As discussions about the budget and the national debt take center stage, it is interesting to see to whom the US government actually owes money.
Contrary to popular belief, China is not our biggest creditor. 53% of the US debt is owed to Americans and American institutions, with China coming second with just 9.8%, Japan a close third with 9.6%, and the UK next with 5.1%. All the oil-exporting countries hold just 2.6% of the national debt.
The White House has released the president’s proposed budget for 2011-2012. Given that we still don’t have a budget for the 2010-2011 fiscal year that began on October 1, 2010 and are operating on continuing resolutions, it is not clear that this budget should be taken seriously.
But the New York Times has put together a very nice interactive graphic that breaks down the president’s proposals.
In yesterday’s post, I discussed the origins of the Federal Reserve System. In an interview, Jane D’Arista, who served as a staff economist for the Banking and Commerce Committees of the U.S. House of Representatives and as a principal analyst in the international division of the Congressional Budget Office, explains what is wrong with the current Fed system and how it came to be dominated by private banking interests.
As every child learns in their social studies class, there are three branches of the US government, the executive, legislative, and the judiciary. But there is another quasi-government agency that operates behind a veil of secrecy and yet wields enormous influence over the US economy (and thus indirectly the world economy) and deserves to be considered as a fourth branch. This is the Federal Reserve system of the US, commonly referred to as the Fed.
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(For previous posts about the oligarchy, see here.)
I have repeatedly said that progressives have to be most on the alert when Democrats are in power. It is under Democratic administrations that the oligarchy tries to achieve major goals because the party’s base, ever-vigilant to guard against encroachments when Republicans hold power, falls asleep when their own party is at the helm. We see Obama doing things in the name of national security that would have evoked howls of protest if Bush had done them. We see Obama treating Wall Street with a generosity that would be loudly protested if a Republican did it.
The big prize for the oligarchy is, of course, Social Security. The privatization of Social Security has been a long-cherished dream of Wall Street anxious to get their hands on that trillion-dollar account. In general, Republicans have been thwarted when they tried to do it. George W. Bush tried to privatize it in his second term but was beaten back and gave up on it. The Democratic Party has long been seen as the defenders of Social Security, which is why the oligarchy sees it as a better agent for achieving its goals.
Recall all the speculation in housing that resulted in the crash that is currently causing large numbers of people to be foreclosed upon? That was due to mortgages being bundled together into huge slabs, sliced into small packages that were called SIVs (Structured or Special Investment Vehicles) and then traded like stock. (I did a series of posts explaining this debacle back in 2008 and the specific ones that dealt with this topic are #7 and #8.)
The result of this practice was that ownership of mortgages was diversified and it became unclear as to who the actual owner of any given property was, which enabled them to deny any responsibility for the upkeep of abandoned property as required by local ordinances. The blight on neighborhoods caused by this evasiveness was so bad that a Cleveland housing court judge got fed up and started levying penalties on whichever entity he could hold responsible.
But when it comes to selling off properties, the banks are not shy of claiming ownership. It turns out that banks, the very organizations that were instrumental in the crash, are now foreclosing on, and selling off, people’s property without proper documentation showing that they own the property. They decided they could just manufacture documents to show ownership.
Last fall, the banking industry’s foreclosure machine came under intense scrutiny with revelations that low-level employees called “robo signers” powered through hundreds of foreclosure affidavits a day without verifying a single sentence. At the time, analysts warned that the banks’ allegedly fraudulent document procedures could imperil their ability to prove that they owned the mortgages.
The Massachusetts State Supreme Court on Friday upheld a housing court judge’s ruling in that state that ordered a halt to two foreclosures unless the banks can properly documented their ownership. The history of that case can be read here.
To you and me, this would seem a perfectly reasonable requirement: you should not be able to sell something that you cannot prove that you own. But we live in a country in which banks have got used to thinking that normal rules don’t apply to them and these perfectly reasonable court rulings are being greeted with shock by the banking sector.
If this ruling is repeated in other states I wonder how long will it be before the banks demand of the Congressional and presidential clients that they pass special measures exempting them from the tedious business of carefully maintaining records that prove ownership?
In The Road to Wigan Pier, George Orwell argues that it would actually not be a good idea for the poor to budget carefully to eat healthily because if they did and actually started to look healthy, the government would think they were getting too much aid and would reduce it. He writes:
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In The Road to Wigan Pier, George Orwell writes in chapter 6 about how government and social service agencies calculate carefully how much money should be given as public assistance to be sufficient, with careful budgeting, to purchase enough wholesome food to meet their nutritional needs. However, the actual choices of the poor, with its outlays on alcohol, tobacco and sweets, would appall social workers. These better-off people would scold the miners and their families for wasting their money on what should be considered luxuries, when their basic nutritional needs were not being taken care of first.
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Because people have such negative prejudices about the poor and unemployed as being lazy good-for-nothings who are trying to live off the fruits of other people’s hard work, they pay unusually close attention to prevent cheating and fraud by the poor. This explains why some people get more worked up by stories of petty fraud by poor people than by huge corporations and rich people carrying out massive swindles that have a far greater negative impact on almost all of us. People will rail about welfare cheats or workers in the cash economy not reporting all their incomes and thus paying less tax, while ignoring the tax sheltering schemes of the rich.
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