What is grand theft? The formal definition is that of a crime of theft where the value of the goods stolen exceeds about $200. If the amount is less, it is usually considered to be petty theft and is prosecuted as a misdemeanor. But grand theft is typically a felony, with punishment commensurate (sometimes) with amount stolen. In thinking about what is happening to USA citizens in the current disaster of an economy I was trying to find an appropriate phrase or term that would capture the magnitude of the theft crimes that are now being committed against them, that follow from yet other crimes committed in earlier years. To my knowledge there is no term that captures the magnitude of the thefts of at least ten trillion dollars that impact almost all common USA citizens. These thefts and their implications are what I will discuss in this article, from the perspective that the victims have been set up to lose no matter what they do. If you permit me some definitional license I will make a case that the basic crime or motive is the kidnapping of assets (with no intent to return them at any price) and the elimination of opportunity to become and remain financially secure by judicious saving and hard work. Letís say that the wide range of victims from different segments of society have been bamboozled. That means fraud is also involved, and it is continuing as I create this article.
In a kidnapping the victim is at the mercy of the criminal, for means of victim freedom to act to the victimís advantage have been removed. A traditional kidnapping is done, most of the time, to force the victimís family or support network to deliver major assets to the kidnapper, so as to effect the release of the victim unharmed and without the identity of the kidnapper being discovered. Said assets are typically in the form of cash or cash equivalents like bearer bonds or gems that cannot be traced later. Law enforcement agencies are available to seek out and to arrest the kidnapper(s) based on very clear laws defining the illegality of that crime. Do we have an analogue germane to our economic problems in this article? You will decide as you read.
As most of you know, the assets paid to a kidnapper are often referred to as a ransom. So it is that a ransom will be paid by USA citizens, even to regain/maintain their employment, and that ransom will be in the form of higher future taxes combined with lower real incomes, due in part to inflation that results from devaluing the dollar. Prior to that time, the citizens will have been the victims of grand theft, where their assets like their homes and investments in the stock market and retirement incomes and forced savings accounts (Social Security) will have been plundered or devalued.
This horror is realized with intentionally stimulated inflation of cost of consumable goods, like gasoline in 2008, and services of necessity, like healthcare, and simultaneous deflation of the value of personally acquired assets like homes, fixed incomes and savings. One is done in part by means of undermining the value of the dollar by creating funny money, the other by destruction of the housing market due to job losses brought on by, among other things, offshoring without trade parity. Note that the unwarranted rise in the cost of gasoline in 2008, to $4 per gallon, was accomplished within an unregulated monopoly. Massive profits from that ripoff were permitted by our federal government, and numerous business segments of our society, like tourism, were badly hurt. Individuals simply stopped driving whenever possible.
Okay, I have provided some superficial definitions and some explanatory claims. Now I must explain my concerns in ways that are tangible, understandable and unarguable. If I succeed, you will conclude that the structures of power that actually run the USA are criminal and unworthy of loyalty, respect, faith or friendship at any level. Perhaps my accusations seem over the top. If so, I submit that you havenít been paying attention to economic realities that are in fact obvious, nor to the origins of how these realities have happened. You may have missed identifying the unmet responsibilities of government and business to keep the USA economy on track on behalf of the citizens at large, not only the wealthy few. Most of all you may miss the gradual, stepwise realization of these disasters until you are personally and materially affected. At that time you are or will be financially weaker and thus less able to fight to reverse the disasters. Note that you are routinely being misled by what you see and hear via the media, so your current perceptions, if they are based on media reporting, are of questionable value.
People submit to be governed not because they have been conquered as slaves, but because there is a contract to protect and to provide infrastructural national or state services to all citizens in exchange for loyalty and submission to be governed and to obey the laws passed by government. But we have a set of very destructive practices, some long established, that make a mockery of that fundamental contract, like corporate favoritism in congressional legislation and in Supreme Court decisions dating all the way back into the 1800ís. These are in direct opposition to the justification for submitting to be governed. You own yourself. You have the right to life, liberty and the pursuit of happiness, and no entity has the right to impede you in your endeavors until and unless you attack those same rights of your fellow citizens. If you agree in principle continue reading. If you do not, simply stop here. The problem is that others have in fact used their wealth to attack and to destroy your rights to life, liberty and the pursuit of happiness. How? Some have meddled with and perverted the very law-making bodies put in place to represent every personís interests. Others have waged illegal war to feather their oligarchyís financial nests, and perhaps to play God from a temporal power position. In the latter case lives of our citizens, specifically our soldiers, and many more lives of non-combatant citizens of other countries are lost to support greed, not to protect our country. Financial resources badly needed for purposes like infrastructure upgrades and maintenance, e.g. bridges and underground pipelines, are and have been wrongly directed to support opportunistic war.
