Archive for the ‘Family’ Category

The Dystopian Society is Here

By: admin
Published: February 8th, 2012

 Welcome to our brave new world, where we will live in  a repressive and controlled state, where the authority will be monitoring our every move, where nowhere is going to be safe from the big brother’s eye, where the thought police can treat us as a criminals…

 FBI warns of threat from anti-government extremists – 

 Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday.

These extremists, sometimes known as “sovereign citizens,” believe they can live outside any type of government authority, FBI agents said at a news conference.

The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

Never Let A Crisis Go To Waste: Holder Uses Fast And Furious To Push Congress For Stricter Gun Control Laws… – 

Attorney General Eric Holder attributed the difficulty preventing gun-trafficking into Mexico to weak gun controls laws, when he blamed on the U.S. House, with particular reference to the House investigators asking him about Operation Fast and Furious.

Drones over U.S. get OK by Congress – 

Look! Up in the sky! Is it a bird? Is it a plane? It’s … a drone, and it’s watching you. That’s what privacy advocates fear from a bill Congresspassed this week to make it easier for the government to fly unmanned spy planes in U.S. airspace.

There are serious policy questions on the horizon about privacy and surveillance, by both government agencies and commercial entities,” said Steven Aftergood, who heads the Project on Government Secrecy at the Federation of American Scientists.

The Electronic Frontier Foundation also is “concerned about the implications for surveillance by government agencies,” said attorneyJennifer Lynch.

The provision in the legislation is the fruit of “a huge push by lawmakers and the defense sector to expand the use of drones” in American airspace, she added.

According to some estimates, the commercial drone market in the United States could be worth hundreds of millions of dollars once the FAA clears their use.

The agency projects that 30,000 drones could be in the nation’s skies by 2020.


Spying on Europe’s farms with satellites and drones – 

Farmers who claim more EU subsidies than they should, or who break Common Agricultural Policy rules, are now more likely to be caught out by a camera in the sky than an inspector calling with a clipboard. How do they feel about being watched from above?

Imagine a perfect walk in the country, a few years from now – tranquillity, clean air, birdsong in the trees and hedgerows, growing crops swaying in the breeze.

Suddenly a model plane swoops overhead.

But there is no-one around manipulating radio controls. This is not a toy, but a drone on a photographic mission.

Meanwhile, hundreds of kilometres up in space, the same patch of land is being photographed by a satellite, which clearly pinpoints individual trees and animals.

What is there to spy on here? No secret military installations, just farmland.

Dependency Index Surges 23% Under President Obama – Soon the government will own us…

The American public’s dependence on the federal government shot up 23% in just two years under President Obama, with 67 million now relying on some federal program, according to a newly released study by the Heritage Foundation.

The conservative think tank’s annual Index of Dependence on Government tracks money spent on housing, health, welfare, education subsidies and other federal programs that were “traditionally provided to needy people by local organizations and families.”

The two-year increase under Obama is the biggest two-year jump since Jimmy Carter was president, the data show.

The rise was driven mainly by increases in housing subsidies, an expansion in Medicaid and changes to the welfare system, along with a sharp rise in food stamps, the study found.

Apple and Foxconn: Who made your iPhone? –  In China the Government already owns the citizens

1984 George Orwell Movie Trailer – “A nation at war, where terrorism is exploited by the state, where media is controlled, a total surveillance society and every citizen is a property of the state…”

Equilibrium – Citizen:”You can”t do this, you can not do this”….

