The Next Financial Catastrophe

Now  that the U.S. and the world have experienced a financial catastrophe comparable only to the Great Depression, the thing we might want to ask is this: are we safe now? The answer is no. Even while Ireland is facing financial devastation, because they followed a path that mirrors George Bush’s economic “thinking” for the past several years, the U.S. is seemingly on the road to recovery. That’s because the newly elected Democrats instituted a major stimulus program (admittedly a weak and barely sufficient stimulus – but far better than what the misers of the Party of Herbert Hoover would ever offer).

The problem is that we are a myopic country. Our Congress is incapable of looking down the road beyond the next election cycle. And that is exactly where the problem lies.

The crazy, mind-boggling, economic policies of Ronald Reagan and his Republican successors will soon bear their bitter fruit. I am talking about a little time bomb created by the Reagan administration called section 401k of the U.S. income tax code. It is what governs the 401k plans that most Americans have instead of the old employer-guaranteed pension plans. Reagan’s lunatic idea was that throughout your working life you would contribute tax-deferred money into your 401k account, which would sometimes be matched by employer contributions. You take charge of this money while you are working and cleverly invest it in the stock market. Then, when you retire, you live in grand style off your earnings from the stock market! For as long as you live!

Complete economic rubbish. Complete deception of the American people. However, the good news is that your former employer is completely off the hook, and you are on your own! Isn’t that just grand? It’s a Republican Tea Party dream come true.

If you care to look at the history of the U.S. stock market, you will see that, for the thirty years or so before Ronald Reagan’s administration created the 401k  idea, the Dow had very anemic growth. It was only  when America’s workers started pumping large chunks of their salaries, via the 401k plan, into the stock market that stocks really took off. This soon led to two stock market bubbles (one NASDAQ and one NYSE). Remember the “irrational exuberance” of ten years ago?

A couple of years ago, we had the  housing bubble that led to the world economic collapse. This was enabled by Congress changing the income tax laws so that you could buy and flip houses every two years and not pay income tax on the profit. This gave the false hope to many people that they could still build up a nest egg even though their 401k accounts that had been destroyed in the previous stock market bubbles.

So what has Republican Reaganomics achieved for  our economy (and, while we are on the subject, where is Ireland’s heading)? The answer: A gigantic smouldering ruin.  High unemployment, low wages, a devastated real estate market, and little to hope for. Could things get any worse? As Tea Party Palin would say, “You betcha!”

A large part of our population is about to enter crisis mode, and we are totally unprepared.  The World War II baby boomers are now reaching retirement age and most do not have employer guaranteed pensions. However, most do have those good ol’ 401k plans.  Of course these 401k accounts have been savaged by the Voodoo economics policies of Republican Presidents Ronald Reagan and George Bush. But wait – won’t  Social Security save them? Hardly. Well, yes, maybe from starvation, I suppose. Maybe. Unless, that is, the Republican Tea Party succeeds in cutting or privatizing Social Security, which they would love to do.

We are on the verge of having an entire generation enter a situation so desperate that they cannot meet their own living expenses because the 401k thing was just a gigantic Ponzi scheme and their not-fully-paid-for homes are only worth half of what they used to be worth. It will be a financial catastrophe.  Many have virtually nothing left in their 401k accounts. They will be lucky to survive a year if they have to depend only on their 401k plans – but many have life expectancies that would take them into their 80’s or beyond. What can they do?

Expect another wave of house selling as the boomers divest themselves of this last piece of wealth they partially own. It’s a young Tea Party Republican’s dream of course – think of how cheaply these houses can then be bought and then flipped! What a chance to make a killing! It’s the chance to make a small fortune! The question, of course, is who is going to buy them and at what price? And what will this mass selling will do to an already bleeding real estate market?

The baby boomers are a huge bulge in the population of this country, and as they have gone through life their generation has always had major effects on the U.S. economy simply because they represent such a large part of the population. When they were young, schools had to be built for them. When they earned money they spent it and the economy boomed. When they objected to war, they caused chaos in the streets.They changed the culture. They changed the environment. They changed the way we worked, shopped, ate, vacationed. They changed America because there were just so many of them. Now they will change America again.

