House Values Fall 30%, But Property Taxes Keep Rising

Even though home values have plummeted by a third, property taxes are increasing: welcome to the Great Middle Class Squeeze.

You might think that with home prices off by 30% or more since the housing/credit bubble popped in 2006, property taxes would have declined by a similar percentage. But you'd be wrong: they've gone up. As if the massive reduction in home equity wasn't enough of a blow to the Middle Class, they're also paying higher property taxes.

Though house prices have declined roughly 30% nationally since the 2006 peak of the housing bubble, property taxes have continued their decade-long rise, jumping $45 billion (over 10%) since 2008.

Local governments are responding to declining revenues by jacking up all taxes and fees. To counteract sharp declines in property values, municipalities are raising their property taxe rates, squeezing more out of properties even as they drop in value. Though there are local variations, the result is the same: property taxes are rising.

In southern Washington, the rate jumped from $10.06 to $11.60 per $1,000 of assessed value--a leap of over 15% in one year.

Even as assessed valuations slumped by over 13% annually, property tax revenues statewide increased 2.1% to $8.8 billion--a $181 million increase to taxpayers. Though Washington state has limits on property tax increases, local government's property tax rates do not rise or fall with assessed value--they're set by budget requirements. So falling prices do not translate into lower property taxes.

In Oregon, a voter-mandated statute limits increases in assessed value to 3% a year. As a result, assessed values are still lagging market prices, which soared in the housing bubble. In Multnomah County, the average assessment of $174,000 is $100,000 lower than average market values. That means property taxes can increase 3% a year even as home prices slip. So property taxes won't fall until market values fall below assessed value, and that would require further massive declines in home prices.

In northern New Jersey,property taxes are rising by as much as 12% in some municipalities, after skyrocketing 80% over the past decade, far outstripping the consumer price index (31% rise) and household incomes (up 24%).

Nationally, property taxes now dominate local tax revenues. Property taxes tripled from 1990 to 2005 in Florida, for example; once the local government obtains that gargantuan revenue stream, it becomes the "baseline" for all future years.

Local governments should go back to the revenues and budgets of pre-bubble years, but instead they are jacking up rates to maintain revenues, even as valuations have fallen off a cliff. Bubble-era prices and equity are gone, it seems, but bubble-era property taxes are here to stay.

According to U.S. Census Bureau data, the nation's local governments will collect an estimated $476 billion in property taxes in 2010--almost double total state income tax revenues of $250 billion and considerably more than total sales tax revenues of $286 billion. That means property tax revenues are 66% higher than sales tax revenues--$190 billion more a year.

A decade ago, property taxes were roughly equivalent to sales taxes. In 2000, property taxes totaled $247 billion and sales taxes came in at $223 billion-- a differential of roughly 10%. Sales taxes have increased by 28% since 2000-- roughly in line with the rise in consumer prices (as calculated by the Bureau of Labor Statistics).

Property taxes, meanwhile, have far outstripped inflation, soaring from $247 billion in 2000 to $476 billion in 2010--a gargantuan increase of $229 billion, or 92%.

State income taxes have risen nationally from $217 billion in 2000 to $250 billion in 2010, after peaking at $303 billion in 2008, just as the global financial meltdown began. That's a rise of $33 billion, or 15%--actually less than inflation, since income taxes have fallen substantially in the recession.

Add all this up and we can see that local governments have become far more dependent on property tax revenues than they were in 2000.

No wonder they're jacking up property tax rates.

California property taxes have been limited to 1% of assessed value by the voter-mandated Proposition 13, passed in 1978. Assessed value is limited to a 2% increase per year. Additional parcel taxes can be added only through voter-approved bond measures and "special assessment districts" which fund municipal water districts, libraries and other local government services.

But assessed values are re-set to market valuations when a property is sold. As millions of homes were sold during the boom years, the assessed value of those homes skyrocketed,reaping huge increases in property taxes for local governments in California.

A random selection of homes in the San Francisco Bay Area yielded these representative increases (addresses are not listed due to confidentiality concerns, but property taxes and sales figures are all public records, easily accessible on sites such as zillow.com.)