Government Agent(cleric): “There is nothing, that we can not do”

Demolition Man – Citizen Edgar  Friendly: “I am the enemy, cause I like to think, I like to read, I am in for freedom of speech and for freedom of choice…”

Iron maiden – Brave new world – 

Dying swans twisted wings, beauty not needed here
Lost my love, lost my life, in this garden of fear
I have seen many things, in a lifetime alone
Mother love is no more, bring this savage back home

Wilderness house of pain, makes no sense of it all
Close this mind dull this brain, Messiah before his fall
What you see is not real, those who know will not tell
All is lost sold your souls to this brave new world

A brave new world, in a brave new world
A brave new world, in a brave new world
In a brave new world, a brave new world
In a brave new world, a brave new world

Dragon kings dying queens, where is salvation now
Lost my life lost my dreams, rip the bones from my flesh
Silent screams laughing here, dying to tell you the truth
You are planned and you are damned in this brave new world

Motörhead – Brave New World – 

So this a new beginning, as the new century dawns
The world’s a better place for you and me
Shouldn’t smoke or drink or watch that evil filthy porn.
Be Christian and God will set you free.
But being poor is worse than having AIDS,
The homeless live in boxes at our feet
Living in a constant state of dull frustrated rage,
The innocent shot daily in the street

Brave new world, brave new world, brave new world

The government has always been your pal, as you well know
Absolute corrupted power play,
If we all wipe each other out, it only goes to show
While the bureaucrats get richer by the day,
Smoking dope will get you more than murder one,
And even worse than statutory rape,
Don’t understand your children, so you send them all to jail,
Believe me, you will never make a worse mistake.

The government is coming and it wants to be your friend,
It wants to show you how to be a snitch
Inform upon your children, the inevitable end,
Is everyone’s a victim but the filthy fucking rich,
And religion, like the monster that it is
Keeps telling you to turn the other cheek
God is on your side, but I don’t think that you’re on his,
If Jesus showed up now he’d be in jail by next week.


Cop chases himself after being mistaken for burglar by CCTV operator

AN undercover cop “chased himself round the streets” for 20 minutes in a town in southern England after a surveillance camera operator wrongly identified him as a suspect.

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Why Am I Pessimistic About the Future of the USA?

By: admin
Published: December 2nd, 2011

I Got 15 Kids & 3 Babydaddys-SOMEONE’S GONNA PAY FOR ME & MY KIDS!!! – Let others pay for my mistakes mentality…

Will “Generation Gimme” Ever Work For The American Dream? – Jaw dropping!

Obama Is Going To Pay For My Gas And Mortgage!!! – That was in 2008. Is she better now than 3 years ago? I bet she is in worst position now, but she probably blaming other people for that.

And what the top Elite thinks about the future….

Is it bright and rosy?

For them it is, but not for the rest of us

Barack Obama: My Kids Will Succeed… Even if USA Doesn’t – At the very end of his campaign speech in New York…

Our kids are going to be fine.  And I always tell Malia and Sasha, look, you guys, I don’t worry about you — I mean, I worry the way parents worry — but they’re on a path that is going to be successful, even if the country as a whole is not successful. But that’s not our vision of America.  I don’t want an America where my kids are living behind walls and gates, and can’t feel a part of a country that is giving everybody a shot.

And that’s what we’re fighting for.  That’s what 2012 is going to be all about.  And I’m going to need your help to do it. (Applause.)

So, thank you, very much.  (Applause.)

That speech was given at fundraiser with a price tag of $35 000 a head

Now my question is why Obama is not campaigning at the Occupy Wall Street camp, since he loves them and they love him back?

May be that he is afraid they will ask him to give them something, instead of him asking them to give him something…

Oh, here is another one: What would Occupyers think of the prospects of their future compared to Obama’s daughters future?

Just saying…

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A look inside the heartless, miserable, greedy, vain world of the Madoffs

By: admin
Published: October 31st, 2011


From NYP

Bernie and Ruth Madoff met in 1954 when they were teenagers, and from the beginning Bernie criticized Ruth, perpetually, pointing out every minor imperfection in his young bride.

As a result, she led a life in which fear was her overarching motivator: She was so afraid of Bernie cheating, she allowed him only 24 hours of travel alone.

Yet, cheat he did.

For 16 years, he regularly slept with Sheryl Weinstein, a top executive at the time for a women’s Jewish group, who eventually penned a Madoff tome, “Madoff’s Other Secret.”

