$60K In Gov Handouts Per "Poor" Household

With the government spending a record $60K annually per household below the poverty level, how is poverty still a problem in this country? How much spending is enough? Households below the poverty level are currently eligible for the following government assistance: direct cash payments, food stamps, cell phones, health care, subsidized housing, unemployment benefits, disability benefits, transportation subsidies, education (free K-12 education and scholarships and grants for college), mental health counseling, and legal assistance. Plus, they're often recipients of benefits from non-profits, charities, family members, and religious institutions! And yet, with all of this money spent on the poor, there has been 0--zero--decrease in the poverty rate since LBJ's "Great Society". With nearly a half-century of failing to reduce poverty in this country, perhaps the government's policy of coddling the poor should be reexamined.

As part of my contract work, I've done finance work for the federal government and a non-profit that doles out federal grants to the poor. So I know how the system works. And I can tell you that, for every dollar the government and non-profits allocate to the poor, at least 1/3 of that dollar is spent funneling the money through massive government bureaucracies. If the government is currently spending $60K per household below the poverty level, that means that "only" $40K makes it to the intended recipients. Thus, instead of pushing the alms through the system, the government would be better off just writing the heads of the recipient households $60K checks.

Oh, and did I mention that, as a large percentage of government spending is deficit spending, much of the $60K earmarked to poor households is borrowed money that must be paid back with interest? How nice!

ECOMINOES Radio Live @ 4PM EST

No guest this week. Just Eric and me discussing the stories of the week. They'll be plenty to talk about:  Obama and gun running in the Middle East, the joke of a presidential "debate", the recent BS economic reports, how a bunch of liberals got my Twitter account suspended, and more. Don't miss it here on KineticHifi, and don't forget our archives here.

1/3 Of GDP "Growth" Is Gov Spending

The Obama sycophants in the MSM are parading around today's Q3 GDP report, which beat expectations even though it printed at a pathetic 2%. Keeping with the tradition of producing rosy, Obama-friendly statistics, the feds this time showed modest growth from the last report while omitting a key point: more than 1/3 of the "growth" actually came from government spending, which, in economic depression America, is conducted with money that is either 1) printed out of thin air, 2) borrowed from China, or 3) seized from the productive economy.

Obamnesia Cost Lives In Iraq

Obama has been on the campaign trail parroting the cutesy catchphrase "Romnesia" to describe Mitt Romney’s issue flip-flopping. Perhaps the president has "Obamnesia". Perhaps he forgot that he said on the campaign trail in 2007 that he would, on his 1st day in office, bring the troops home from Iraq. And when he took credit during the recent debates for ending the war in Iraq last December, perhaps he forgot that, in 2008, a proxy for President Bush signed the Status of Forces Agreement, which stipulated that the U.S. would withdraw in December 2011.

At least Romnesia doesn't cost American soldiers' lives.

Obama And Gun Running In The Middle East

With all of the talk during the foreign policy debate lovefest about "supporting" insurgents in Libya and Syria, Bob Schieffer should have asked the presidential hopefuls where the U.S. should draw the line in terms of getting into bed with murderous, tyrannical religious zealots. Of course Obama, Romney, and the pollyanna American public might consider such a question offensive, so Schieffer instead served up softball questions that any Columbia Journalism School grad could have come up with: "What do you think America's role in the world is?", etc.

Glenn Beck, who gets it right every now and then, dug into the circumstances surrounding the assassination of U.S. Ambassador to Libya J. Christopher Stevens and found that Stevens was likely killed because...wait for it...the Obama administration ordered him to get into bed with murderous, tyrannical religious zealots in Libya and Syria. (How about that, Bob?) Stevens, according to Beck, was funneling arms to insurgents as part of a plan to remove Gaddafi and al-Assad from power. I brought up the possibility that Stevens was killed to in an attempt to destabilize the Middle East so to provoke the U.S. into war. It appears I was partially right: Stevens was allegedly providing arms to Libyan and Syrian insurgents in an attempt to destabilize the region. And the Obama administration did know about the attack on the embassy. It was caught on camera by U.S. drones.

Another question Bob should have asked: Would the U.S. be better off if it left the Middle East all together? But we couldn't expect tough questions from a MSM debate moderator, now could we?

Majority Of Jobs Created: Part-Time Senior Work

ZeroHedge.com, one of my favorite sites on the web, parsed employment data going back to 2009 and found something extraordinary: The majority of the jobs created since the recession officially "ended" in June 2009 have been filled by Americans age 55 or older, a demographic challenged with the prospect of not having enough money to retire. It doesn't take a rocket scientist to deduce what that means about the quality of jobs created: they've been of the part-time, low-wage variety. Another extraordinary finding: there are 729,000 fewer Americans of prime working age (25-54 years old) employed now than there were 3 years ago. How about that recovery!

Younger Americans Never Able To Retire?

The economic depression and the Fed's incessant money printing and zero interest rate policy has threatened retirement plans of the Baby Boom generation and challenged those who have already retired, but it's the younger generations' golden years that look especially bleak. My generation--Americans in their 20's and 30's--faces an especially bleak future, carrying 75% of the more than $1 trillion (and growing) in outstanding student debt, struggling to make ends meet with an incredible underemployment rate of 32%, and facing a long-term economic outlook of crushing national debt (which has already passed the critical 90% debt-to-GDP threshold), insolvent Social Security and Medicare programs, "explosive" inflation, and significantly reduced economic freedom. The future looks awful for younger Americans, and my generation is taking notice.