Soon, a  significant number of the boomers will start leaving the work force. They have to. They are getting too old to work. They will soon stop putting money from their jobs into the economy. But, they will still need  money to meet their living expenses. Sadly, for many, their 401k money has gone up in Republican smoke.  They have little other savings. In the near future the U.S. will soon be facing another major financial crisis, because millions of these boomers have almost no retirement funds, and they won’t be able to survive on their paltry Social Security check. This is a recipe for financial disaster.

And nobody, as usual, in our government is thinking about it or planning for it.

But the Boomers are coming, and they’re coming soon.

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It’s Time to Rethink the Banking Industry

As another nation, Ireland, now peers into the abyss of economic chaos, once again governments are being called upon to bail out the banking industry. Does this sound vaguely familiar? Of course it does . We have been hearing this tune for the past couple of years, perhaps the most loudly in the U.S. where those bastions of our economy like Goldman Sachs, Bank of America, and many more were once facing oblivion and financial Hell. A fate, perhaps, well deserved – but avoided by the intercession of our government. This act of semi-divine intercession is about to be repeated in Europe as that which must not come to pass is prevented from coming to pass.

Of course, I am referring to the collapse of the banking industry in Ireland. The current Irish government, similar in philosophy to the Bush/Cheney Republicans of the U.S., enjoyed the ride while they could. The run up in housing prices, the run up in wages, the run up in credit. It was all a bubble, no different from America’s bubble and equally unrecognized by the Republican economic philosophers at the time. Everyone thought it could go on for ever, except for a few economists. America had its Cassandra economist, Roubini.  Ireland had its Cassandra, McWilliams. Both were right. They called the collapse long in advance, but neither government will admit it, and neither will seek the advice of these bright economists to this day.  Why? We can only wonder.

Here’s another “why”. Why did the U.S. government feel the need to bail out the banks and why does the European Union feel the same? Does anyone know how to spell oligarchy? We are led to believe that the banks are the sine qua non of our economy. The loss of our banks would spell doom for civilization as we know it. Really? Just the banks, I suppose.  Oh no,wait. General Motors too. We couldn’t live without them either. But what about the thousands of individuals who lost their homes? What about the millions who are out of work? Do we not need them also? Apparently not. At least not with the same sense of urgency as the banks.

So let’s take a look at the banks. What, in essence, do they actually do? Well, at their core, they are a source of money. They make loans that people and businesses need in order to carry on their lives. But how does that work, you say? Here’s an example. Suppose old J.P. Morgan had a lot of money (which he did) and he decided to use that money to open a bank (which he did). You go into his bank and you borrow $1,000. Great! Now you only have to pay it back in easy installments of $49.99 for a period of about twenty – two months. Twenty-two? Wait, shouldn’t it be about twenty? Ah, we’re forgetting the interest of about $100, aren’t we? See, you borrow $1,000 but you have to pay old J.P. back $1,100. That’s how he makes money. As Ebenezer Scrooge said, “It’s business.”

But, here’s where the magic comes in: After you pay back old J.P. his money plus interest, he pockets his profit and then what does he do? He loans out that same $1,000 again! Yes! Isn’t that amazing? J.P. can loan out the same money over and over again and make money each time he does so, and his $1,000 never wears out! The best thing for old J.P. is that he doesn’t have to do any work to make money. He doesn’t produce a product, he doesn’t farm any land, he doesn’t build anything, he doesn’t even sell anything. Being a banker has to be just about the best job in the world because you don’t have to work to make money! Even better, bankers make more money than anybody and if they screw up and made stupid loans where they don’t get paid back, the government gives them all the money they lost so they can start lending all over again.

Now imagine you were a banker – like those Payday loan guys. You could loan out money  at $300% interest and get it back in a week! Or, what about if you were a different kind of banker – a credit card banker? You could loan money at 30% interest and it would take years and years for people to pay you back – maybe even a lifetime. Of course you would get your principal back pretty soon, but the poor credit card holder will be paying interest for a semi-eternity. But that is the beauty of the system – you can then loan out the original amount over and over again! And you don’t have to take risks like building televisions or cars that might not sell, or refrigerators that might be defective and people want their money back. No, banking is the ideal business for making tons of money – and the best thing of all is that our governments won’t let you fail! Who could want anything more?