Shockingly, it wasn’t her son’s death or the loss of her fortune or her husband’s vile plot and resulting imprisonment that unsettled Ruth the most

More fucked up shit here…

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When student loans become golden handcuffs

By: admin
Published: October 15th, 2010

From The Sacramento Bee

The Heritage Foundation

This April, while hashing out the bill that reconciled differences between the House and Senate versions of health reform, lawmakers tossed in another overhaul as well. They completely remade the student loan industry.

As a result, college students will pay more for their school loans … unless they go to work for the government.

Of course, that’s not the story told by those who voted for the change, which eliminated the decades-old Federal Family Education Loan Program. In eradicating that program, Congress took private financial institutions out of the student loan business. Instead, all that lending is now done exclusively by your friendly federal Department of Education.

President Obama lauded the change, suggesting that students would save by borrowing direct from the feds. Congressional sponsors claimed the bill would make student loans more affordable because it would allow graduates whose monthly loan payments exceed 10 percent of their monthly income to extend their repayment period by 10 years or more beyond the norm.

Under the new arrangement, borrowers may extend the life of their loan to as long as 20 years. But while the monthly payments may be lower, borrowers will end up paying much more for the loan, thanks to greater interest costs.

Take the example of a married couple making $100,000 per year. The wife, just graduated from college, has $100,000 in student loans outstanding. Under the new law, the couple qualifies for an income-based repayment plan that lets them stretch out their repayment period to 13 years. The longer-term loan lowers their monthly payment by $175, to $975. But over the life of the loan, they will shell out an extra $13,000 in interest.

But there’s a loophole. Our new grad can avoid paying the additional interest simply by going to work for the government.

Here’s how it works. The College Cost Reduction and Access Act of 2007 established a loan forgiveness program for all full-time public-service employees. It provides that, after 10 years of public service, the remaining balance on all student loans issued under the Direct Loan Program (the only program in town, post-Obamacare), is forgiven.

To appreciate what a sweet deal this can be, let’s assume that the wife in our example above works for the government – federal, state or local, it doesn’t matter. The couple still qualifies for income-based repayment, paying only $975 a month. But because she works in the public sector, they are only responsible for making payments for the first 10 years – approximately $117,000 in principal and interest.

Meanwhile, her identical twin sister, in the exact same financial situation but working in the private sector, is responsible for making all 13 years-worth of payments, totaling $151,000.

In this case, the loan forgiveness program boosts the after-tax value of the public job by $34,000. With a huge bonus like that on the horizon, few workers could be tempted to leave their jobs after eight years of service.

In this way the loan forgiveness program turns student loans into golden handcuffs for government workers.

It’s highly unlikely that private employers will be able to pony up a compensation package more attractive than what the public service wife has even without this incredible student loan premium. Recent studies show that government compensation levels are 12- to 40 percent than those of the private sector.

In the end, the new student loan program will hit the economy hard. Young people who chose to go into the public sector will find themselves “job locked,” with few opportunities to leave the public sector without suffering a large financial loss.

This will increase labor market rigidity and drive talent away from the private sector, resulting in a slower economic growth. Meanwhile, taxpayers will continue to be hit with ever increasing tabs for government payrolls, employee benefits and student loans.

Given the current recession, lawmakers would do far better to embrace policies that will boost private sector growth – the only engine for real economic growth. They might also pursue policies that – unlike the federal Direct Loan Program – actually reduce the real cost of higher education.


Paul Winfree is a senior policy analyst in The Heritage Foundation’s Center for Data Analysis. Readers may write to the author in care of The Heritage Foundation, 214 Massachusetts Avenue NE, Washington, D.C. 20002; Web site: Information about Heritage’s funding may be found at

This essay is available to McClatchy-Tribune News Service subscribers. McClatchy-Tribune did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of McClatchy-Tribune or its editors.

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Generation Y’s steep financial hurdles: Huge debt, no savings… Still Optimistic About the Economy?

