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47%?

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I don’t think there is anyone in the US that isn’t aware of Mitt Romney’s writing off of 47% of the American electorate, I don’t wish to dwell on this act of gross stupidity, enough has been said and it is my belief that Romney is now an absolutely flawed presidential candidate and quite possibly unelectable. In describing nearly half of the people of the US as ‘moochers’, Romney has inadvertently attacked over 40% of the Republican base that were expected to vote for him in the November election. Of the 47% around 130 million people that don’t pay income tax, 60 million are seniors and further 57 million don’t earn enough to pay federal income, they do however pay payroll taxes, property taxes and sales taxes, the rest are people that are unemployed, the disabled and those who have fallen out of the system. The problem with Romney’s remarks is that at least 40% of the people he referred to are Republican voters and many of them are exactly the people that attend Tea Party protests and feel that their ‘country is under threat’.

Republican ‘Red State’ USA, is engaged in the kind of cognitive dissonance that makes Europeans like myself exclaim ‘Only in America’. Right to work legislation and the lack of a social safety net, in Red State America this has lead to the incomes of unskilled and semi-skilled workers declining by around 40% in inflation adjusted terms since 1980, people that were the American middle class are now the working poor, they are struggling, they are disaffected and they have been manipulated into the kind of thinking that destroys hope and belief in the American dream ideal that anyone in America through hard work and perseverance can progress financially and socially.

Educationally America is falling behind, the greatest demographic shift is in the attainment of the children of white, blue collar workers that live in Red states, the high school drop out rate is higher amongst this group than any other group, higher than African Americans, higher than latinos and nearly 37% higher than than that of those from similar socio-economic backgrounds in Europe. Thirty years ago there were jobs and opportunities for those with little formal education, America needed unskilled and semi-skilled workers, however today those jobs and that kind of production has been off-shored to China and to developing nations, American production cannot compete on that kind of cost basis. America needs skilled, educated workers that can embrace the challenges of global production, young people that are mathematically and scientifically literate to work in industries that are high wage and high skill. This is the future and this is the vision of America that we on the centre left have to sell to the American population has an whole.

Unlike Mitt Romney we cannot turn our backs on the poor and disaffected, even those that are adhering to the Tea Party ideology, they are our people too. Since the end of the Civil War, the American political right and vested interest groups have managed to stall social and economic progress by using divide and rule tactic of the fear of the other. African Americans, the Irish, Mexicans and other immigrants are presented as coming to take ‘Our Jobs’. Latterly we have this notion that Christianity is under threat from gay marriage and women’s rights and this completely false idea that minority groups are living in the lap of luxury at the expense of the American tax payer. It is our duty to address this ignorance and confront the vested interest groups, demonstrating exactly what the Koch brothers and their ilk have to gain from the Tea Party agenda and show these folks that are being manipulated by people that have no interest in their well being. Yes, this is possible.

The God, Guns and Old Glory agenda is predicated in fear and of the loss of economic status, it becomes much easier to blame ‘The Other’ an African American president than look for the real problems and find answers that benefit the whole of society. A second Obama term offers a real opportunity to address this once and for all in American society and a chance for the social democratic centre left to make real progress, if those who are currently supporting the Tea Party agenda can be made to feel that their children and grand children can be given greater social and economic opportunities and prosperity then maybe some of the more prejudicial beliefs can be tackled. But the single most important thing that we on the centre left must never forget is that all people are our people, they may support ideas that we find repellent, they maybe plagued by racist, sexiest and homophobic prejudices but they will always remain human beings and deserving of humanity. Unlike Mitt Romney we must not exclude and reject a significant proportion of American citizens.

Dali’s Magic Cheque Book: America’s Economic Dilemma

Dali’s Magic Cheque Book

Spanish surrealist painter Salvador Dali had a magic cheque book, no matter how much he spent, his cheques were hardly ever cashed, he had made a realisation that was to make him the most generous host and dinner companion in the whole of Spain. He would regularly wine and dine his friends and retinue in the finest restaurants, eat the very best food, drink the very best wines and cognacs and seldom it would cost him a single penny. After a lavish evening, Dali would call over maître d’, thank him for the excellent service and ask him for the bill, when the bill was presented, Dali would take out his oversized cheque book, write out the cheque for the cost of the meal plus a generous gratuity and sign the cheque, but before handing the cheque over Dali would turn it over and on the back make a pen and ink sketch, unsurprisingly Dali’s cheques were seldom cashed, however much the extravagant dining had cost the value of a Salvador Dali sketch was so much greater. For the sake of a couple of minutes of doodling Dali and his friends were able to dine for free and the restaurateurs were delighted they had just be handed something of great value by one of the most famous artist alive. Sometimes, some things are worth a great deal more than their face value.

The Power Of The United States Dollar

In the years that followed the end of the Second World War, the United States became the world’s dominant economy, replacing the United Kingdom and its diminishing empire. Along with this economic dominance came the gradual adoption of the US Dollar as the world’s prime reserve currency, this meant that the US Dollar became the principle currency for international transactions and therefore nation states, international banks and companies operating globally needed to keep large reserves of US Dollars. In 1971 OPEC (Organization of the Petroleum Exporting Countries) adopted the US Dollar for all crude oil transactions, this for the first time in history this made a currency, the US Dollar, the de-facto official world reserve currency.

With the adoption of the US Dollar, the United States, it’s banks and corporations were placed in a unique position, because of the need for nation states, banks and companies to hold reserves of US Dollars it effectively gave them a real world advantage. The United States Federal Reserve was able to keep the value of the US Dollar relatively stable on international exchanges whilst keeping domestic US interests rates and US domestic inflation relatively low. Because of its importance as the world’s primary reserve currency the US was effectively able to manage the world economy to its own advantage, the effective costs of borrowing in the United States was modest compared to the rest of the world, this allowed the creation of an affluent consumer led economy with cheap and easily available credit for US consumers and US business. It also allowed the United States government to spend and increase the national debt whilst paying very modest yields on government bonds and gilts. This unique position allowed the United States to become the world’s first hyper power and sustain not only the world’s largest military but also be the major player in a world economy that was becoming more and more integrated.

