Inequality and the Credit Crisis
It’s a cliché, of course, that the 2000s are the new Gilded Age, that inequality in America is at levels not seen since the original Gilded Age, which you may recall was ended by a terrible depression.
During this decade’s tiresome debates about inequality, the don’t-worry-be-happy side of the argument frequently, and correctly, noted that income inequality statistics overstate the lived experience of inequality, since the poor spent more than they earn and the rich spent less.
Of course, the poor spend more than they earn primarily by taking on debt. In the halcyon days of 2006, that was no problem. Credit flowed like honey, and what could always be refinanced need never be repaid. It’s a wonder we didn’t do away with the whole “money” thing entirely. If you can spend all the way down to negative infinity, it hardly matters whether your starting wealth is one dollar or a billion dollars. Why keep track?
But, alas, people did keep track. They also stopped lending to people who might not be able to repay, people who, you know, spend more than they earn. Which means, even putting aside the terrible hardship of bankruptcy, or struggling to pay down old loans, all of a sudden the lived experience of inequality must come very much to resemble those unpleasant income inequality statistics. Are we cool with that?
In a way, the credit crisis comes out of a tension between the broad-middle-class America of our collective imagination and the economically polarized nation we have in fact come to be. We borrowed to finance an illusory Mayberry. The crisis won’t be over until this tension is resolved. Either we modify the facts of our economic relations, or we come to terms with a new America more comfortable with distinct and enduring social classes.
Tanta and Calculated Risk have popularized the notion that “We are all subprime now.” But that simply isn’t true. The vast majority may be subprime now, but not all of us. To use an old expression, as the easy money falls away, we are being left to “find our own level”. For many, it may be quite a bit lower than we had imagined.
I’m sure this is a bit polemic, but I don’t think it is much overstated. Credit was the means by which we reconciled the social ideals of America with an economic reality that increasingly resembles a “banana republic“. We are making a choice, in how we respond to this crisis, and so far I’d say we are making the wrong choice. We are bailing out creditors and going all personal-responsibility on debtors. We are coddling large institutions of prestige and power, despite their having made allocative errors that would put a Soviet 5-year plan to shame. We applaud the fact that “wage pressures are contained”, protecting the macroeconomy of the wealthy from the microeconomy of the middle class.
The credit crisis will end, and life in America will go on. What we have to decide now is, when the floodwaters clear, what kind of country will be revealed. Peering down through the murk, I don’t like what I am seeing.
Addendum: Tyler Cowen was prophetic on this point. He wrote in January, 2007 on income vs. consumption inequality:
People may be borrowing and accumulating large debts. Note that in this case, however, the comeuppance, however bad it may be, has yet to come. It could instead be argued that “inequality will (someday, when the debts come due) be a serious problem.”
Welcome to someday, Labor Day, 2008.
FD: I’m still very stagflation-oriented in my personal portfolio (precious metals, short long bonds and stocks), so the wage-price spiral demagoguing might be interpreted as self-interested. That said, no apologies. It astonishes me that even very liberal economists take comfort in the evisceration of wage-earners’ bargaining power. Yes, it means that Ben doesn’t need to hike, regardless of what commodities do. But what kind of economy are we building when we take the price of past mistakes out of future wage-earners’ pay packets, while protecting the accumulated wealth of those who profited by erring?
steve, In the US, the current crop of “scribblers” are clueless. Instead of throwing out their scribbling and starting over, they’re going to take the country down with them.
In particular listen to the key scribblers coming up with a million and one ways to keep the asset du juor “HOUSING” from finding its long term real value.
They are trying every trick in the book(as well as make up new ones)to forestall this inevitable event.
All they give a rat’s ass about is the financial sector.
They are a disgrace. Trials and executions are the needed response to such hubris.
August 31st, 2008 at 11:41 pm PDT
link
Hi Steve:
I think as little of “bailing out creditors and going all personal-responsibility on debtors” as you do, but it is also true that the poor spend more than they earn not solely (or even primarily though debt — subprime was not about lending money to poor people to buy houses, at least no initially) but through transfer payments from the government.
Also, there are plenty of rich people (doctors, lawyers, engineers) who were not making Wall Street money at the best of times, did not make out like bandits during the housing boom, and are not being bailed out by the government now. But they may hit the top tax bracket to pay for this mess.
I would characterize the US economy as one which cannot safely delever, and therefore can hold a gun to the Fed and Treasury’s head. An economy that can lever up easily, but not delever, is a banana republic waiting to happen. But this has nothing to do with income inequality — the US could be a profoundly unequal society and still have a monetary system that doesn’t suck.
-zanon
September 1st, 2008 at 12:11 am PDT
link
“Of course, the poor spend more than they earn primarily by taking on debt”
Nonsense. Try to find anyone supporting facts. There aren’t any.