3 bedroom, 2.5 bath home, built 1924:
assessed at $270,000 in 2004, property taxes: $5,090
sold 2005 for $725,000: 2006 taxes: $10,997
sold 2010 for $540,000, 2010 taxes: $12,193

Once this home was sold at a bubble-era valuation, then the property tax more than doubled, and then rose 10% from 2006 to 2010 as local "special assessment districts" levies increased.

Now that the home has sold for $185,000 less than its tax assessment (a drop of 25%), then the property taxes collected will certainly decline by a similar percentage. Multiply that by hundreds of thousands of homes sold for less than bubble-era valuations, and it paints a bleak picture of major declines in property tax revenues for local government.

Homeowners in many locales can petition the property assessor's office to lower the assessed value of their homes; if granted, such reductions in value can substantially lower property taxes.

This is no guarantee that your property taxes will stay low for long, though.Anecdotally, one reader from a state without Prop 13 limits wrote that he petitioned the county for a reduction based on lower valuation, which was duly granted. But that $1,200 reduction was largely offset by a $700 increase resulting from a higher tax rate.

Again turning to California for an example, a 3-bedroom, 1.5 bath house built in 1928 saw its assessed value leap more than ten-fold when it was sold for $770,000 in 2006. Property taxes leaped from $2,522 to $11,394. But the assessed value was notched down from $801,000 in 2008 to $630,000 in 2010 as an adjustment to the realities of post-bubble valuations. Though the value dropped 21%, the property tax only slipped to $10,035, a 15% reduction.

That's still quite a leap still from the pre-bubble annual tax of $2,500.

Either by re-assessment or by sales, assessed property values are falling around the nation. While local government can jack up tax rates by 10% or more annually, at some point those substantial increases will likely trigger resistance from homeowners who continue to see their home values stagnate or decline.

The property tax cash cow will likely get leaner as a result, and local governments will have to slim down budgets to match the new realities of lower property values.

Here's a simple suggestion for local government: go back to the pre-bubble budget of 1996, and add in the inflation since then--39%. That would be fair and transparent.

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One Scenario for Early 2011: Reality Intrudes

The global fantasy that euphoric stock markets reflect the real economy is about to be tested by its nemesis, reality.

Beneath the surface, all central banks and governments have pursued a single fantasy the past two years: that massive injections of borrowed capital to "extend and pretend" and inflate new asset bubbles will magically restart global "growth."

The policy is based on three simple ideas:

1. The financial and political power Elites are scared witless by the prospect that the entire financial/monetary status quo is irrevocabley unsustainable. They have no Plan B. So their only policy choice is to print/borrow unprecedented sums of credit/money and inject it into every failed institution to keep it afloat.

2. At some magical point, they hope that "growth" that isn't just government spending and credit creation will arise to replace their command-economy interventions. How the over-indebted and bankrupt will spark a new round of "growth" is left to magic: "animal spirits" and so on--the equivalent of putting on a funny hat and waving a dead chicken while chanting, "We are the Fed! Away, tides!"

3. This much-desired magical return of organic growth (i.e. not the "growth" created by governments borrowing and squandering 12% of their GDP every year) will be sparked by a new asset bubble: in China, the ongoing real estate bubble is the "answer," while in Europe, the U.S. and the developing world, a euphoric stock market is seen as the magical incantation.

Global markets have returned to their pre-global meltdown levels. Too bad the same can't be said of the real economies. Let's take a look at two data points:

Notice that prior to the Great Recession which began in late 2008, the private non-farm payroll in the U.S. totaled about 116,000,000.

Currently, the number of private non-farm jobs is about 107,000,000. That means there are 9 million fewer people getting paychecks.

According to the stock market, everything has returned to the heady days of wonderfulness before the Great Recession struck.

But of course the stock market doesn't reflect jobs, it reflects profits. And those soaring corporate profits are based on four premises:

1. The China story: China's searing growth and rising consumption of everything will fuel global growth essentially forever.

2. The declining U.S. dollar boosts the overseas profits of U.S. global corporations. In other words, you can still make more profit even as your revenues decline: since most major U.S. companies earn half or more of their profits overseas, a declining dollar boosts their profits. Borrow a couple billion at low rates to buy back some stock and presto, earnings per share are rising.

3. Productivity gains can flow directly to the bottom line because workers have zero leverage. Slash and burn that headcount, baby, work the survivors a bit more efficiently, and voila, no need to hire more bodies to handle the anemic growth in revenues.