In virtually all problem situations a citizen in the USA expects to be able to apply personal or external knowledge and sometimes power/money/work to resolve an immediate problem, and hopefully to remove the likelihood of future similar problems. It is that ability and freedom and responsibility to solve our own problems through our own diligence and work and to fulfill our desires that makes life sensible here for anyone with reasonable intelligence. These things were/are implicit, and often explicit, in our Declaration of Independence, our Constitution and in the constitutional amendments known as the Bill of Rights. Thus, any act that denies the individual ability (as opposed to only responsibility) to be responsible for self, and to gain fairly from the fruits of oneís labor, is by definition contrary to our most fundamental set of laws Ö our Constitution. That document and the associated Bill of Rights supercede all other descendent laws in validity. Laws passed by any Congress or decisions made by any court, especially the Supreme Court, or decisions made by any president, are legally bound to follow the very clear concepts of those documents, else we are not bound to be loyal to that government. We the common citizens are in fact empowered and ordered to modify that government or to create a new one per the Declaration of Independence. It is a simple two-way contract with clear obligations on both sides and, most important, a legal exit clause. And note, formally, that all of these documents are the essential story and meaning of the United States of America, in juxtaposition to subject rights in Great Britain and other European monarchies of the eighteenth century. But we have seen our very foundation reasons and methods for defining and forming and operating the USA being abused. Blatant examples of that abuse go back well over 150 years. The problem now is that the occurrence of abuse is continuous and more generally ruinous for the common citizen, and it is assumed to be legal because nothing effective is being done by government to stop the abuse. Alas, government is an integral part of the abuse.
While Iím at it, suppose I continue with our Declaration of Independence Ö so as to make clear to all readers the depth and power of our rights and responsibilities, and the freedom to act on our own behalf when conditions become intolerable. Take the time to read it and to reflect, even if at an earlier time in your life you studied that document as a foundation to understand why the USA was formed. I believe you will identify far too many discontinuities between theory and practice as the USA has evolved, with accelerated destruction of financial security, freedoms and a rapid downward spiral in our current and coming quality of life (compared to what it could be Ö an example is uncontrolled healthcare costs).
Do take the time to read, not skim the entire document. Reflect on the meaning of what you read relative to the present time in USA history.
THE DECLARATION OF INDEPENDENCE
When, in the course of human events, it becomes necessary for one people to dissolve the political bonds which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.
Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. --Such has been the patient sufferance of these colonies; and such is now the necessity which constrains them to alter their former systems of government.
The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world.
He has refused his assent to laws, the most wholesome and necessary for the public good.
He has forbidden his governors to pass laws of immediate and pressing importance, unless suspended in their operation till his assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved representative houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the legislative powers, incapable of annihilation, have returned to the people at large for their exercise; the state remaining in the meantime exposed to all the dangers of invasion from without, and convulsions within.
He has endeavored to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new appropriations of lands.
He has obstructed the administration of justice, by refusing his assent to laws for establishing judiciary powers.
He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.
He has kept among us, in times of peace, standing armies without the consent of our legislature.
He has affected to render the military independent of and superior to civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his assent to their acts of pretended legislation:
For quartering large bodies of armed troops among us:
For protecting them, by mock trial, from punishment for any murders which they should commit on the inhabitants of these states:
For cutting off our trade with all parts of the world:
For imposing taxes on us without our consent:
For depriving us in many cases, of the benefits of trial by jury:
For transporting us beyond seas to be tried for pretended offenses:
For abolishing the free system of English laws in a neighboring province, establishing therein an arbitrary government, and enlarging its boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule in these colonies:
For taking away our charters, abolishing our most valuable laws, and altering fundamentally the forms of our governments:
For suspending our own legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated government here, by declaring us out of his protection and waging war against us.
He has plundered our seas, ravaged our coasts, burned our towns, and destroyed the lives of our people.
He is at this time transporting large armies of foreign mercenaries to complete the works of death, desolation and tyranny, already begun with circumstances of cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the head of a civilized nation.
He has constrained our fellow citizens taken captive on the high seas to bear arms against their country, to become the executioners of their friends and brethren, or to fall themselves by their hands.
He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare, is undistinguished destruction of all ages, sexes and conditions.
In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury.
A prince, whose character is thus marked by every act which may define a tyrant, is unfit to be the ruler of a free people.
Nor have we been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our separation, and hold them, as we hold the rest of mankind, enemies in war, in peace friends.
We, therefore, the representatives of the United States of America, in General Congress, assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the name, and by the authority of the good people of these colonies, solemnly publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved; and that as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.