The poor spend more than they earn because they receive help from the government.
It is the middle (and higher) class that uses debt to live beyond its means. Consider MEW. Did the poor use it? Of course not. Really poor folks don’t even own their own homes. MEW appears to have been concentrated in areas with incomes well above the median.
September 1st, 2008 at 1:14 am PDT
link
Peter & Zanon — I agree… and disagree. First, I should confess that the phrase at issue is just a sloppy artifact of the writing. I started with a rich/poor dichotomy, and went with that. But as you both (correctly) point out, the really poor, people who can’t muster an income at all, don’t borrow. It’s really intended to be a rich/aspirant middle class dichotomy, upper 20% vs bottom 80% maybe. The plight of the unemployable is important to me, but it’s not what I was trying to get at in this piece.
To defend myself a bit, when the world is decomposed with as rough a granularity as rich and poor, it’s not unfair to expect the dividing line to be discerned from context. I think it’s pretty clear from the rest of the piece that the people I am talking about are those who seemed to live a “middle class” life with access to increasing debt, but would struggle to do so without. Yes, it is bullshit to suggest that the true underclass lives beyond its means on credit. But it is not bullshit to suggest that a large fraction of what considers itself the “middle class” is much poorer than it has perceived itself to be, and with their debt loads might even be called poor.
That class does includes “home-owners” with mortgage/home-equity debt. But it also includes non-homeowners with credit card debt, auto loans, student loans, etc.
And part of the point is a median or even above median income may not be enough for many households to live a “middle class” lifestyle as we’ve come to understand it, without taking on debt (or spending down asset appreciation when they’re lucky enough to find it). If that’s right,do we define down a middle class lifestyle to something within median-income means? If so, given the degree of income inequality that characterizes the US, doesn’t that imply a pretty starkly polarized society?
September 1st, 2008 at 2:14 am PDT
link
Zanon — I agree that the US could be profoundly unequal without the credit crisis. What it couldn’t be is profoundly unequal without feeling that way, without even noticing, except by sowing the seeds of a credit crisis.
I don’t buy the notion that the “US economy” holds a gun to the Fed and Treasury’s head. The choices we’ve made in dealing with the crisis have been political choices, and alternatives were possible without triggering armageddon. Delevering an ill-conceived credit boom may be difficult, but the cooperation of intermediaries might have been secured with sticks rather than with carrots and endless compassion.
I think it’s true that the “innocent” upper-middle class, doctors and lawyers and such, will end up paying to clean up after this. I think all of us will, and it’s hard to predict on whom the burden will fall most unfairly. This piece was not very constructive — I didn’t suggest any “solutions” exactly, though I may try some other time. But the first thing to realize is how very deeply we’ve fucked up, not just in terms of overleveraging into nonproductive assets — tho’ that’s certainly a big one — but also in permitting and applauding the onset of a new Gilded Age under the opiate of all that leverage and the pseudoaffluence that came with. As we wash through this mayhem, we need to think seriously about the kind of society we want, and what constraints that puts on the wealth and income distribution we tolerate.
To be clear, I’m not in favor of enforcing a very equal society. I’m all for the usual arguments that a wide range of economic outcomes is important to maintain incentives to produce and innovate. But I think we’re in danger of becoming a two-class society, rather than a middle class society with an upper tail to aspire to. Actually, I think a lot of Americans view the world in these terms, and engage in an almost Calvinist struggle to maintain all appearances of being among the elect, even if that implies making dark deals with the debt-vil. (har har.)
September 1st, 2008 at 2:42 am PDT
link
The US Gini coefficient has been increasing for a many years. I estimate real US personal incomes have fallen 35-40% since their 1973 peak. We are heading for a great crackup similar to Germany’s 1922-23 hyperinflation and have said this since 1980! Will we see the rise of an American Napoleon? Or a lot worse? We must believe we have a shortage of poverty in the US so import it from south of the Rio Grande and subsidize it. As Uncle Miltie said, “We economists don’t know much. But we do know two things. If you want more of something subsidize it. If you want less, penalize it”. We want more poverty so subsidize it. We want less production, so penalize it. We want more irresponsible actions from Wall Street so privatize Wall Street’s profits and socialize its losses.
I think we are too far gone for any pretty end to come of this. Our “Bastille” will be stormed and much suffering will flow. I only wonder if the peasants will direct their anger at those who caused this mess as opposed to those who exposed it? With $53 trillion in social security and medicaid actuarial debt, how can Uncle Sam’s creditors be made whole? Anyone who holds Uncle Sam’s debt is crazy. US Treasury bonds are a SELL! Got gold? Get more. It’s been money for 5,000 years, 4,800 longer than the US has been in business.