How about the American people? Wouldn’t we want something more, something different? One might think so, but I don’t hear a lot of people complaining about our banking system. I guess that’s because if we change anything it would make us communist or something even worse – just like with health care, and public schools. Still, I have to wonder…why can’t our government run the entire banking system like a utility?  Do we really need privately owned banks that produce no tangible product and charge the highest interest rates possible? Why can’t we just get loans from a government bank at 0% interest? Why not? It would be our money anyway – you know: our tax money. Isn’t that a good use for our tax dollars? If the government, via the Federal Reserve, can print all the money it wants and then give it to the banks at extremely low interest rates, why can’t the government do the same thing for the citizens and eliminate the middlemen bankers who bleed us and our economy while doing no productive work at all? Is it really so un-American to even think about a redo for America’s banking system? Think about it….

Why wouldn’t it work?

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When Elephants Fight

There is an old Thai saying that goes like this: “When elephants fight it is the grass that gets trampled”.

There is a massive fight going on now in Washington D.C., and while many Americans might feel they have a stake in this battle, the fact remains that we are the grass in this battle of elephants.  On one side we have the strong and robust Republican/Tea Party – the party of the already wealthy. They feel they can take care of themselves and the less government, the better. On the other side are the weakling Democrats, traditionally the party of the working class, who believe that only a strong government can protect the average person from the avarice of the wealthy. This is not a new struggle – it is the remnants of a struggle that began in England before this country was even a glimmer in John Winthrop’s eye.

The old traditions of Europe: a small and very powerful wealthy class that owns almost everything and a very large peasant class that performs all the necessary labor so that the wealthy might live in luxury, were left behind when the Puritans sailed to Massachusetts. It was a new, virgin land (except for those troublesome Native Americans who really had no right to the land because they were not part of the Elect – and the fact that they mostly all died in battles with the early settlers (who had all the guns) proved that God was on the side of the Elect!!)

For a time, it all worked out. Anybody could just grab the land they wanted and they could live in total freedom. But with success comes more people, and more people, and more people. Pretty soon the people realized this total freedom thing wasn’t working for everyone, so they made rules. Then they fought a war against the English King and the English people because the English still wanted to play the old game of rich man, poor man. So, with the help of the people of France, who had recently overthrown their own wealthy oppressors, they created a new country styled upon the democracies of ancient Greece and Rome (which is why the architecture of Washington D.C. looks like it does).

Unfortunately, the rules didn’t cover a lot of things so it wasn’t long before the fox was in the henhouse – so to speak.  The wealthy people, not above stealing from the poor, soon owned the banks and the big businesses and went on to steal from the poor and the unsuspecting, which led to the Stock Market crash of 1929, not to mention all of the previous bank panics and economic catastrophes before that. The point was that the wealthy manipulators of the economy always enriched themselves based upon the power of their wealth, their connections with other wealthy people, and their inside information.

The Great Depression pointed out (to some people anyway) the need for reform of the system, and President Roosevelt went about that reform. In fact he named Joseph Kennedy to be the first head of the Securities and Exchange Commission – perfect: who better to catch a fox than another fox? The country recovered from the abuses of the wealthy thanks to Roosevelt’s strong government that was genuinely interested in helping the people.

Now, many years since the Great Depression we are in the midst of the Great Recession – with the potential to fall off a cliff into a second great depression if the wrong decisions are made. However, unlike the 1930’s, we do not have a President with a mandate to save the country. We have a house divided. We have the Republican/Tea Party who wants to do nothing, except lower taxes for the wealthy (the source of all jobs, remember?) and then deregulate pretty much everything. Minimal government is best they say – all we need is a strong military to kill everyone who doesn’t like the way we do things. Are far as the poor and the sick and the homeless goes – well, they’re on their own – Will of God and that sort of thing, you know? (They seem to think that this is the teaching of Jesus. After all, they are the Elect.) They feel kind of sorry for those God-forsaken people – but, they say, why is that the problem of the wealthy who have only made their vast fortunes by honest means? Exactly.

