The Con of the Century

By  deepcaster.com

“…In essence, these private banks and corporations now own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks will never understand how “saving our financial system” led to their servitude to the very interests they bailed out.

 The circle is now complete: in “saving our financial system,” the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.

In effect, it’s a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better.”

As for part two of this epic con we are all living through, Charles explains as follows:

“The Con of the Decade (Part II) meshes neatly with the first Con of the Decade. Yesterday I described how the financial Plutocracy can transfer ownership of the Federal government’s income stream via using the taxpayer’s money to buy the debt that the taxpayers borrowed to bail out the Plutocracy.

In order for the con to work, however, the Power Elites and their politico toadies in Congress, the Treasury and the Fed must convince the peasantry that low tax rates on unearned income are not just “free market capitalism at its best” but that they are also “what the country needs to get moving again.”

The first step of the con was successfully fobbed off on the peasantry in 2001: lower the taxes paid by the most productive peasants marginally while massively lowering the effective taxes paid by the financial Plutocracy…

The second part of the con is to mask much of the Power Elites’ income streams behind tax shelters and other gaming-of-the-system so the advertised rate appears high to the peasantry but the effective rate paid on total income is much much lower…

The last step of the con is to raise taxes on the productive peasantry to provide the revenues needed to pay the Plutocracy its interest on Treasuries. If the “Bush tax cuts” are repealed, the actual effective rates paid on unearned income will remain half (20%) of the rates on earned income (wages, salaries, profits earned from small business, etc.) which are roughly 40% at higher income levels…”

“The Financial Con Of The Decade Explained So Simply Even A Congressman Will Get It”

Tyler Durden, Zerohedge.com, 07/10/10 quoting Charles Nash Smith of oftwominds.com

And, we should add, the fact that the Private for-profit Fed gets to “print” (keystroke) Money into existence for free, and then gets to charge us taxpayers for it, greatly magnifies the amount of Wealth transferred to the Plutocracy. A Key Reality and thus one essential Clue.

The fact that a person who held the Dow Stocks throughout the first decade of the 21^st century enjoyed virtually no appreciation (and, indeed, took a substantial loss, when adjusted for inflation) provides an another Essential Clue that is of Paramount Importance to successful Investing and Trading today.

Indeed, those who paid attention to what Kurt Richebacher, RIP, said, or to what John Paulson did, prior to 2008, could not only have avoided losses in the Fall, 2008 Market Crash, but also could have made substantial profits. Both Richebacher and Paulson correctly forecast what was coming, as did Deepcaster, by the way.

Even those who acquired securities of very strong companies at low P/E ratios, suffered greatly in the 2008 Market Crash in first decade. This fact has very important implications for the Second Decade. It is also an Essential Clue.

Thus at this beginning of this second decade of the 20^th Century Examining Key Realities is once again essential, and we identify certain ones here which provide Essential Clues to anticipating the next Mega-Moves.

All the aforementioned and the following Realities have one Key Characteristic in common. And studying this Key Characteristic will be essential to Profit and Protection in this Second Decade.

Let’s look first at the Realities and then focus on The Key Characteristic.

As the Charles Hugh Smith piece quoted above indicated, the first, and, so far, the second, decade of the 21^st Century are characterized by an ongoing Massive Wealth Transfer to the “Private Power Elites” as he calls them (we encourage you to read Mr. Smith’s entire Article at www.oftwominds.com).

This will have profound consequences for Investors and Traders world-wide in the next very few years. To cope with these ongoing Wealth Transfer attempts, see Deepcaster’s “Surmounting The Armageddon Scenario & Cartel ‘End Game’” (2/26/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.

1. Notwithstanding the $12 Trillion of Taxpayer money(!) the U.S. Feds have committed to spur recovery (ostensibly, in fact most went to the Mega-banks) the Recovery is not happening.
2. Deleveraging is happening instead. Rather than being used for capital creation and goods and services purchase, Government and Fed-provided liquidity is going to pay down Sovereign and other Debt mainly owed to the Mega-Banks. But given the slow (or in some cases nonexistent) pace of debt liquidation, the process will take years.
3. The necessary conditions for a Sustainable Recovery – e.g. a Housing Recovery and Recovery of Consumers which are 70% of U.S. GDP – are not happening.
4. The Equities Markets Macro-Technicals reflect the negative Economic and Market Fundamentals and prospects. Over recent weeks- The Major Indices continue to Make Lower Highs and Lower Lows (as Deepcaster earlier forecast), and
   – on increasingly lower volume and
   – continue to find resistance at their 50 day and 200 day moving averages.More Importantly, longer term, the MACRO-Technicals (e.g. Multi-year Bearish Head and Shoulders) signal Serious Trouble ahead for the Markets. For Profit and Protection Opportunities in this Troubled Context see “Opportunity in the DEFLATION to HYPERINFLATION Transition” (06/17/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
5. China is slowly putting on the brakes, and the Eurozones’ recent “Extend and Pretend” Bailout has not created a Sustainable Solution.
6. Investors around the world are misled by Bogus Official numbers and spin.Fortunately, in the U.S. there are excellent sources of Real Numbers foremost among which is Shadowstats.com. Shadowstats.com calculates the Real Numbers for the U.S. the way they were calculated in the 1980’s and 1990’s, before systematic Data Distortion and Interventions began in earnest.

	Official Numbers	Real Numbers Per Shadowstats.com
Annual U.S. Consumer Price Inflation reported June 17, 2010	2.02%	9.22%
U.S. Unemployment reported July 2, 2010	9.5%	21.6%
U.S. GDP Annual Growth/Decline reported June 25, 2010	2.42%	-1.48%
U.S. M3 reported July 9, 2010 (Month of June, Y.O.Y.)	No Official Report	– 5.91%

Conclusion: The one key Characteristic that all of the above REALITIES share is that they are MACRO-REALITIES. Thus, like the Depression Era 1930’s the Overwhelming Determinant of an Investment’s Success or Failure will be MACRO-REALITIES and Not (as much) the individual merits or demerits of any Particular Stock or Other Investment.

To see Deepcaster’s specific recommendations made in light of the foregoing MACRO-REALITIES, see our latest Letter and Alerts at www.deepcaster.com.

And consider the following:

• Regular readers know that Deepcaster advocates buying Gold both as a hedge against inflation and deflation, and for profit, but with a Large Caveat.

We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2009 Letter entitled  “A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques – II” in the “Latest Letter” Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. ”Fortunately, The Cartel has been somewhat weakened recently. To see our Strategy designed to take advantage of this weakening, see our “GOLD: Opportunities + Threats = Opportunities” (06/11/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.