September 1st, 2008 at 3:51 am PDT
link
‘Erring’? Oh yeah sure, chuck prince ‘erred’ when he walked off into the sunset with 100 million dollars in his pocket. Angelo Mozillo ‘erred’ when he cashed out a billion dollars in stock options. Yeah, this was all some kind of ‘error’, and you can be sure that if the titans of wall street had a chance to hop in the way back machine they would do things completely differently. Sure, yeah. No doubt they lie awake at night think of all those poor people… can laughing.
September 1st, 2008 at 10:32 am PDT
link
The entire incentive structure of the economy is so deeply borked that I don’t know where to begin. Earlier comments cite doctors, lawyers, and engineers as your everyman working rich. However, physicians, at the center of our monstrous health care industry, are suffering declining real wages. Real wages for scientists and engineers have fallen for 20 years solid. Heck, real wages have been declining for all college graduates for years. Lawyers are doing better, thankfully.
There might be good reasons for this divergence: the superstar effect, bad monetary policy, returns on
educationconnections, or good old-fashioned luck. I don’t know.I’m not principally concerned about wage distribution. The bigger story to me is the relative value of assets and wages, which strikes at the heart of how we bail ourselves out of this mess. The current incentive structure strikes me as deeply counterproductive to collective progress right now. Innovation comes from rewarding true ingenuity in fields that improve the human condition, and as one of those researchers earning less and less every year, thank goodness at least the non-financial rewards remain invaluable.
FD: I’m in the same sinking ship as Steve for similar reasons, and the lunch tastes much worse than the free ones on shore.
September 2nd, 2008 at 3:47 am PDT
link
P.S. I suspect that Steve is a very good analyst, a very bad trader, and again much too early.
September 2nd, 2008 at 4:15 am PDT
link
ndk — I’m not sure I’m such a good analyst, but I’m quite certain I’m a terrible trader. Oh well. It’s still too interesting a game not to play (even if it is at times quite painful). There really is no substitute for being involved in the dramas you follow. One of the virtues of investing (I prefer to think of myself as an investor, not a trader, but my positions might seem hard to square with that) is that it draws you into the world, gives you a stake in something. When you’re short stocks and dollars and long paper commodities, you don’t really have a stake in the end of the world. (A really terrible meltdown, and your futures contracts won’t be worth the electrons they’re written on.) You’re making a case for a major change of direction, one that invalidates the assumptions underlying current valuation of financial assets, and also their current distribution. (Gold bugs may not know it, but fundamentally what they’re betting on is the notion that the current distribution of financial wealth — wealth in the form of financial claims and potential future taxation — cannot or will not be sustained, that the financial economy as we’ve known it has sown the seeds of its own destruction. It’s a very left-wing kind of implication for a stereotypically right-wing kind of cohort.)
September 2nd, 2008 at 4:58 am PDT
link
Steve:
All the gold bugs I know are betting that the existing financial structure built up around existing real assets will collapse.
September 2nd, 2008 at 5:13 am PDT
link
IA — Yeah, exactly. Usually that’s put in terms of government indiscipline given the capacity to print, but to explain “why now”, you’ve got to believe that there’s something unsustainable about the interface between the financial and the real, such that the government will choose to let the financial side give for fear of the real consequences of debt deflation and/or onerous levels of taxation. The govt/Fed can always preserve or enhance the value of the currency, and there are always forces pushing them both ways. Letting gold win implies a huge long-term cost to government power. For a time, they may have to be disciplined by a credible (ie redeemable) commodity standard, or a private or foreign currencies might even usurp the govts monetary role. It’s not enough to say that governments don’t have the discipline not to tax by inflation. That’s an argument for the last-three-decade status quo of under-reported but still moderate inflation supplementing taxation. You have to believe that government is going to succumb to widespread imbalances that are realities outside of its desire for pork and power. You have to believe that whatever system it is we’ve been living under, call it financial capitalism, call it Fed-bubble-ism, call it what you like, has driven the state to a point where a very public breakdown of one of its core functions is preferable to the alternatives, even from the perspective of Fed officials or Washington politicos who may not bear the full brunt of the pain from those imbalances. You can see why a lot of people think gold bugs (myself among them!) are a bit nuts. You’ve really got to believe things are bad, or will be pretty soon, to expect more than moderate appreciation over time. (There’s an international dimension I’m underemphasizing though. Precious metals are universal currencies, so even absent a US breakdown, monetary turmoil elsewhere could drive up their dollar value too.)
September 2nd, 2008 at 8:47 am PDT
link
Interesting to read mention in the comments of trials and executions and storming the Bastille! About a week ago, I suggested on Brad Setser’s blog that the windfall tax idea mooted for oil companies should instead be applied to financial bosses payoffs in a “reign of terror”. If taxpayers money is going to be needed to sort out various financial problems, as much as possible should be raised from those who undeservedly benefitted from the making of the mess. And if such a tax did distort future economic behaviour, that would hardly be a problem!