The Pew Research Center recently published a survey that reveals that younger Americans are extremely concerned about their prospects of being able to retire. 40% of respondents age 44 and younger have "little or no confidence" they'll have enough money to retire, and nearly half of respondents in their late 30's and early 40's doubt they'll ever be able to. This is unprecedented. From the survey:

As a whole, retirement worries rose across all age groups — roughly 38 percent of U.S. adults say they are “not too” or “not at all” confident that they will have sufficiently sized financial nest eggs, according to the independent research group. That’s up from 25 percent in 2009.

But the concerns are increasing the greatest among younger adults approaching middle age, whose equity in their homes represents most of their net worth. About 49 percent of those ages 35-44 said they had little or no confidence that they will have enough money for retirement, more than double the 20 percent share in that age group who said so in 2009.

The author foolishly attempted to connect home prices with the ability to retire, as if the average American depends on his house as a significant source of retirement income. (According to US News, home equity isn't even in the top 4 sources.) But, as a reminder of far we've fallen on the 2nd leg down of the ongoing economic depression (and as something to consider on election day), we need to remember the sentence I highlighted in bold in the preceding paragraph: Since Obama has been in office, the percentage of survey respondents in their late 30's and early 40's who doubt they'll be able to retire has more than doubled.

What A Worthless Debate Lovefest

If there was any question that both Obama and Romney believe in the same tired, disastrous Leo Strauss-influenced interventionist foreign policy, one need only watch last night's debate. While the two traded "that's what you said-that's not what I said" jabs, they, for the most part, agreed on every single opportunity for the United States to get mired in a new military quagmire. Sure, they tried their best to position themselves as non-interventionists. Both talked about providing "support" to insurgents in Syria and Iran, "allies" in Libya and Egypt, etc. But come on. Decades of American blood in the Middle East shows that when you get into bed with murderous, tyrannical religious zealots, you end up getting caught up in an armed conflict. Honestly, judging from the debate, the only stark difference I can see between Obama and Romney's foreign policy is that Romney would be quicker to get involved in an armed conflict with Iran. But that's not to say that Obama wouldn't send U.S. troops to Iran if Israel decided to strike. (He certainly would.)

As far as China was concerned, Obama and Romney's criticisms of China's "unfair" trade policies and human rights violations--yes, they agreed to criticize China as well--was pure political theatre. Considering America's reliance on cheap Chinese goods and China's mass purchases of U.S. debt, neither candidate dare challenge the dragon.

As far as Russia was concerned, both agreed to rattle their sabers a little at Putin.

Neither Obama nor Romney described how they would address the nation's trade deficit, a foreign policy issue that actually impacts the lives of average Americans, especially given that the country is muddling through an economic depression.

What a worthless "debate".

Fed Must Buy Riskier Debt With Moral Hazards

The Fed's unofficial 3rd mandate is propping up the stock market. Bernanke is a firm believer of the so-called "wealth effect" that inflated equity prices supposedly provide. While there is much criticism of the Fed's unofficial mandate, Bernanke has, by the Fed's own admission, inflated the S&P by as much as 50%.

In order to continue to prop up the market, the Fed stepped up from purchasing Treasuries to purchasing agency MBSes, a debt instrument with higher yields. But if the market faces stronger economic headwinds--which it likely will in short time--and Bernanke wishes to continue to prop up the market, the Fed will have no choice but to purchase debt with still higher yields. From an investment perspective, this means you should buy up as much high-yield debt as you can. Bill Gross of PIMCO made money hand-over-fist buying up MBSes in expectation of QE-Infinity. The smart money, therefore, is on non-agency MBSes. (See next paragraph.) From a macroecon perspective, this means that the effectiveness of future Fed money printing is limited by the law of diminishing returns: the Fed would have to buy riskier and riskier debt to maintain the same level of market propping. This means the probability of the fed successfully propping up the market in the face of future economic headwinds is reduced.

Notice that the next 2 debt instrument "steps" are municipal and corporate bonds. If Meridith Whitney is correct--and it appears that some of her prognostications regarding munis are finally coming to pass--the municipal bond market could crash in short time. But financial risk aside, there would be a huge moral hazard if the Fed not only continued to monetize the national debt, but started to monetize municipal debt as well: Which cities' debt should it buy? Should it buy all muni debt? If it buys muni debt, why shouldn't it buy debt from other public organizations? After munis, the next step up the yield ladder would be corporate bonds. If the Fed took that step, the moral hazard would be so great that people would take to the streets. Given these moral hazards, the Fed might be tempted to skip a few steps and proceed directly to much riskier non-agency MBSes.

Inside Look At NYPD's "Stop-And-Frisk"

Your humble blogger has been on quite the civil liberties tear as of late, exposing the rapid expansion of the police state with posts about TSA checkpoints in DC metro stations, the coming domestic surveillance drone fleet (which 1/2 of Americans welcome), and the local law enforcement investigation of a controversial political group. Today, I came across a brief documentary about the NYPD's "stop-and-frisk" program, a controversial policy of detaining pedestrians, questioning them, and frisking them with little probable cause.

The video, entitled The Hunted and the Hated: An Inside Look at the NYPD's Stop-and-Frisk Policy, gives us a taste of things of come: a complete disregard of the 4th Amendment by local law enforcement at the behest of the Department of Homeland Security, which local law enforcement agencies have increasingly relied upon for funding.