The Burden Of Debt

In absolute fairness to all United States presidential administrations both Republican and Democrat, the United States federal deficit and the United States national debt were relatively modest until the election of George W. Bush in 2000. Even under Ronald Reagan who publicly stated he wished that he had done more to contain federal spending, the United States debt and deficit was similar to that of other industrialised nations and was in no way problematic. It was only with election of George W. Bush that spending and debt started to become a problem, Bush inherited a budget surplus in his inaugural year of 2001, he immediately proceeded to cut taxes, a modest tax cut for middle class Americans and huge tax cuts for the rich and corporations. After the attacks of September 11th 2001, his administration embarked upon two wars firstly in Afghanistan in 2001 and in Iraq in 2003. Rather than fund these wars from current fiscal year spending which would have increased the deficit, the cost of these wars was added directly to the national debt. With the banking crisis of 2008 and the real fear of a complete collapse of the world financial and banking system the US government massively increased the national debt again to bail out and reinforce the banking and financial system.

After winning the 2008 presidential election Barack Obama was faced with a mounting deficit, a spiralling national debt and an economy in recession he took the decision quite rightly to slow the rate of spending increases whilst still managing to stimulate the economy, however he has been unable to raise taxation on corporations and the rich because of the political rhetoric of the Republican controlled House and the use of the filibuster in the Senate. This has lead to a slight increase in the US federal deficit under the Obama administration, but the claims made by his political opponents are without substance. The US national debt now stands at 103% of Gross Domestic Product and without raises in taxation on those that can afford to pay the United States even with its status holding the world’s principle reserve currency will face steep rises in interest rates if the situation is not addressed. It is only via taxation that this problem can be solved, cutting federal spending would almost certainly force the United States into yet another recession.

Absolute Power Corrupts Absolutely”

From 1987 onwards Alan Greenspan in his role as Chairman of the US Federal Reserve deregulated the US financial markets, effectively ending the oversight of US financial institutions by regulators. Greenspan a devotee of Ayn Rand and her Objectivist philosophy believed that financial markets would become self regulating and this absence of regulation would lead to stable and continuing growth, however Greenspan appears to have underestimated the sheer criminal greed of those involved in the banking and finance industry. It isn’t just outright crooks like Bernie Madoff that stole peoples money, many major banks, insurance companies and hedge funds produced financial products that they happily sold into the market that were little more than junk and the credit referencing agencies gave them triple A ratings. How could system exist where ratings agencies that rated products were paid to rate those products by the very institutions that were producing them? This was absolute power corrupting absolutely and it very nearly led to the collapse of the entire financial system.

This Coming Election

The rise of The Tea Party in 2009-10 and their influence on the Republican Party have effectively drawn the battle lines for the forthcoming presidential election, the Republican party are now in a position where they are unable to raise taxation and therefore forced to to make massive cuts to US public spending in order to address the deficit and national debt, be in no doubt a Republican administration would cause the biggest recession in world history and even further widened of the gap between rich and poor.

I have checked and rechecked every statement I have made in this article because I want my friends and those who may just casually read to realise exactly what is at stake over the next few months. The US can get back to the days of cheap credit and long term investment, the US Dollar can remain the world’s prime reserve currency if steps are taken to regulate effectively financial markets and realistic taxation is used to address America’s debt crisis.

Please in November vote for the future of your wonderful nation and vote against self interest and greed.

How The Rich Become Super-Rich

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So Daddy did well in business and left you a couple of hundred million dollars, but rather than lie on beach earning five percent you really fancy joining the ranks of the billionaire super-rich, well this is how you do it, it’s risk free, totally safe and guaranteed to make you super wealthy. Follow my step by guide and you too can be enjoying the billionaire lifestyle, be hailed as a hero of capitalism and a real master of the universe.

  • Set up an holding company through which to start your enterprise, we shall call ours Rand Capital Investments, you might want to register it in a tax haven such as the Caymen Islands, Jersey, Switzerland or Monaco.
  • Transfer your personal assets to Rand Capital Investments, you will now be able to use those assets to leverage finance for a company purchase, if you have assets of $200 million you will be able to raise up to $2 billion in capital from the banks. Unlike ordinary people in business you wont be struggling to raise finance, you are already rich.
  • Find a company that is asset rich but struggling for either cash flow, turnover or market share and buy it using your $2 billion of leveraged capital.
  • Transfer the debt taken on in the purchase from Rand Capital Investments to the company you’ve purchased, clearing Rand Capital Investments debts. Charge the company a large consultancy fee for arranging the transfer of debt. This will not only make you money but will reduce the companies tax liability. And you still own the company!
  • Sell off the profitable divisions of the company, reducing the company’s debts and improving the balance sheet, for each sale charge the company a large consultancy fee. If you use the revenue from the sell off to reduce company debt this avoids the need to pay tax.
  • Now you are left with just loss making divisions it is time to sell the remainder of the company, the best buyer is obviously the company’s own pension scheme who will want to buy the company to try and save their own jobs.

Congratulations, you’ve turned your $200 million into $2 billion and because you had the foresight to register Rand Capital Investments in a tax haven you don’t have to pay tax.

Sadly this is the way that capitalism works, it is risk free, your strategy doesn’t depend on being able to turn a company around and create new business, it is simply about making your money work for you, it is 100% legal moreover it is openly encouraged by American, Australian, European and British governments.

That’s Capitalism Folks!

 

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