September 2nd, 2008 at 9:10 am PDT
link
“It’s not enough to say that governments don’t have the discipline not to tax by inflation. That’s an argument for the last-three-decade status quo of under-reported but still moderate inflation supplementing taxation. You have to believe that government is going to succumb to widespread imbalances that are realities outside of its desire for pork and power. You have to believe that whatever system it is we’ve been living under, call it financial capitalism, call it Fed-bubble-ism, call it what you like, has driven the state to a point where a very public breakdown of one of its core functions is preferable to the alternatives”
steve, at the end of the day John Q Public wins. The “No Mas” moment occurs when the public finally realizes they’ve been snookered all along.
When does this occur?
After the coming pension bust. As the aging BOOMERS(at least in the private sector) come to realize they’ve been working in a true “Auschwitz economy”,
the backlash will begin.
Economist’s at the FED are always puzzled as to why citizens allow themselves to be so easily led astray. Yet, they are the Pied Piper, with the current Byronic hero, Mr. Bernanke at the helm.
As Ron Paul has stated(something along the lines of)”if I treated my patients the way you treat the economy, they would all be dead”.
The last year has shown that the US financial system has moved from tragedy to farce. At this point, the coming collapse is pre-ordained.
September 2nd, 2008 at 10:26 am PDT
link
OT, from bloomberg
The Treasury Borrowing Advisory Committee, consisting of officials from 14 investment firms including Goldman Sachs Group Inc. and Soros Fund Management, recommends eliminating five-year Treasury Inflation-Protected Securities.
Inflation expectations MUST be held in check because inflation is good for america.
September 2nd, 2008 at 11:03 pm PDT
link
When you don’t lend to people with poor credit you are red-lining. When you lend to them (so you are not accused of red-lining) and they can’t pay you back (like you knew they couldn’t) you’re guilty of predatory lending. THis is the absurdity of todays stupid liberal mentality – everyone has rights nobody has responsibilities. But then, when you look at how our government is wiritng checks they can’t afford with the way they handle our Social Security system, who can be surprised when Joe Six-pack does the same? Go figure.
September 2nd, 2008 at 11:29 pm PDT
link
Inflation expectations MUST be held in check because inflation is good for america.
Mr. Greenmonkey, I think you were being facetious, but that won’t prevent me from being in perfect agreement with what you said. To me your statement is, in fact, remarkably perceptive and exactly true, in that we need to (A) wash some of the real debt pile away; and (B) do so without triggering too much panic, hysteria, and distrust in fiat currency.
We’ve walked that fine line thus far. I’ve been remarkably impressed by the finesse with which the Fed &Treasury are playing. I still don’t think it’s a winnable hand, which is of course why I’m deeply underwater on my investments. This recent spike in the dollar will present them a real challenge, though. Let’s see what is played next.
September 3rd, 2008 at 12:32 am PDT
link
realdebt — oopsSeptember 3rd, 2008 at 12:33 am PDT
link
My family is lower middle class (by income but we have no debt so we DO truly know what the standard of living is for this class). I am just curious if anyone else is considering emigration. I am beginning to feel that with what lay ahead and our already compromised “quality” of life, that we would have a better life elsewhere. We have two young children and I am seriously concerned for the future both them and ourselves (no retirement savings, no health insurance).
Am I just overreacting? Paranoid? Or is anyone else thinking something similar. Get out while we can. And if so, where?
Steve, I loved your link to the Land of OZ. Dorothy, after being exploited by the “good” witch, was able to learn her lessons and go home. I don’t feel like “home” exist any more. The place I was raised in vanishes a little bit every day.
Thank you for sharing your wisdom with Main Street and for bringing it into the larger picture.
September 3rd, 2008 at 1:09 am PDT
link
Wow! I am surprised that people don’t live within their means, and I don’t think that I wear roes colored glasses. I often wonder why we (humans) can’t see the big picture. I am certainly not an economist by trade, but when did it happen that people stopped learning that you can’t get something for nothing? And haven’t we all been screwed over by the pyramid scheme?
I am neither liberal nor conservative, and I think that part of the problem with resolving these issues lies in the fact that we play the “blame game”. Financial deregulation, the root of this problem, did not happen in a democratic or republican administration, it has accumulated over time. The deregulation of the safeguards for the public happened a long time ago, and have been continued from administration to administration. A better question would be when did the public opinion stop having any political meaning in the US. I’m no historian, but I just bet it occured inversely to corporate America having an increased say, through PAC’s and lobbists, in our governments choices.