4. Interest rates will remain absurdly low essentially forever. Mortgages will be cheap, corporate debt will be cheap and government borrowing will be cheap-- endless nearly free money will always be available.

Unfortunately for the the believers in magic, all four stories are unraveling.

The China Story was always based on a single premise: that China's central planners could magically weld together a command economy dominated by State companies, banks and bureaucrats and a vibrant capitalist model of private production, consumption and asset bubbles which would never pop.

The wheels are falling off that project: inflation is rampant-- China is now more expensive than the U.S., even though the average wages are 8 times higher in the U.S.--and the notion that the central government can prop up property values which are out of reach for 99% of the populace will be tested as the government is forced to raise rates, limit their explosive increases in money supply and constrain "hot money" seeking a quick "guaranteed" return.

The China Story was always based on cheap labor and rising consumption, both conditions which are changing. Restive labor is demanding higher wages, and consumption based on government stockpiling of commodities and building cities in the middle of nowhere are about to reverse course as money tightens.

The last time inflation took off in China (1989), the unrest quickly got out of control. Those who don't think it could happen again are relying on magic, not realism.

As the dollar rises, the "rising profits" of U.S. global companies reverse. Nobody seems to notice that this dynamic goes both ways. All those rosy projections of endlessly rising profits ignore the consequences of a rising dollar.

As for rising productivity: the easy gains have all been reaped over the past two years. It will be much harder to squeeze more profitablity out of current workers, especially as revenues decline.

About that endlessly cheap money in unlimited quantities:

That looks like rates are rising, and rather quickly. Oops. So much for the endlessly cheap money for mortgages, corporate debt and all the rest of the credit-based magic.

If we take the above into consideration, a scenario for early 2011 takes shape. This is only one scenario of many, and we'll just have to see what actually transpires.

As the wheels fall off and reality intrudes, the crown jewel of the central banks' interventionist policies, the stock market, may well encounter a bout of gravity. Since the central banks and governments have no other plan other than "borrow and spend" and "extend and pretend," they will move heaven and earth to reflate their golden child, the stock market, because its rise is their primary propaganda tool. Its demise would shred their claims to "success," so they will place the entire shadow machinery of intervention behind a last-gasp play at reflating stocks.

But reality will eventually intrude anyway. The tides don't really care if you're wearing a funny hat and waving a dead chicken, and that you're from the Federal Reserve. People are growing weary of the Fed's "we're the fourth banch of government, except with no controls or oversight, hahahaha" fiefdom, and as a result the Fed is about to encounter some political resistance to its feudal pretensions.

This scenario suggests a "head and shoulders" pattern might develop, where the current levels of resistance will form the head (top) and the previous peak in April 2010 will form the left shoulder.

It looks like 2011 will be an interesting year.

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America's Childlike Desire to Avoid Making Trade-Offs

The U.S. is childlike: we refuse to make trade-offs, as these require analysis, judgment, sacrifice and maturity.

The key characteristic of adulthood is the ability to make trade-offs. The child and the adolescent want everything that they want, now, and they soon learn (at least in America) that whining, cajoling, bargaining and guilt-tripping will get them what they want without having to make difficult choices between less-than-perfect options.

America has not yet grown up because it refuses to make any adult trade-offs that require sacrificing one desire to bring another desire within reach, or matching reality with competing demands. Energy offers a cogent example.

When I posted a rather measured report on natural gas ( The (Relatively) Good News About Natural Gas), I was accused of being a "shill" for the natural gas industry, and many readers sent me links to the documentary Gasland.

I understand there are serious environmental issues in fraccing, which the report I published noted. (I wrote about these concerns for AOL Daily Finance over a year ago:Natural gas boom not all it's fracced up to be, and I was excoriated by industry insiders as a result.)

I am not an expert in fraccing, but it seems fairly evident that if the drilling is performed properly and carefully, then the water table could be protected from contamination.

Should fraccing be exempt from environmental laws? No. Clearly, any private enterprise which has the potential to damage or destroy "the commons" of our soil, air and water needs to be tightly regulated and inspected. That is the proper role of government--protecting the commons and the citizenry via common-sense regulation and rigorous inspections.

But let's follow the notion that the potential environmental hazards of fraccing mean it should be banned.