By: admin
Published: April 26th, 2010

By Christine Dugas

They’re called “Generation Y” — teens and twentysomethings known stereotypically for their coddled upbringing, confidence, opinionated dialogue, free-spending habits and openness to change.

Ultimately, however, the more than 50 million members may be best remembered for whether they can overcome the dire financial straits that plague many of them.

Even before the recession, those in Generation Y — the latest products of a get-it-now, pay-for-it-later mind-set that has permeated the nation’s economy — faced a range of financial pitfalls as they embraced expensive high-tech gadgets and added credit card debt onto student loans.

Now, stagnant wages, job insecurity, the decline in employer-sponsored health insurance and retirement benefits, the rapid increase in basic expenses, soaring debt and minimal savings have jeopardized the economic security of the entire generation, according to a recent report by Demos, a public policy research and advocacy think tank.

Their generation is the first in a century that is unlikely to end up better off financially than their parents, the Demos report said.

“The recession has hit them hard,” says Jose Garcia, associate director of policy and research at Demos, based in New York. “It affects their income potential, their saving potential and their career-ladder potential.”

Kristen Ammerman, 21, a senior at Michigan State University, faces such challenges and sees her Gen Y classmates struggling with financial issues — while seemingly oblivious to the potential consequences.

“I work at a part-time job, have incredible debt and get food stamps,” she says. “I’m still short on rent every month. … My friends all want the newest and best things. They spend money on them any chance they get.”

No standard definition for Generation Y exists, but analysts generally classify anyone born from the 1980s to 2000 as members. Demographers also call them the Millennial Generation.

Their plight seems as much created by members’ pre-recession personal finance habits as by the misfortune of coming of age as the recession took hold in December 2007:

About 37% of 18- to 29-year-olds have been underemployed or out of work during the recession, the highest share among the age group in more than three decades, according to a Pew Research Center study released in February.

This generation is the least likely of any to be covered by health insurance. Just 61% say they were covered by some form of a health plan, the Pew study said.

Only 58% pay monthly bills on time, a National Foundation for Credit Counseling (NFCC) 2010 survey said.

60% of workers 20 to 29 years old cashed out their 401(k) retirement plans — typically a big financial no-no because such a move squanders retirement assets and forces the recipient to pay a tax penalty — when they changed or lost jobs, an October study by Hewitt Associates said.

Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt, says a November MetLife poll.

On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000, according to Fidelity Investments.

•Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004.

“They have high, unrealistic expectations,” says Lee Jenkins, author of Lee Jenkins on Money and a managing partner of Atlanta Capital Group in Atlanta.

“And many of them don’t manage money very well.”

‘A pretty optimistic outlook’

Even so, not all Gen Y members have learned from the harsh realities they face.

This year, 25% of Gen Y members say they are spending more than last year, compared with 18% of all adults, according to the NFCC survey.

“They are throwing caution to the wind and have a pretty optimistic outlook,” says Gail Cunningham, vice president of NFCC.

Unemployment among Gen Y members is “badly setting back their careers,” says Paul Taylor, executive vice president of the Pew Research Center. “Yet, despite the problems they face, they tend to be upbeat — which is typical of young adults.”

That doesn’t necessarily mean that Millennials are confident in their ability to manage their finances in a way that allows them to emerge from their predicament.

“Many of them are willing to buy now and pay later,” says Ashley Adami, a financial planner for ClearPoint Credit Counseling Solutions in Seattle. She not only has Gen Y clients, she is a Gen Y member.

A common trait within members of the generation is a belief that they have the skills and ability to make money and afford large purchases, even when it doesn’t appear that they do.

Frank Lennon, 27, an analyst in the hospitality industry in Nashville, acknowledges that during his college years and after graduation, he spent more money than he made.

“I was greedy,” he says. “I made a lot of poor financial decisions without thinking of the big picture. I should have known better.”

Lennon’s wife, Erin, 26, is still in college and has $28,000 in student loans. It was only when they were married in October that they became aware of their total credit card and college loan debts.

“The real shock was on our wedding day, when we realized that we were $104,000 in debt,” Frank says.