Now for the Democrats – the voice of the working man – where do they stand? It seems they stand firmly in favor of compromise. They talk a good story but in the end they will cave – and the Republican Tea Party knows that. Like a lion waiting in the tall grass, they know the Democrats have no teeth and no stomach for a battle. And why should they – after all, every Senator in the U.S. Congress is already a multi-millionaire, so really – just who do these people represent? And just why should they fight for the working man? After all, they’ve already been elected, so who cares, right? As for the Congressmen, they know where their bread is buttered. Sure some poor working class man might have scraped up $10 to make a campaign contribution – but can that compare to the vast amounts contributed  by major corporations to the campaigns? Of course not. Who would you listen to? And now that the fools in our Supreme Court have declared that corporations have the same rights of free speech as living people, everything has changed. Would you want the corporations, with their semi-infinite resources buying unattributed TV ads against you in the next election?

Don’t look to the Democratic Party to save the country this time. They don’t have the stomach for a fight – they like the good life too much. But, if we only look at history we can see that we are heading for a fight. We are a polarized country – the haves against the have-nots;  and the polarization is deepening. The Republican/Tea Party people are too stupid to see this, nor do they care, and the Democrats are equally blind to the danger that is building. When the Republican Tea Party proceeds to heartlessly cut the lifelines of Social Security, Medicare, Medicaid, Welfare, and all other assistance to the poor – the fight will inevitably come. It has to. It will be a fight for survival. It won’t be the weaklings of this Democratic Party that lead the charge, but it will come anyway.  It always does when people refuse to learn the hard lessons of their own history.

And it is always the grass that gets trampled.

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The Justification of Torture

Well, he’s finally admitted it. Former President George Bush condoned the torture of prisoners, and he is proud of it! He says that it was OK because the information that was obtained was used to save lives. So the end justifies the means.

Of course George also did a lot of other things that weren’t quite proper. Like telling the world that Iraq had weapons of mass destruction when he had absolutely no evidence that they did. So he started a war which resulted in the deaths of many Americans, Europeans, and Iraqis. He held captured prisoners in Guantanamo indefinitely without trial on charges that they were terrorists, although there was no evidence that they were terrorists – which is why there were no trials.

So where is the outrage from the Tea Party? Wasn’t George acting against all the ideals of America? Sure he was. We all know that. So where are the demonstrations in the streets? Remember Vietnam? Remember all the protests? What happened? Is America simply exhausted? Could it be that Americans just don’t care anymore? Or, could it be that George really speaks for America and the Tea Party. Have we become a nation of torturers? Is our national ethic now that the end justifies the means? It doesn’t matter what you do as long as the outcome is what you want?

So, how is that different from Adolph Hitler or Josef Stalin? Philosophically, I mean. Oh sure, I know. It’s a matter of degree. Hitler killed millions of Jews and Bush only killed thousands and thousands of Iraqis. Stalin tortured people and sent them to Siberia, but Bush only waterboarded people to the point that they thought they were drowning, and then it had it done again, and again, and again until they confessed to whatever their CIA torturers wanted them to confess to. And every once in a while they also gave out a tidbit of useful information. So it was OK. It was OK because George was protecting us. Right?

Tea Party people! Where do you stand on torture? For or against? Speak! Let’s see what kind of Americans you are.

For the rest of us, I think I know how we feel. We are exhausted. And we are helpless and powerless. It doesn’t matter who we vote for, the government only takes care of the wealthy these days – and the banks, especially the banks.  What is the point of demonstrating in the streets like we did during Vietnam? The government isn’t listening. Something has changed in America. We are no longer the country of John Kennedy. Our idealism died with him it seems. We are ruled by pragmatic men these days, men who know how to make a bargain or a back room deal. Only fools have ideals – or at least only fools try to live in accordance with their ideals. Isn’t that the message of America today?  Tea Party persons: What are your ideals anyway? Where do you stand on torture? Where do you stand on indefinite imprisonment without trial? Where do you stand on the Constitution?