To be consistent, then we should also ban other energy extraction activities which are potentially hazardous/destructive to the environment:

1. no fraccing for natural gas.

2. no drilling for oil or natural gas offshore (see Gulf Disaster).

3. no nuclear plants (waste is only stored, remains a hazard for decades/centuries).

4. no hydroelectric dams (dams destroy the rivers and wildlife).

5. no wind turbines (visual pollution, kills birds).

6. no geothermal energy wells (they can trigger earthquakes).

7. no shipping via freighters which burn bunker fuel (trans-Pacific shipping creates 40% of the air pollution in the Pacific Basin).

8. no coal-mining or burning coal (massive degradation from open-pit mines, danger to miners in deep-tunnel mines, mountains of toxic tailings and waste, acid-rain and air pollution).

9. no tar sands or shale oil mining (massive stripping of the land, moonscapes, huge use of water, pollution of water and air from "dirty" oil produced).

10. no more subsidized solar energy plants (they don't pencil out without subsidies and make no sense in the northern half of the nation).

Each of these objections are based on valid points. Many residents and environmentalists don't approve of wind turbines, solar arrays currently don't make financial sense in most places unless they're subsidized by taxpayers ( a no-no to many), coal is an environmental disaster (I will believe in clean coal when coal executives are clamoring to live in the downwind plume from "clean" plants burning coal), nuclear power depends on hazardous mining of uranium, the waste from nukes has yet to be resolved, and so on.

Many environmentalists view dams as ecological catastrophes that should be torn down.

Ships burning bunker oil are creating an air-pollution calamity and should be banned.

Add all this up and the only acceptable sources of energy are existing hydroelectric dams, solar arrays and land-based oil wells which don't require pressurized water to extract the oil (as the pressurized water could pollute the water table, just like fraccing), and maybe existing nuclear power plants though many would choose to close these down.

That means the domestic energy supply would be 10% or less of demand/consumption. The rest would come from overseas or our North American neighbors, Canada and Mexico.

So it's OK for the fraccing to be done elsewhere, and for oil spills to ruin Nigeria, because we don't have to live with it. That's the classic definition of a colonial power: extract the resources from elsewhere, regardless of the damage to the local environment or people. The root assumption of this dependence on imports: Only the Imperial citizens matter.

Are we ready to face the consequences of closing down all environmentally damaging energy sources? That would require giving up 90% of our consumption. Are we ready to pay higher taxes or utility bills to subsidize solar power arrays? We still need backup capacity for nighttime consumption--where will that come from? Imported natural gas? From where?

If the present is any guide, we are happy to import that 90% of our energy from elsewhere, knowing full well there are few if any environmental restrictions in many of those exporting nations.

In other words, we want a perfect world: no potential "costs" to producing energy domestically, and also no significant reduction in our consumption of energy.

The "solution" we have chosen is to import the energy from elsewhere, leaving the damages and environmental costs to others, while leaving our own nation exquisitely vulnerable to distruption of energy supply chains and Peak Oil.

This is the same "solution" we've chosen for industry in general: close down the "dirty" domestic industries and import the goods from overseas. Even recycling plants are inherently "dirty"--there is no such thing as "clean" industry--there are trade-offs to be made at every step. So let's also stop recycling.

As a result of our childlike fantasies of "clean" living with no trade-offs, the states have fallen over themselves to offer film producers huge subsidies. Hollywood is a "clean" industry and everybody loves "clean" industries which fill office parks with white-collar workers and "information" businesses which pay lots of taxes.

Too bad the states didn't grasp that films are at best a $5 billion "industry" in a $14.7 trillion economy. The states improved the profitability of the film industry by offering dueling tax breaks, but they didn't really boost state revenues. It was all a foolish fantasy, attractive to adolescents who hoped to be seen with "movie stars."

Isn't this same desire for "clean" no-trade-off businesses one driver behind the financialization of the U.S. economy? It was all "clean" money-making: lower interest rates and jack up leverage and securitization, causing property values to skyrocket, which boosted consumer consumption of overseas-made imports (just unload on the dock and truck to Wal-Mart or the mall) and simultaneously increased the equity foundation for further financialized skimming and churn.

It was an adolescent fantasy: everyone could work shuffling electrons and paper in office parks and towers, making money by producing nothing. By speculating in housing, everyone could make money doing absolutely nothing but transferring pieces of paper and electronic entries.