“Because we had gotten some cash gifts, we used it to make a credit card payment on our wedding night.”

Turning around the turmoil

The keys to turning around financial turmoil traditionally have been employment and earnings.

But Millennials have become known for switching jobs constantly, says Brad Kimler, executive vice president of Fidelity’s Consulting Services business.

And unfortunately, when they have left jobs, they often have cashed out their retirement plans, saying they needed the money, he says.

Ammerman, who works part time at Home Depot, has job-hopped since she started working in high school.

“I switch around because I get bored or need to make more money,” she says. She says she does not participate in Home Depot’s 401(k) plan because she has too many bills to pay.

The recession and its fewer job opportunities have grounded some Millennials.

Stefanie Potts, 24, an assistant director at the University of Southern California’s Office of Admission, says many in her generation initially thought it was desirable to move around, take job risks and get experience.

“The advice has completely changed,” she says. “Most of us are happy to have a job.”

But many who are just graduating from college are having trouble starting out with an entry-level job in their field. Some can find only unpaid internships. And because entry-level jobs generally offer low pay, graduates who are overwhelmed with debt may have to seek better-paying, non-professional jobs.

“I was helped by my parents,” says Mark McShane, 27, who works for a financial services company in Boston.

“Even when I graduated, they gave me a small stipend to help me with those first 15 months out of school. But without that, I’m not sure I would have been able to accept my initial job, which leads to the next step in my career.”

Even before the recession, nearly half of college students dropped out before earning a degree, the Demos report said.

Now, people from low- and moderate-income families are much less likely to enroll at all.

‘A dose of reality’

The unemployment rate for Gen Y remains much higher than the national rate.

In March, the national rate was 9.7%, compared with 18.8% for workers younger than 25, according to the Bureau of Labor Statistics.

“The economy has given them a dose of reality,” Jenkins says. More than half of Generation Y, 60%, say they are concerned about paying their bills, according to a recent poll by Harvard’s Institute of Politics.

“When you get a little bit of money, what do you do with it?” asks Mikala Shremshock, 27, who works for Veeco Instruments near Philadelphia.

“Do you pay off your credit cards, put it toward student loans, make an extra payment on your house or car, or put it in your IRA? I don’t have enough to really make a big dent in anything. If you get a bonus, why not just spend it?”

Faced with financial setbacks, Millennials are starting to be more realistic.

More than half of them, 55%, say they are watching their spending very closely now, up from 43% in 2006, according to the Pew Research Center.

It’s unclear whether the more-conservative approach to personal finance is only temporary, Fidelity’s Kimler says.

Frank and Erin Lennon say they are living frugally now. They rarely eat out. Frank temporarily has stopped making contributions to his 401(k) plan so they can focus on paying down debt.

“I think the reason why we’re being so frugal now is because we’ve seen the rainy days, and we’ve had friends that have gone through some really hard times,” he says.

The couple have a dry-erase “Bill Board” on their refrigerator, where they keep track of their debt.

“This allows us to remain on the same page and resist unnecessary spending,” Frank says.

Unlike their parents, who had the G.I. Bill and pension plans, those in Generation Y have few safety nets.

Ammerman is not worried about her future, even though she will graduate with a journalism degree at a time when newspapers are closing and jobs are hard to get.

Rather than trying the newspaper route, she is thinking of trying to use her skills to write about video games, a field she says is male-dominated.

“I know what I’m capable of, and I know where I can go, so I can do the best,” she says.

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German Insanity

By: admin
Published: April 20th, 2010

Coming to America?

Probably…It seems insanity and incompetency is contagious….

German Unemployed Sent to Fake Supermarket to Hone Skills

From Der Spiegel
By Oliver Trenkamp

Inflatable cheese, plastic money and wine bottles full of tinted water: What sounds like a preschool game is actually a full-scale, fake supermarket used for retraining the long-term unemployed. Hamburg’s simulated shopping trip is costing German taxpayers millions and delivering little success.

