Obama budget are the same on health cuts for the next 10 years.”

This is what is usually called a lie. But the article seems to hold this as a truth of some sort. Yes, Ryan and Obama are proposing similar cuts in Medicare, but Obama double counts these cuts as he allocates these savings to pay for ObamaCare.

Argh.

New spending cuts you ask? Nope.

Spending cuts will be crucial to this. The floor for new spending cuts is simple: replacing the $1.2 trillion in automatic cuts set to kick in if the two parties can‘t cut a deal before year’s end. Republicans will insist these are real and imminent to swallow the rest.

In other words the spending cuts in this proposal are less than the cuts already made. No new spending cuts.

Argh.

They will also count the winding down of the war as a "cut." This has already been counted once in the CBO estimate, so let's count it again.

Argh.

There is some talk about minor Medicare cuts, so I continue in being guardedly pessimistic. Since most people will not examine the details of whatever budget deal is made, there will be a spurt of false optimism when we pretend everything is fine. 2013 may not be as bad as I thought, but that means 2016 will be worse.

Argh.

Frédéric Bastiat, an early economic writer, had this observation about economists: “The bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

This obvious truth is the exact opposite of modern economic thought, like Keynes, who said, "In the long run we are all dead."  

Argh.

Here is Karl Denninger's version of these hard truths. 

How Does Financial Fraud Work?

The New York Times summarized a report that tells us how Lehman Brothers was able to keep its dire financial situation under cover:

According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money.

...

But Lehman used aggressive accounting in its Repo 105 transactions: it appears to have structured transactions such that they sold securities at the end of the quarter, but planned to buy them back again days later.

The effect of the accounting was to artificially and temporarily lower the firm’s debt levels to hit certain targets, making the firm look healthier than it really was.

This is the same kind of financial “creativity” that led to the Enron bankruptcy. Note the date on the news article. This has been known for 2 1/2 years, yet no one has been prosecuted. I am beginning to wonder if what one insider I saw interviewed said is true. He said that the reason no one has gone to jail is that all these shenanigans are legal. Surely we are not that corrupt—surely?

Max Keiser has suggested that this kind of financial confusion is common, and done with the approval of the accountants to hide the true situation from the regulators. I know Keiser has good sources because of his background, or he could be guessing; I hope he is wrong. The only way we will find out is if there is another crisis.

In the meantime I suggest that you get ready for the end of the world when the Mayan calendar ends on December 21 prepare for a prolonged period of financial troubles. Make sure by your hard work that you would be one of the last to be fired in a crisis. Start now.

Here is the Max Keiser Report:

His Prices Are Crazy

Hewlett-Packard recently wrote down 5 billion of a 10 billion dollar purchase of the British Company Autonomy. This was just one quarter after writing off 11 billion for the purchase of EDS. Both EDS and Autonomy are computer science service companies. In the case of EDS it looks like a case of overpaying, but in Autonomy there may have been fraud: 

HP said on Tuesday it discovered “serious accounting improprieties” and “a willful effort by Autonomy to mislead shareholders,” after a whistleblower came forward following the ouster of Autonomy’s then-chief executive, Mike Lynch, in May.

Naturally HP stock is at a 10 year low. This might not affect you or me directly, but if, or as, more and more of these examples become known, it will cause trouble in the economy.  

How common are these kind of irregularities?

I never lived in the North East, so I never had a chance to shop at Crazy Eddies—known for their “crazy” commercials. “Eddie” was even crazier that the casual observer would have thought. The entire company was based on fraud. The CFO (Chief Financial Officer) and a convicted felon says that fraud is easier today than in the 80’s. He seemed almost envious of modern CFOs. Sam Antar is interviewed by Lauren Lyster on Capital Account: 

The Market Is Failing

Note that I did not title this post “The market is FALLing.” That may be true as well. But the market is failing because the “powers that be” are cheating. I have been reading an interesting article on the current situation we are in. One quote from it summarizes the problem with modern “economics.” 

Of course, people respond to such distortions.  When the government fixes the price of something too low, then people will hoard or export it.  If the price is fixed too high, then they will flood the market .”

Because of these market distortions lots of very odd things are happening—like the very low interest rates that are the current “market” price.

When I googled market failing, this picture appeared. As a Mac guy I could not resist using it

The second part of the article points out that under the almost gold standard pre-1913, the interest rate was 3 to 3.5%. After the creation of the Federal Reserve, interest rates were anything but stable—varying from 18% in 1981 to 1.7% today

With the artificiality of our system today you cannot rely on prices to be rational. In the real estate field, these artificially low interest rates mean that we cannot trust the “market” prices for real estate. The low interest rate raises the “market” price of real estate. The market is so corrupted that investors have no real idea what anything is “worth.” 

Based on current rents, real estate in many markets looks cheap. Many foreign investors are right now buying rental housing in selected markets. Will these rental rates continue? No one knows. The last time any nation tried to buy up US real-estate was the Japanese in the 80’s. It ended badly for the Japanese. 

In a market where prices cannot be trusted, the rational thing to do is not to participate as much as possible. Self-sufficiency is nearly impossible in our modern culture without great effort. Instead of making investments that may be no more than putting your money in a bag of holes, as one prophet put it, try to become more self-reliant. 

We all make fun of the neighborhood boy, who if things do not go his way, takes his ball and goes home. But if the boy is bullied, or the “rules” of the game make it impossible to play, then going home is the totally rational thing to do. 

How does fraud work? Capital Account has an interview with a psychologist college professor who tells us how the rationale works. It involves, surprise, surprise, self-justification. I will have several more interviews on the subject of fraud over the next few days.