But like any other adolescent fantasy, reality eventually intruded. The debts remained after the bubble, and even at 4.5%, a $500,000 mortgage requires hefty payments--as do the skyrocketing property taxes.

Corporations played the same game, too, of course: profits could be plumped up just by borrowing vast sums to buy competitors or to buy back stock, boosting the per-share earnings without having to actually produce more or work harder.

This is the fantasy world the U.S. continues to live in. Yes, fraccing is potentially hazardous; so are coal, oil, wind turbines, geothermal, hydroelectric and nuclear power. Those who are against each of these can make very strong cases, as can those who argue that subsidizing solar power at the expense of the taxpayers is misguided and a malinvestment made to benefit politically favored industries. (Needless to say, the fossil fuels industries have long had massive tax breaks and hidden subsidies paid for by other industries and taxpayers.)

Those of you who deal with children and teens probably know the "solution" to whiny demands: invite the kid/teen to solve the real issues and make the trade-offs themselves.

Nobody demands that of America as a nation. We want everything and we want it now, and we don't want to sacrifice anything to get it. Our solution is pathetically childlike:just borrow trillions of dollars every year to buy what we want, so no adult trade-offs are ever required. Just buy our energy from somewhere else so we don't have to make any sacrifices or balance competing demands.

We want to spend $700 billion on "defense," another $700 billion on Social Security, $600 billion on Medicare, $250 billion on interest on old debt, $350 billion for Medicaid, $567 billion on other entitlement transfers (pensions, Federal unemployment costs, etc.), etc., for a total of $3.7 trillion, while revenues may run about $2 trillion at best. The rest is borrowed.

States and local governments are borrowing billions more via bonds, and the shadow bailouts of the "too big to fail" banks are safely masked in the Federal Reserve balance sheet and accounting that's hidden "off budget." Those add up to trillions more that's being borrowed or printed.

We want abundant, cheap energy, and we want someone else to supply it to us so we don't have to make any difficult trade-offs. We want all our entitlements and we also don't want higher taxes. Isn't this the acme of childish fantasy?

When pressed about energy, we want to hide behind fantasies of fusion, or algae-based fuels, or some other technology which has been "10 years away" for the past 30 years or which is 20 years away from scaling up to industrial production, if ever. Our ignorance of the actual science is breathtaking, but we refuse to consider the possibility that breeder reactors and algae-based fuels may not pan out.

At some point, probably within the next 5-6 years, the oil exporters will stop shipping their hydrocarbons to us in sufficient quantities to meet our demands, and bond buyers will stop trading their capital for absurdly low rates of return on U.S. Treasury bonds.

Once it costs $1 trillion just to pay the interest on existing (and rapidly ballooning) debt, then we won't be able to borrow enough to fund the Empire and the Savior State and the interest. Trade-off time will finally be forced upon us.

At that point, the trade-offs will be much harsher than they would be now. But we don't want to make adult trade-offs; that makes us testy and pouty. Fortunately, Uncle Sam is indulgent; he can borrow trillions every year to give us everything we want--at least for now.

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Thank You, Readers and Contributors

I take a moment to thank you for your readership and financial support.

As Christmas and a new year draw closer, I want to thank you (yes, you) for your readership and for your financial contributions in support of this site.

I cannot thank thousands of individuals personally for devoting time to read this site, and so I am left with this highly unsatisfactory public expression of gratitude.

Truth be known, I am humbled to have an audience and embarrassed to be the recipient of so much generosity. Readers have sent me books, music CDs, photos of their families, essays, questions, cash, U.S. Armed Forces service medallions, money via PayPal, seeds, stamps, silver coins, collectors' copies of LIFE magazine, and hand-made wind chimes.

I am embarrassed to receive so many donations and gifts because I am not doing anything noble nor am I aspiring to being noble or saintly. I am average or below average in everything I do. There are millions of better writers and better guitar players, millions who are stronger and more fit, millions with deeper insights, millions with broader experiences and knowledge, and so on. The site is littered with typos, and I often lose track of things. The site is a rolling ball of chaos loosely bound by my scattered attention.