The MSM presents a pretty picture, or at least cautiously optomistic, but how does the MSM allign with the rest of the players? I once did financial markets, and faired quite well, but these days I wouldn’t touch them. It’s a sad situation when not only are we as Americans pillaging other countries for their long term assets and our shor term gain, but we are pillaging one another. If we can’t use deadly force to maintain our standard of living from those removed from us, then we need to use the same deadly force to extract this “living” out of our countrypeople. After all isn’t this the example that our government has modeled for us?
I am not a globalist, and I am fully aware that the idea of globalization scares the American public (why do we have to give up our wealth just because 4/5th of earths population lives below our standards?). But, can’t anybody see that this logic applied by someone of higher living standard in the US (certainly excluding those that took the credit hook, their living standard is yet to be determined) is bound to also have no conscience regarding the American middle class?
And, yet, the middle class makes up the majority of the US, at least I think it still does, but where in government are our desires represented. You and I will likely soon be bailing out Freddie and Fannie, how does that feel? The great majority of us never had dealings with Freddie and Fannie (although I bet a lot of us were given the only option of Sallie). We are streamlined into choosing between a two party system, is this really enough diversity to represent our collective needs?
I, personally, (and I know that this does not apply to most of the American public, but I would encourage practicing it whenever you can, because you just never know when you might need these skills) will engage in non dollar based local trade. I have things to trade with others in my community that they need, they have things that I need, we bypass the dollar and wallstreet and the IRS (naturally if the IRS wants some of my vintage garden produce and eggs, I will be more than happy to send them their portion, rest assured that I will collect it in December of 2008, but not mail it until April of 2009, which is the same time period that they have held my $tax return for, for 10 out of the last 12 years. Except, of course, the time they held it for 8 months, because I had been audited(I have children, shame on me) and they are not efficient enough to get this done in a timely manner (I shouldn’t even add that I had a misleading rapid refund loan from a leading tax “broker”, because that might just expose them to being part of the fraud, and I needed to secure a loan from a private party in order to cover the first, which H&R Block had assured me verbaly would be no problem).
Bottom line is that people don’t care who you are or if your children might suffer as a result of their misdeeds. People want something for nothing in the US, they became this way by watching the lead of their government. It’s all a guise. Governments definitively do not have a conscience, it is not defined in their goal (especially now that they are campaign funded on the frontend by corporate america), however people do. If you see the big picture and you have a conscience, then don’t follow the lead of our deregulated goverment (they deregulated at the insistance of and to placate their funders). Trade item for item not dollars or item or item for dollars, take dollars out of the equation, let corporate america reap what it has sewed. We don’t need to fight back, we need to fight forward, we all still have rights that allow us to more or less leave that system behind, since we collectively lack the organization to fund a political party enough to get the same kickbacks that corporate america gets, we can just set about abandoning the current monetary system.
You ask what about your 401k, retirement funds, look at your balance statements, and then look at the economy for a etter picture of your assets, and then look at the degree to which your investment firm(s) “cook the books”. More and more it seems that our futures rely on the firm and immediate relationships we establish with our neighbors, not our dependence on an econonomic system weighted towards wealthy, corporate america. If your bank fails soon, consider yourself lucky, get your money out and spend it in stuff you will need. Most banks will fail too late for the FDIC to have the ability to cover the amount without massive resulting inflation, don’t mark my words, be proactive. As a laywoman I have looked at the numbers, and the big picture, on numerous occasions. The FDIC can at best cover about 14 more FDIC insured bank failures, at worst about 5, even gamblers wouldn’t take this kind of risk, because for the depositer it’s a lose lose situation.
Our MSM is involved in a campaign to keep you the depositer from knowing the whole truth, but really who is paying them, or who are they paying? In situations like this you really have to dig deep for the truth, plus have the ability to make informed decisions.
If you watch sports, survivor, american idol etc…(basically t.v.) you are being subjected to mind numbing opiates (oh how I wish sometimes that I could succumb, but alas my t.v. is a plant stand), along with these you get the MSM message that everything will be ok. You also got a message back in 2007 that the housing market had reached it’s bottom, along with the message in 2005 that the economy was doing quite well thank-you. Do you still believe all of that?