The checkout scanner stalls over a bottle of plum schnapps. The woman behind the cash register looks questioningly at her teacher, Mr. Rothe, who instructs her which buttons she should press. The checkout receipt says the schnapps costs €49.99, even though the bottle is empty.

The man who bought the empty bottle is Markus Repschinski, a 28-year-old who has filled his shopping cart from supermarket aisles lined with fake products, inflatable cheese and empty plastic containers as well as some 6,000 real food stuffs.

Repschinski has the words “Real Life Training” written on the back of his vest. And that is the crux of this simulated supermarket and warehouse, the first scheme of its kind in Germany. Here, long-term unemployed people get to experience supermarket work first hand. The idea is that the “workers” take part for almost 40 hours each week for a period of between six and nine months. They are supervised by social workers and five group leaders.

Today, like every day, Repschinski spends more money than he has to live on for months. The former warehouse worker now lives on €359 euros ($484) from the so-called Hartz IV benefit, which is the deeply reduced welfare payment the government gives to those unemployed for more than a year. But here in the training supermarket he only handles play money, miniature euro bills and plastic coins.

‘Realistic’ or ‘Silly’?

This is Germany’s biggest toy supermarket by far, paid for by the job agency in charge of helping Hartz IV recipients back into work. The reintegration of Germany’s long-term unemployed into the work force is an expensive problem for Germany, where several million people receive the Hartz IV benefit. No one wants to say exactly how expensive the supermarket program has been. But Rainer Westerwelle, managing director of the training center, confirmed that the sum will surpass €1 million and could rise into the single-digit millions, saying: “it is not possible for less.” In Germany, job center staff send unemployed people to do courses in everything from filling out job application forms to driving a forklift truck and using powerpoint. There has even been a speed-dating session with potential employers. But no one knows for sure what impact this approach has. What is more certain is how much it costs: The Federal Labor Agency pays €6.6 billion a year for the retraining of Hartz IV recipients.

In the words of the German employment agency this training is “a realistic experience with genuine articles.” But you get no qualification, just a certificate of attendance, drafted like an employment reference. Failure to attend the training course is punished with sanctions, like a reduction in benefit payouts.

Since October 2009 there are many people, like Repschinski, playing shop and taking part in training courses. A number of them see the program as plain silly: “pure nonsense,” “humiliating,” are among the words used by participants. “This stuff can also be taught to a baboon,” a smoker says during a break. Many do not want their names to be printed, while some do not even tell their friends and families they are taking part in the course. Day after day, they sort goods, drive forklifts through the warehouse, take orders and push packed shopping carts from one room to another.

But its organizers refute the complaints: “You can never please everyone,” says project manager Ulrike Kügler, adding that some people refused to take part at first, but soon got involved. She said she there was less dissatisfaction among those working in the supermarket training courses than with other measures Germany uses to retrain its Hartz IV recipients.

Poor Success Rate

Some taking part in the novel scheme say it beats sitting around at home. Regla Ketty Morales Leverenz, 28, from Cuba, said that she has learned a lot and has already been invited to interviews. Karolina Sieg, 26, says she had already secured an apprenticeship job in retail, starting this summer.

At the checkout, a man is waiting to pay for his purchases again. Sieg, working as a cashier, has forgotten to look into the security mirror on the wall to check and make sure that the customer hasn’t forgotten or hidden any products in his shopping cart. The customer says he wants to pay by card — a decision which avoids the need for the cashier to fumble for the right change. There’s not credit card machine here, so the cashier must simply write the amount down on a list.

“This is a good way to inspire people to work,” says project manager Kügler. She says she is strict, throwing out those who fail to take part.

And the results? Of 161 people who have so far been registered to take part in the simulated supermarket, only 14 have gone on to work for temporary employment agencies in the warehouse industry and none have obtained jobs in the retail trade. But project organizers stress that the project will need to run for two years before it can be fairly evaluated. They say their goal is not only to boost the number of people getting jobs, but also help give people the confidence and courage they need to accept a job. They speculate that the pilot project may be taken up by other German states. And most of all they are proud that the work environment is realistic: “This is not a place full of hot air,” said CEO Westerwelle.