There are people doing great and difficult things who deserve our support--people building schools and libraries in Afghanistan and elsewhere, as one example of thousands. I make no claim to deserving financial encouragement; readers suggested I put up a donation link, and other readers suggested the voluntary $5/month subscription. Though the site is free and contributors receive nothing but a modest thank-you and token of my appreciation, hundreds of people have contributed in support of this site. This leaves me astonished and humbled. I know this reads like false modesty, but I am surprised when someone tells me they have never contributed to any other blog or site, that this is their first such expression of support. All I can do is honor them by doing my best.

Many others make their amazon.com purchases through this site as a way of supporting the site.

This wealth of support is embarrassing because all I do is write about topics that interest me and that I reckon to be important.

I get thousands of emails a year, and do my best to answer them, though my time and energy impose severe limits. I am not a super-human, I am average; after 12 hours of work, I'm tired and have to let go of all that remains undone. Lots of things fall through the cracks. I apologize for this; I do my best but I can't answer every email or read every link. I am just one person who has to earn my living doing other things.

I sometimes wonder if your recognition of the fragility of this entire project-- that is, oftwominds.com--motivates some of you to donate. Perhaps you sense my vulnerabilities, and the donation is a form of emotional as well as financial support.

I have no idea why you visit the site, but I suspect it's because you are concerned about The Great Transformation ahead, and you sense that I too am concerned. If there is any thread to the apparently random offerings here, it is my search for an integrated understanding of the interlocking crises we face.

For example, there is simply no way to understand or resolve the healthcare/sickcare crises we face without grasping the essential role of nutrition, diet, the growing and preparation of healthy food, fitness, personal responsibility, 24/7 marketing, the capture of governance by finance and global corporate cartels, a culture of ignorance and other unhealthy, deranged aspects of American society.

To talk about improving health and reducing healthcare costs while ignoring nutrition, fitness, mental health and our deranged culture is utterly nonsensical.

I think you understand the interconnectedness of all these issues--healthcare, Central State over-reach, Peak Oil, environmental degradation, the ascendence of Financial Elites and the hollowing out of America via the financialization of its economy and governance, the loss of integrity and the spiritual rot at the heart of the American "lifestyle," and so on--and you see me struggling to make sense of our situation in an integrated fashion.

I think you support this effort, even though you may disagree with much that I propose. That is as it should be. Honest expression and debate based on available, ungamed, unspun facts is the only way we can truly make informed decisions and trade-offs.

I also suspect you realize any real solutions will be radical, and will require great changes in both attitudes and practicalities. These radical changes will be viewed as "sacrifices" by many if not most Americans, even though what is being jettisoned is largely wasteful, unproductive, needless and destructive.

Perhaps you support the site's fundamental pragmatism, which reflects my own experience in self-employment, grass-roots political action, new media, carpentry, small business, etc.

Regardless of your motivations, I am grateful for your financial support and encouragement. I learn so much from you, and gain from your experience. It really is "oftwominds," yours and mine.

I don't hide that I am an individual, nor do I burden you too heavily with that ( I hope). I try not to be a hypocrite, i.e. I grow some of my own food, try to stay fit, don't game the system to draw a government check, ride my bike for transport within a 5-mile radius, etc. etc. I try to live such that if energy consumption drops by 75% then our household will not be affected because we already consume modest amounts of energy, fuel and water, and could easily use even less.

I hope to communicate that there are no easy answers, that ideological purity is a dead-end, that trade-offs require letting go of things which will be painful to surrender (even if they are at root only market-driven fantasies)--but also that a more sustainable (note I did not say environmentally pure) lifestyle is not only possible but also preferable in terms of full-spectrum prosperity (health, personal integrity, productive work and the pursuit of happiness).

I reckon you are honoring those goals and my own modest efforts on their behalf by contributing to the site. I am grateful for your readership, which forms a loose, opt-in community of "The Remnant," and for your financial and spiritual encouragement.

I am preparing the first section of my next book, "Investing in Troubled Times" for distribution in the new year to my loyal subscribers and those who have earned the honorific of "Heroes and Heroines of New Media" by contributing to the site's maintenance. This is a modest way of expressing my gratitude for your support.

Just as we "vote" very meaningfully with what we buy and where we buy it, so too do we "vote" when we contribute time and/or money. I am honored to be on your short list of sites which you support with your hard-earned cash.