For eight years we had a President who condoned the torture of prisoners. This has to be a first in the long and honorable history of this country. When Pearl Harbor was attacked and our Pacific fleet destroyed President Roosevelt didn’t start torturing Japanese prisoners of war. When Hitler overran Europe we didn’t start torturing German prisoners, despite the fact that German U-Boats were sinking our ships every day and American sailors were dying every day. When we fought in Korea against both the Koreans and the Chinese and our soldiers died by the thousands and later when we fought in Vietnam and our soldiers died by the thousands our Presidents did not engage in torture.

George Bush and Dick Cheney. They are the first in the long history of this country to condone the torture of human beings. And we just sit there and change the channel and see what else is on TV. So what are America’s ideals? Do we believe that torture is evil and that the end does not justify the means, or is there a place for torture and endless imprisonment without trial in our country? Do we still possess any of that old American morality and idealism.If so, where is the outrage? I see and hear none.

I fear that we Americans have finally crossed over to the dark side, the side of Bush and Cheney and Hitler and Stalin. I can only wonder what will come next. I also wonder this: does anybody care?

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Privatize Social Security? Don’t Do It!

There is a saying that goes, “Those who do not learn from history are doomed to repeat it.”  Clearly, one of the things that the Tea Party, the Republican Party, and conservative American organizations like the CATO Institute have not learned is that their policies with respect to Social Security are diametrically opposed to the lessons of history. These people conveniently forget the origins of Social Security, the reason it was created, and why it is necessary now and for the foreseeable future. A good history of Social Security can be found at the Social Security website.  In brief, while Republican President Herbert Hoover stood by helplessly at the beginning of the Great Depression, millions of Americans lost their jobs, their savings, their homes – everything. Among the hardest hit were senior citizens. Some of these might have had some sort of private pension, but it went up in smoke along with the rest of the economy.  Many of the seniors lost all of their savings because of the collapse of the stock market and the failure of the banks. It was only when Franklin Roosevelt, a Democrat, became President that our Social Security system was created – and it saved thousands upon thousands of senior citizens from becoming homeless and from facing the very real prospect of starvation.

Now we hear the newest “words of wisdom” from the CATO Institute and other right-wing organizations: Privatize Social Security.  These people are either fools or they take us for fools – or both.  If you would like to know how Social Security would be if it were privatized, just take a look at your 401k account. That is a privatized pension plan – a gift from that “great” Republican economic genius Ronald Reagan – the man who drove us trillions of dollars into debt with his foolhardy concepts of Reaganomics. The problem is that Republicans think he did a great job, even while he drove the U.S. debt to historic levels. Another foolhardy concept that came to fruition during the Reagan era was the 401k Plan. Until then, people had employer pension plans; however, the creation of 401k plans let the employer off the hook i.e. the employer’s responsibility ended when the employee retired – the employee would then obtain his retirement income from his 401k investments. Most employers terminated their retirement plans and their employees were told to invest in the stock market in order to create a nest egg that would fund their privatized pension. So, how’s that working out for everyone out there? All set to retire?

The privatization of Social Security is nothing more than yet another Republican scam designed to force people to invest in the stock market.  If this happened it would create another stock bubble similar to the one created by the 401k investments that began in the Reagan years. And what would happen the next time the stock market gets overheated and crashes, like we have seen just recently? You guessed it. You can kiss your privatized Social Security account goodbye – but don’t worry, the government will save the banks. So that’s good.

It is truly amazing that Republicans, Tea Party people, and conservative “thinkers”, like the CATO dudes are actually advocating this. One can only conclude that they feel pretty smug about their own situation. They have plenty of money themselves so they don’t need Social Security anyway. I’m sure that’s true for all the wealthy Republican bankers – but the poor Tea Party people? What are they thinking? Do they really think they don’t need Social Security?

As for those CATO guys, I wouldn’t buy a used car from any one of them.

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