And in the meanwhile, ‘workers’ continue to buy and sell water-filled wine bottles and inflated packets of cheese.

Warm winds blowing

Heating blue sky

And a road that goes forever

Been thinking ’bout it lately

Been watching some TV

Been looking all around me

At what has come to me

Been talking to my neighbor

And he agrees with me

It’s all gone crazy

Well my wife returns from taking

My little girl to school

She’s got beads of perspiration

As she tries to keep for cool

She says that mess it don’t get no better

There’s gonna come a day

Someone gonna get killed out there

And I turn to her and say

Texas she says what

Texas she says what

They got big long roads out there

Warm winds blowing

Heating blue sky

And a road that goes forever

I’m going to Texas

We got to get out of here

We got to get out of here

Well I got a little brother

Several metres high

He’s built just like a quarterback

He swears he’ll testify

He says he’s been to Texas

And that’s the only place to be

Big stakes, big girls, no trouble here

That’s the place for me

I’m going to Texas

I’m going to Texas

Watch me walking

Watch me walking

Check out the German Democratic Republic (GDR) made Trabant (Trabbi)

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Canada’s Brewing Debt Storm

By: admin
Published: April 17th, 2010

From The Globe And Mail
by Paul Waldie and Steve Ladurantaye

Canadian borrowers are fast approaching a day of reckoning.

Lured by cheap money to buy up, buy in, expand and make over, families have pushed credit levels to a record high.

Now, mortgage rates are beginning to creep up and the Bank of Canada is poised to retreat from the record-low interest rates it adopted to fight the recession and spur recovery.

The end of the free-money era has left consumers more vulnerable than ever, and those who threw caution to the wind could soon face costs they can’t handle.

Household debt has surged three time faster than income in recent years and now stands at a record high of more than $1-trillion. Put another way, Canadians owe about $1.47 for every dollar of disposable income. Even more remarkably, they took on more debt during the slump – a first for a recession – because borrowing was so cheap.

With debt levels this high, even a small hike in interest rates will be ugly for those whose incomes aren’t rising fast enough to meet their day-to-day expenses.

Their woes could have a snowball effect: As debt-strapped consumers pull back, their credit woes spill over into the broader economy and risk putting a damper on the recovery.

For some, the trouble has already begun. John Silver, who runs Community Financial Counselling Services in Winnipeg, has seen his caseload increase 20 per cent from last year. “We re seeing more people coming in with more stress with regard to their debt,” he said.

Much of the recent rise in debt in Canada has been due to low interest rates, generally easier credit terms and fierce competition among lenders. Even when the recession hit in late 2008, Canadians remained far more confident than Americans in part because of a better housing market and stronger financial institutions. Consumer confidence in Canada is only about 20 per cent below where it was in 2007 whereas it’s 60 per cent lower in the U.S.

The higher confidence level and stronger banks meant Canadians were far more eager to borrow during the recession than Americans, said Benjamin Tal, senior economist at CIBC World Markets.

“I can offer you a very low mortgage in the United States and you won’t take it,” he said. “In Canada you jump on it, because confidence is high.”

Now though, “what I’m seeing is a consumer that is more sensitive to higher interest rates,” he added.

Most of the increased debt, roughly 70 per cent, has been in mortgages, reflecting the still hot housing market in much of the country. That has left many households struggling to meet monthly payments on hefty mortgages and more susceptible to rising rates. Families in Vancouver, for example, spend about 68 per cent of their disposable income on the cost of maintaining their house, compared to less than 40 per cent 10 years ago.

“There’s been a real frenzy just to get in [to a house] at all cost, because if you don’t get in you may never get in,” said Scott Hanah chief executive of the Credit Counselling Society, a non-profit group based in Vancouver that helps people sort out their debts.