I have three kids in school, school lunches omg have increased 75% in the last year, so much for 6% inflation, possibly a “cooked” figure. Bus routes have been cut, preferred families have been notified that they might receive reimbursement for mileage, the poor families are not aware of this, until I tell them, what’s up with that? Girls sports have been cut, it costs too much to travel, (btw does anyone ever wonder why cheerleaders still have to make money to pay for their “uniforms” while those they cheer on have always had them provided?) Is sexism still alive and well in the great US? Orthodontist appointments, I can only hope that he is able to stay in business until the braces are removed, as he’s the only one within a 150 mile radius, and we have a contract with him. Medical insurance is a lot of BS. I have one daughter who is triple dental covered, and yet every time she goes to the dentist, I get a bill, more telling, I always get a bill for services she has not received, namely Topical flouride, which btw her chart specifically states that she is not to receive, not that I totally buy into the conspiracy theory of flouride, but one of my kids had a moderate allergic reaction to it at same dentists office (the dentist denied that it was even possible, after he left the tech said that it had happened before, and I asked her: “What would you do?” she explicitly stated “I would never have
any of my kids receive topical flouride.” That was two years ago, the dentist’s office continues to issue bills to me with this billing line. I have called all three of my daughters dental insurance providers and informed them of the misbilling, guess what I still get statements for this procedure, none of those insurance companies care what they are charged. It seems to me that they are all in bed with each other. Of course if it was some sort of life threatening operation that needed to be preformend on one of my kids, then you bet they would raise the big “time out” and say we really can’t afford this and plus it might be experimental, but paying out for documented not applied topical flouride at $24 a pop (and that is just partial billing) is a-okay?
Seems to me that it doesn’t really matter about individuals anymore, so I guess it’s up to us to matter to each other, I am no longer willing to buy into the snake-oil. Anyone want to trade something for eggs?
September 3rd, 2008 at 5:28 am PDT
link
Any truth to the rumor that the DoD did a “M-swap” with the FED?
The story is that the Pentagon got M3 and the FED got M16s.
September 3rd, 2008 at 9:46 am PDT
link
We, need any tomatoes?
I agree with most of your post. Though the FDIC will have access to the taxpayer purse, so, current deposit limits will be paid indefinitely.
We live in a banana republic. Massive distortions and basically as dishonest as the soviet system before it’s collapse. Recall the propaganda the soviet people were fed for decades about how wonderful their system was and how they were going to bury the west…….
Repetition, it’s the mother of learning and we’re about to relearn the lesson.
September 3rd, 2008 at 9:59 am PDT
link
above I was commenting on Silvie not We
September 3rd, 2008 at 10:01 am PDT
link
*LOL*
I live in the middle of one of the larger cities in the US and I have six laying hens as well! I trade with a neighbor who has a goat for goat milk.
This all sounds so “grassroots” and insignificant but I think that if enough people make small changes we CAN take back some political power, a little at a time. Would be interesting to see what kind of *creative* ideas others have. I do other things as well, like never using the dryer, having “clothing swap” parties, using co-op’s, use old style oil lamps which I power with recycled cooking oil etc…
I have attempted to explain this to many people, that while we DO need to save the money, we also are having more fun, building community and quietly starting a revolution to regain power. The depressing thing is that 90% of the people I know just think I am a circus show, although a interesting one, they don’t want to join the circus, just watch.
For many of the reasons the previous poster discussed, education being the top of the list, as well as concern that things are going to get VERY ugly for some of us no matter what Wall St. looks like and the fact that I have children to think about, I am beginning to seriously consider leaving the US while other countries will still have me! If things get too bad and too many American’s begin to flee I am afraid that it will become more difficult to get a job or a visa in other countries.
We are lucky, we have highly sought after professions (Advanced Education and Nursing) as well as dual citizenship. Were it not for this I think we would have left already.
For whatever reason I have a new found passion for economics, fell in love with it after reading The Price of Motherhood and haven’t looked back. What I have learned in my layman education is beginning to concern me more and more.
If “facism” is the marriage of business and government, which is my non-professional understanding, then some of the decisions that the Fed have made, no matter what their motive, are clearly facist.
I am not a radical but I am also not closed minded. The fact is things are so complex that it is difficult to say what “their” motive is because “they” are human beings like us all. Some have truly evil motives and some have truly angelic ones. I have decided to stop trying to figure out why and started trying to focus on deciding what the best potential outcome is for me, my family and my fellow human being.
Perhaps the Fed made these choices because they are the lesser of the evil’s. I can believe that but I can also believe that they were not looking out for citizen’s but rather multinationals. This is easy to believe given some other facts, like corporations being allowed to write off human lives if the cost of paying off the few injured does not exceed the profit margin. (Like the case with vaccinations that was recently revealed in a more public light when a case in California ruled that a child’s Autism HAD been activated by their vaccination.)
Why are they so afraid to give the public information? Or when they do, it is so complex that the poorly educated working class have a very hard time understanding what it means for them? I live in a poor neighborhood and I have begun to educate some of the teens about the war on drugs. This can be very complex OR very simple. When I explain that many prison’s are “Private” and the make money by having beds filled and that this is why the war on drugs is ongoing and that they are being used as a pawn, they get it.