If nobody ever donated a dime, the site would remain free. It's nothing noble, it's just me being me.

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The Devil's Christmas Letter

The Devil pens a Christmas letter.

Through means I am unable to disclose, I have obtained a copy of the Devil's Christmas letter. Yes, Satan too sends a Yule letter, and no, I was not on his mailing list. I think Satan's Holiday cheer should give us all pause.

To my fallen angels Beelzebub, Lucifer and Leviathan, princes of Hell's demons, and to my minions, lackeys, toadies and sycophants on Earth:

As you know, this time of year usually finds me quite despondent, as the Prince of Peace's influence waxes most atrociously around his birthday. But this year I am in fine spirits, nay, let me even declare myself absolutely giddy, for the destruction of the United States of America draws ever nearer.

Though my minions have long sown festering seeds of hate and disharmony in that now-benighted land, only recently have my favored weapons of destruction--leverage, debt, half-truths and endless, preening justifications for greed, sloth, lust, pride, envy, anger and gluttony--have been unleashed to worm their way into the stricken heart of that Republic.

My most treasured hopes of destitution and conflict in the U.S.A. are nearing fruition.

First, my minions in the Federal Reserve--such loyal servants!--and the Federal government have unleashed a veritable orgy of leverage and debt upon the land, spreading ruination under the false guise of prosperity. What a delicious irony, that the fools doomed to eternal damnation in my Empire believe themselves prosperous as they absorb the poison of exponentially rising leverage and debt.

They have made a mockery of the rule of law, openly flouting it by letting financial crimes go not just unpunished but rewarded. The blatant injustice that roams the land like a foul, slobbering beast--there are two sets of laws and two sets of books now, one for the financial Elites and their political toadies, and another one for the tax donkeys beneath them--this will eventually ignite the firestorm I seek.

American extravagance has surpassed even my highest expectations, as purveyors of luxury goods reap record profits, and the childish desire for instant gratification has become the unspoken ruler of the land. Convenience is now worshipped as a god, sitting triumphant beside entitlement, greed and willful ignorance.

Convenience is, as you all know, the name of a peculiarly slick slide into Hell.

One of my favorite sins, gluttony, is running amok, with half of the people groaning under their own weight, sickened and weakened. My loyal minions in the fast-food and packaged food industries have followed my plans to perfection, and my lackeys in the marketing and media have fueled the instant gratification and ignorance which insidiously undermine even the greatest empires.

Pride--oh, how the Americans excel at hubris and pride! The Federal Reserve chairman, bless his doomed soul, has declared himself 100% confident about an economy that is nothing but a confidence game. Oh, what joy to hear his lies spoken with such confidence!

The mere thought of the word greed cause me to chuckle delightedly, as the U.S. excels as a haven for greed without bounds, a greed so boundless that the entire universe would be insufficient to satisfy its bankers, hedge fund managers, high-frequency traders, Imperial factotums and politicians. How happy I am to see their greed grease their way into Hell.

I feel like dancing a jig when I hear the unbridled sense of entitlement which has poisoned the American spirit. Yes, let greed and avarice be cloaked with rationalizations--"I was promised," "It's my right," "I deserve it," "it's in our contract"--it is wondrous indeed how my secret invention, "free money," debilitates once-independent souls.

Anger is now overflowing everywhere, building my empire with every thoughtless word. Politicians rage against each other, the people rage against the politicans, and behind the scenes my servants in the political action committees feed the anger with billions of dollars in campaign donations. How amusing to see the politicos lay claim to noble ideals even as they scramble on their knees to collect the millions tossed at their feet to do my bidding.

Oh yes, my bidding, for their greed, pride and anger are my bidding. By all means, politicians, do my work: give tax breaks to the ultra-wealthy, let financial crimes go unpunished, allow the financial Elites' looting to go unhindered, transfer the wealth earned by the citizens' sweat to the financial Elites when their trillion-dollar bets go bad--fuel the anger which will tear you from power, and tear the country apart.

I laughed with glee when One Beholden To Me announced that he was doing "God's work"--how I love twisting together irony and lies! He fooled no one, of course, for even the most deluded souls know he is doing My Work, not the Lord's, but they are too distracted by games and ginned-up contests to care.

Not caring is doing my work, too, of course.

