11/16/2008

Why the Bubbles?

In the last couple of decades, we've had a collection of economic bubbles bursting. Post-Vietnam, the overspent economy crashed, bringing down our technological capacity, education system, and middle class economy. Reagan poured zillions into his California military-industrial buddies (the reason they'd put him in office), dropped taxes on the highest income bracket, added non-income-based taxes on the middle class, and released the electronic media from their social responsibility so they could reap the "magic of the market" and kept the majority of the nation in recession for another dozen years. Clinton rolled back some of the mil-industrial corporate welfare, slightly adjusted the income tax percentages, almost balanced the budget, and occasionally listend to smarter people in government and his cabinet. We managed to sustain a reasonably robust and less unfair economy and began to bring a little life back into the education system and economy for about half of his 8 years. Bush turned that all around. He went whole brainless hog on deregulating the Wall Street crooks, designed an economy to best benefit corner office psychopaths and trust fund babies (big surprise, since Bush is probably the poster child for both species), and cranked up the welfare system for the most inefficient, corrupt part of the national economy; the military industrial complex.

The nation suffered 8 years of depressed middle class incomes, two major economic crashes, a radical dumbing down of the education system, more corporate and government scandals than the conservative media could cover-up, and is, now, stone broke and functionally inept.

Obviously, "bubbles" follow stupidity. The radcon habit of electing the braindead is hard on the economy. It's great for the elites, since nobody is watching the national cookie jar, but it's tough on the nation, overall.

The old radcon tactic of constantly repeating Nixon's Big Lie is even wearing out. My favorite Big Lie is the "myth of Middle Class decline." The chart at right may be hard to read, but it's a plot of incomes, broken into economic classes; from the 95th percentile (95th highest incomes) at the top to the 10th percentile at the bottom. This is census data and is unweighted for cost of living or any other funky copout to try to hide the facts. At the bottom of our income class system, it's pretty obvious that the poor have seen no improvement in life from the booms or busts. Since inflation hasn't slowed at all over the years, they obviously are more poor than they were 40 years ago. If you believe that a "middle income" family made about $85,000 in 2003 (the green line), it appears that their income has at least steadily increased. Since these are before tax numbers, they are fudged a good bit to disguise the cost of the double-income households' attempt to stay with inflation. Even the Census Department is in on the game to convince us that we're treading water, not sinking.

The latest economic bust is evidence that we're sinking and are shod in lead boots.

For most of my adult life, I've wondered how ordinary, "middle income" families can afford modern Texas whorehouse-style surburban homes. When we lived in California, in the 80s, my kids were disappointed that I stuck us in a $1600/month, 900 square-foot apartment, instead of putting all of my savings into a $300k, $3500/month house in the eastern LA burbs. I couldn't make the math work, on my $85k salary, so I stuck with what I could manage. What I suspected and now know, was that everyone who played that game ran a Ponzi scheme on themselves; paying the big bills with credit card loans and a series of "2nd mortages." Except for my tolerable mortage, I've always paid as I go and gone without when I couldn't. No new cars, no new clothes (yep, I buy my clothes 2nd hand), no new furniture, no new anything except food and toilet paper (that's even recycled paper). The economy wouldn't survive long on me, but it isn't doing well on the rest of you, either.

Here's what I think is the real problem with our economic system; it's designed to benefit the fewest, richest citizens and damn the rest of us. That's it.

Take, for example, interest rates. Common sense would tell you, I think, that bank interest rates should at least be slightly higher than inflation. A rational society would want to encourage conservative savings for all citizens. You can't make people be rational, but government can encourage that kind of activity. The following two graphs seem to indicate that had been the Fed's policy for quite a while:

If you get nothing more out of these two graphs, it should be that there used to be an attempt made to make normal, conservative savings a reasonable investment. It has never been a way to get rich, but for most of modern history savings have kept up with inflation. Since Reagan, that link was disconnected. Reagan wanted to encourage wild spending, irrational borrowing, and the kind of short-term thinking that led us to where we are today. Republicans like to brand Democrats as "tax and spenders." I'd think that "borrow and spenders" would be worse, but the radcon media seems to ignore that notion.

We're reaping the result of "borrow and spend" without a lick of sense. One key, I think, to settling this economy down is to provide a means for ordinary citizens to safely keep up with inflation. Currently, the unregulated credit card mobsters are allowed to charge leg-breaker rates (20-32%!) while those same banks pay pitance interest rates to savers. This kind of system is doomed to failure, but the no-government radcons are too dumb to see it. Or too vicious to care.

1 comment:

  1. Anonymous11/17/2008

    The radcons chase short term gain after short term gain with a devil-take-the-hindmost attitude while cloaking themselves with christian fundamentalist platitudes. They never look to the long term good of all, only what they personally can immediately get out of any situation. They are an unholy alliance which lives by the great lie. WWJD for them should really be "What would Judas do?" (And, yes, I really meant to put a lower case "c" in christian since I don't associate their ilk with real followers of the Christ. BTW, I'm not a Christian myself either but that's a whole other story.)

    Sincerely,
    A fan in Tucson

    ReplyDelete