They also stopped robbing our house and started coming around asking more questions. They are mad. Mad as hell. Mad that their brother was shot and killed, mad that their father was in prison the last 10 years. I hope that one of them will grow up to be a leader. Great leaders are born from this kind of knowledge and passion. A few of them have shown more interest in school, no longer thinking it was pointless.
I went off on a tangent but my original point was that regardless of the motive, the Fed’s decisions are, in my opinion, facist. To put the all of the burden on the taxpayer is unforgivable. Cutting services and increasing taxes will not fly with citizens. Many will not have the knowledge or resources to do much about it on a political level but they will react.
Think of it this way (Something most businesses have failed to do). Employees who are treated well by their employer are more loyal, steal less, give more, have a higher retention rate, are sick less and take pride in what they do. Their pride in what they do gives their life meaning and they are less depressed, better co-workers, better partners, better parents and better citizens. If you consider this and substitute Employer for Government and Employee for Citizen, then you can see the connection.
Then consider those who are NOT treated well.
Wall St. may not incorporate this in it’s decision making but I assure you if has a ripple effect. This is only one social implication of the credit crisis. They cannot believe that they can continue to pile more and more on the middle class and not eventually get a revolt.
I am a pacifist, so I will fall into the retention rate liability.
America, I quit.
September 3rd, 2008 at 10:02 am PDT
link
We,
Your post really resonnated with me. It’s good to know that I am not the only one that sees this situation from more than one perspective. It can be downright depressing when 9 out of 10 people have started their day with kool aid and immunizations (breakfast of champions indeed).
By chance have you viewed Aaron Russo’s documentary From Freedom to Facism? It raises some pivotal questions about our tax system.
Education…I routinely debrief my kids when they get home from school. Most teachers are well educated, but they have seen what happens to their peers when they speak out about a lacking or misleading cirriculum. SAD. But, we can fill in the gaps, my kids get installments of A People’s History of the United States by Howard Zinn, maybe if enough kids are exposed to the other side of the truth they will see the repetition happening in time to change some things.
In any event, it’s good to know that you are out there, and I wish you well in what may very well be a turbulent future.
I wish I had a better blueprint of how to go about doing many of the things that need to be done, then I could get down to business. Suggestions?
September 3rd, 2008 at 11:51 am PDT
link
Groucho,
I was of the impression that all federal tax dollars went towards paying the interest on the national debt. I, however, am not an expert and even if I was there’s a lot of room for misinformation. Do I have this wrong?
I would love to trade eggs for tomatoes!
September 3rd, 2008 at 12:03 pm PDT
link
Sylvie;
You ask for suggestions but you have the answers. I once heard a quote, not sure by whom, that stated:
“You are the treasure but you keep on begging.”
I think that you are doing all you can. You may not benefit from any suggestion I have to offer but you can try to help other people. I printed up flyers and left them in local places. These gave advice for middle class people on how to save money. I will not bore readers of this blog with such information as it is far off topic. Knowing how to save money on power and food and cleaning supplies makes a big impact on some of our lives though.
People are willing to make these changes, in small degrees. Such as cleaning with white vinegar rather than windex etc. This is because it hits them in the pocket, they have more money and because it is easy. This will not however, save the middle class.
There are numerous lifestyle changes that we need to make in order to have the general economic/political and social climate improve. I fear that the majority of Americans are unwilling, or unable to do so because they are working three jobs to survive. I myself know that there is more I could do if I had the time to do so.
Still, this should not discourage us from trying to help others with knowledge. We live in a spend and dispose society. This has to change.
For example:
Last week I picked up a pile of books that someone in my neighborhood has set out by the trash. Today I took them to two used book stores. At one I have a $60.00 credit and the other gave me $20.00 in cash for them. The remaining ones I took by my local coffee house and let them pick what they wanted and the few that are left, are worthless so I sat them aside to start fires in the fireplace. My family can now go shop for free at the used book store and they have anything you could want unless you need something hot off the press. I needed to go to these areas for other reasons today, so no wasted gas. Time: 20 minutes.
This is just an example. We need to stop spending, but most won’t. In that regard, the credit crisis may be a blessing. If people will not do what is right simply because it is right, then in steps doing so through punishment.
Debtors should be punished for their OWN indulgence (Which also gets complex though because a great many of them were targeted as easy prey for creditors.) The thing that is clear however is that taxpayers should NOT be punished for the entire credit crisis that many of us, had no part in. We did not profit from investments nor did we indulge in credit.
I have seen the movie to which you refer but I have not researched it well enough to comment on the content. I will say that if it is true, then it is quite disturbing. Not any more so however than the Fed getting in bed with fannie and freddie and all their friends.
They are having a orgy at our expense and more disturbing, at the future generations expense.