The nation bleeds itself with unwinnable wars, sacrificing its best youth on the altar of endless war--how can I not rejoice at this orgy of death, destruction and sowing of hate? The feeble liars at the nation's helm print endless sums to fund war and to prop up vile tyrants, but offer nothing for libraries or literacy or the curing of malaria. How can I not rejoice at a nation which finds trillions for war and next to nothing to fight the diseases of the poor residents of former colonies, including that Prince of Disease, ignorance.

As for sloth--that millions are being paid to sit around watching television instead of being productive creates the perfect breeding ground for resentment, malice and envy. How perfect to pay people to sit at home and rot away, with only their discontent and despair for company.

As you know all too well, idle hands end up doing my piecework for free.

It was almost beyond my dreams to find the nation's wealth and politics so dominated by a tiny handful of wealthy financial plutocrats--they are doing my bidding without hindrance, though I see by their troubled sleep that they know where their greed and rationalizations are taking them. To channel the nation's wealth to a few hands--what better way to nurture envy and anger?

If ignorance were treasure, the American political class must be declared wealthier than Midas, for its ignorance has reached a pinnacle I can truly admire. Ensnared by their lust for power, blinded by their greed for fame and perquisites, they look no further than the next election cycle, dooming their nation to division, disharmony and the desolation of permanent conflict over the dwindling productive assets of this once-great nation.

The people cry out to be saved by the government, as if it was a Savior instead of a vast combine chewing through the wealth of the nation, "investing" it in corruption, parasitic financial Elites, military misadventures, Homeland "Security"--ha, isn't that a jewel, as the nation withers from within--and the steady, unyielding oppression of the remaining productive members of society.

When the people cheer "We're number One," I cheer with them, for pride goeth before a fall. When they believe the half-truths, the illusions, the mispresentations, the misdirections and yes, the outright lies of the ruling class repeated by their toadies in the media, I can no longer restrain my delight, for lies and half-truths are my favored weapons of destruction. The leaders are themselves leaderless, blank, hollowed-out souls doing the bidding of their parasitic masters, focused only on keeping the corrupt and venal status quo together for a few more months, never looking out ten years.

I delight in that shortsightedness, that abject fear of change and transformation, that clinging to failure and pride, that refusal to face reality.

For the U.S.A. is now an Empire of Debt and Lies, its fraudulent financial system built on misrepresentations of risk and value, and its "economy of confidence" a con game based on illusory wealth, parasitic skimming, government gaming and tax donkeys paying for their Financial Masters' idiotic mistakes.

This adolescent desire to believe the lies, because in believing the lies then nothing need change--this might be my most powerful destructive tool.

A hunger for fantasy and illusion, a fear of adaptation, a childish demand for instant gratification--these are forces I can rely on to lead the once-great country to absolute ruin.

And here is the beautifully evil part, my minions--no external enemy is required. The Americans are destroying themselves with their reliance on leverage, debt, denial, half-truths and overflowing servings of the Seven Deadly Sins, all of which they have elevated to "assets" in their hopelessly twisted values. To be supremely unproductive, a churner of lies and financial trickery, is now the most rewarded and admired state in America.

The spiritual rot is now so deep and pervasive that the people no longer even recognize the decay --they have been lulled into a false belief that this culture of fraud, embezzlement, manipulations, propaganda and parasitic financial Elites has always held sway. This is precisely how a people act when they have lost their way, spiritually and morally: they elevate sins to virtues, and forget the lessons of their past.

And of course everyone claiming that there is no spiritual vacuum sucking the nation dry, that the status quo is simply "business as usual"--they are doing my work, too, for habituating to all that is corrupt and reprehensible, all that is lacking in integrity and honesty, this is doing my work most admirably.

Americans no longer hate me, they hate sacrifice, with a passion that enlivens my enthusiasm for their self-destruction.

How can I not be pleased this season? At long last, the destruction of the United States by its own citizens is close at hand. Give me two years, minions, no more than four, and I shall insure they will finally begin reaping what they have sown. Ignorance, my poor dear Americans, will not save you, nor will your endless parade of excuses, justifications and rationalizations. Indeed, they are my weapons which you drive deeper into your nation's heart with every lie, every excuse, every frantic justification for your own entitlement.

I await 2011 with high expectations.

Most sincerely yours,

Satan

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