His organization is fielding about 4,000 calls a month and has seen a 10-per-cent increase this year in the number of people seeking help.

“Last year we saw an increase in activity of over 50 per cent. So to have a further 10 per cent increase on top of that is significant,” he added.

There are many people in the same position as James Laidlaw and his young family, who borrowed to build onto their Toronto home, adding construction costs on to a mortgage to help finance $250,000 in renovations and an expansion of 600 square feet.

Even a jump in mortgage rates of just half a percentage point will mean an extra $1,700 a year for Mr. Laidlaw, his wife and two children.

“Every dollar counts and I’m already thinking about the other things that may suffer,” he said. “Maybe we’ll have to lose the vacation, or scale back Christmas.”

Canadians used to be big savers and cautious borrowers. In 1982, Canadians socked away 20 per cent of their disposable income and per capita debt stood at about $5,500, according to Statistics Canada. By contrast, Americans were saving just 7.5 per cent of their disposable income at that time and borrowed $6,500 per capita.

Savings and borrowing soon went in opposite directions in both countries and by 2002 debt levels surpassed disposable income for the first time. In 2005, the savings rate in Canada fell to 1.2 per cent, about the same as in the U.S. Meanwhile, per capital borrowing jumped to $28,390 in Canada and $48,700 in the U.S.

Consumers are feeling the pinch. A survey last year by the Certified General Accountants Association of Canada showed 21 per cent of respondents could barely meet the interest payments on their loans. The group is about to release a similar survey this year and, said the group’s chief executive Anthony Ariganello, the level of those struggling to cope has climbed to about 23 per cent.

“We may be back into a recession [next year] because, remember, part of what has helped us get out of this recession was spending and consumer spending at that, and if people don’t have money to spend we could be rapidly back in to where we started,” he added.

And while consumer spending and confidence have increased recently, both may be short lived, said CIBC’s Mr. Tal.

“There is a gap between confidence and ability,” he said. “It’s a gap between what’s in your head and what’s in your pocket. And this gap is, of course, a matter of concern because consumer confidence is high due to the fact that interest rates have been extremely low and people are able to finance those mortgages and those loans.”

In a recent report, Mr. Tal concluded that “Canadian consumer fundamentals are weaker than they have been in almost 15 years.”

That’s something that concerns officials at the Bank of Canada. If consumers run into trouble with their mortgage payments, that in turn can lead to “wider problems with other consumer loans, such as credit card debt,” David Wolf, a Bank of Canada economist, said in a speech in January. “Consumers may also have to curtail other spending to cope with their debt burdens, creating adverse spillovers to the real economy.”

Michael Hammond has already scaled back his plans. The Ottawa resident has a pre-approved mortgage of $220,000 and has been looking for a house. He nearly bought a $214,000 townhouse last week, but backed off because he’s still considering the effect of eventual higher rates.

“I am mulling over mortgage scenarios in my head like crazy right now,” he says. “It’s a scary time to be looking for a house. I’m looking at three cheaper homes today because I am so worried about overextending myself and getting caught five years from now.”

Neil Bigelow and his partner Tina Boudreau are also running over financial calculations as they prepare to buy their first home. The couple has been planning to buy a piece of land in Halifax and build their own home. But the prospect of rising rates has them worried about how much to borrow.

“Right now I could probably get $200,000 mortgage,” said Mr. Bigelow. “But what’s going to happen down the road because interest rates are not going to stay where they are at.”

By the numbers

  • 68%: Average amount of disposable income households in Vancouver spend on the cost of a home
  • 44%: Average in Toronto
  • 35%: Average in Calgary
  • 36%: Average in Montreal
  • 30%: Average in Ottawa
  • 21%: Percentage of Canadians who say they can’t manage their debt load
  • 147%: Debt-to-income ratio in Canada, a record high
  • 157%: Debt-to-income ratio in the United States
  • 70%: Percentage of debt held in mortgages in Canada

Certified General Accountants Association of Canada, CIBC Economics National Bank economics and Statistics Canada

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