September 3rd, 2008 at 2:34 pm PDT
link
I was of the impression that all federal tax dollars went towards paying the interest on the national debt. I, however, am not an expert and even if I was there’s a lot of room for misinformation. Do I have this wrong?
Silvie, it’s a bit of exaggeration, thankfully. Of an estimated $2.6 trillion of tax dollars, about $261 billion, or 9.2%, will be spent on debt service.
September 4th, 2008 at 1:42 am PDT
link
Ndk and Wendy,
Thanks for your responses.
September 4th, 2008 at 11:18 am PDT
link
Steve – You might want to get your blog pen ready. Treasury is getting ready to take over Fannie and Freddie in another weekend caper.
September 5th, 2008 at 11:01 pm PDT
link
Steve,
Yes. People don’t like to be left behind. If they can borrow to keep up their relative position, they will (the poor can’t, the top brackets don’t have to).
The other big change that I attribute to increasing inequality/median income stagnation since 1973/1980 is the women working more, especially married women, to try to maintain household income.
Their increasing labor force participation has led to measures to (partially) enforce greater equality in pay for equal work.
The Republicans fostered both inequality and debt, beginning with Ronnie’s plunge of the federal budget into red ink with his supposedly self-financing tax cuts on the rich, and through the deregulation of the financial sector that allowed “larcenous financial tricksters” to use fancy mathematical models as sales tools to steal wealth from innocent but bamboozled investors world-wide.
There will be no revolution. The authorities have all the firepower. The best outcome would be for the Democrats to relegitimize moderate redistributionist policies through tax reform and to let these flow into the popular consciousness as Alan Blinder’s recent article suggests.
If Americans are stupid enough to vote for another four years of Republican government, we will become a banana republic of serfs and feudal (wealth-owning) masters.
But why hasn’t the Democratic Congress done anything? Are they already bought and paid for? Would they stand up to McCain/Palin if elected? Is it all a charade?
P.S. Deflation, Steve. Wait and see.
September 6th, 2008 at 12:30 pm PDT
link
“Is it all a charade? ”
When in Rome do as the Romans do………………….
September 7th, 2008 at 10:31 am PDT
link
When credit collapses and you can’t lend money to anyone for mortgages, car loans, student loans, capital improvements in business, etc….
Big Time Deflation occurs.
It’s a simple concept.
Since 95%+ of the US consumer economy is based on easy credit, when that all goes POOF!, we will get the Mother of All Depressions.
September 7th, 2008 at 10:08 pm PDT
link
I, Benflation Bernanke promise you as long as you will allow me to head your monetary manipulation committee (MMC), will NOT allow the dreaded DEFLATION to destroy the financial system of america.
I promise, with the approval by Hanky Panky, to monetize any and all assets and derivatives of said ass-ets including but not limited to arsets, buttlets, bootylets and derivatives
of derivatives including craplets and turdlets.
Communism is dead, long live communism
September 8th, 2008 at 9:12 am PDT
link
Benign -Why would you want another failed government program that the taxpayers would have to bailout? If Americans elect Obama that’s what we’re going to have in a national medical system.
I’m not for unbridled capitalism but nationalising everything doesn’t seem to fix it. We need to learn our lessons and tell governemnt thanks but no thanks. There’s otherways to fix the medical system such as limiting malpractice payouts. I may have touched on why lawyers have increasing real wages.
September 9th, 2008 at 6:42 pm PDT
link
The innocent upper class such as doctors and other professionals benefited from the easy credit also.
Without credit cards for example, the risk of treating patients that cannot pay with current income is transferred from the doctor to the credit card company. Other professionals benefited by the availability of easy credit for their customers.
Sans the Cash out refi and easy credit cards, the so call innocent upper classes would have suffered years if not decades ago and demanded governance other than what they supported.
IMHO they deserve what ever extra taxes they suffer with.
September 10th, 2008 at 10:06 am PDT
link
WithoutWith in my above postSeptember 10th, 2008 at 10:08 am PDT
link
Average –
Limiting malpractice liability is probably a good thing, but it is not a foregone conclusion that national health insurance would be a failure. Why does it work in virtually every other developed nation? Why are their health statistics often better than ours, while they spend far less? IMHO, it is barbaric for a country as rich as ours to turn its back on those who get sick without health insurance.
September 10th, 2008 at 11:54 pm PDT
link
We took a severe step towards deflation today. If we can’t rescue AIG or Lehman, with WaMu on the ropes, is there a crisis big enough for fiscal intervention?
I see two possibilities;
1) The Fed and Treasury have decided that they can’t possibly prevent the deflationary wave and should just focus on protecting depositors;
2) Political constraints are being imposed on the Fed and Treasury that make further intervention impossible.
Does anyone have others?
September 15th, 2008 at 7:14 pm PDT
link