New Hampshire: Josiah Bartlett, William Whipple, Matthew Thornton
Massachusetts: John Hancock, Samual Adams, John Adams, Robert Treat Paine, Elbridge Gerry
Rhode Island: Stephen Hopkins, William Ellery
Connecticut: Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott
New York: William Floyd, Philip Livingston, Francis Lewis, Lewis Morris
New Jersey: Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark
Pennsylvania: Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross
Delaware: Caesar Rodney, George Read, Thomas McKean
Maryland: Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton
Virginia: George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton
North Carolina: William Hooper, Joseph Hewes, John Penn
South Carolina: Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton
Georgia: Button Gwinnett, Lyman Hall, George Walton
July 8, 1776
Well, that was quite a read, wasnít it? You donít suppose the individuals who signed that document were angry for good reason, do you? Obviously they were terminally angry because the deck was stacked against them, permanently. Alas, the King of Great Britain was charged with more offenses and more hideous offenses than even we can accuse our government(s) of committing in our over 200 years of existence as a country. Or perhaps not, depending on your ancestry, e.g. American Indians who suffered dislocation, slaughter and abuse in the nineteenth century after the USA was well formed and secure from external attack. So Ö does that mean we should be "disposed to suffer," or does our "long train of abuses and usurpations" qualify for us to demand real change (I hate that word as it means nothing useful unless it is accompanied by complete detail of the intended change)? If so, what change or changes are appropriate to our situations? Let those be rhetorical questions for most of this article, for I must now return to earlier concerns/accusations.
If your birthright regarding the pursuit of happiness has been kidnapped, then you cannot by the product of your wits and your labor become and remain financially successful or even secure. I think that is a pretty simple and clear way of describing what is supposed to be reality vs. what is in fact reality in the USA today for the majority of citizens. An example that all of us can agree on concerns the housing market, and I will now launch into detail about USA citizens in various initial circumstances finding themselves in a no win situation, more accurately called a guaranteed lose situation.
Actually, I am going to discuss three very different fictional examples and show how three couples get hosed, regardless of sense of responsibility, diligence and hard work. The starting year for all three of these stories is 2004. Note that the character names are fictional but the stories are completely valid/real for tens of millions of real people in the USA. As an aside, I know some of the real individuals who are not named in these scenarios, and their situations are as I describe, but I took some poetís license in describing benefits of employment/retirement within real companies.
Tom and Mary decide to buy a house. Home prices have been climbing fairly quickly for the past three years and both believe it is time for them to buy before further price increases cause desirable homes to be out of reach. Tom and Mary are financially responsible. They both work, Tom as a software engineer and Mary as a manager in the local Filenes® department store. They have saved money such that they can put down a 25% down payment on a new house; thus gaining an advantageous mortgage interest rate for their thirty year fixed interest mortgage. Further, they can live on Tomís income alone if they must do so for any reason. But Maryís income could cover only about 75% of the essentials if Tom became unemployed. But not to worry Ö the economy is moving along and jobs in Tomís field, while being offshored by some companies, are still available in the USA with a variety of good companies. And the housing market is moving along well if they later have to move for any reason. Life is good.
Pete and Sally decide to buy a house because even with their limited incomes from both of them working, interest rates are at an all time low. Itís now or never. In fact, they can get an interest only zero equity variable rate loan for a very low interest rate, buy the house they want, and then refinance in a few years as property values continue to climb. Then they will take out a conventional fixed interest mortgage and thus eventually own their home. Pete intends to use his construction skills to enhance the value of their home with upgrades. This will help a lot when it is time to refinance the mortgage, for a higher appraisal value can only help. Pete and Sally both have to work to be able to afford their new life style. Pete sells new cars at a local General Motors® dealership and Sally is a nurse. If either person were to lose his/her job there would not be enough income to pay for essential expenses. Still, automobiles are selling reasonably well and Pete could always find another job if necessary. Things will be okay, for Sallyís job is completely secure. And, with very low, indeed zero percent credit card interest rates, it is easy to furnish the new house. Likely the equity gain from the refinance in a few years will pay off the credit card debt and even allow for Sally to have a new car. Life is good.
Joe and Jane have been diligent through the years of both working and they have just paid off the mortgage to their house. They are proud, for they have also been saving in their 401K plans for a long time to be comfortable in retirement. Paying off the mortgage was the icing on the cake, for both can now retire comfortably. Joe is 60 and he is eligible to start collecting his pension at age 62. He decides to retire early from his production supervisorís job at General Electric®, since the cost of the mortgage payment each month, except for insurance and property taxes, is gone. Besides, GE® is planning to shut down Joeís facility and move the manufacturing operation to China. Joe has plenty of GE® stock in his 401K plan, so he will get dividends sent to him instead of reinvesting them in the 401K plan. No problem. Jane is two years older than Joe, and she wants to retire also from her job as a bank teller. She doesnít have a pension but she can start collecting Social Security right away, and besides, her 401K plan has lots of stock for the bank where she works, a branch of Citibank®. About the only added expense will be health insurance coverage, for their early retirements do not include continued health insurance coverage from their employers, until Joe reaches a normal retirement age of 62. At that time he can also insure Jane through that same coverage as his spouse. Besides, both are in good health, so limited private insurance coverage should be inexpensive, and in five years they both will be on Medicare. Thus, Joe and Jane retire, confident in their financial security and ready to start enjoying their golden years traveling. The best part is their house keeps appreciating in value, so the net effect of dividend and Social Security and guaranteed pension income, along with hefty 401K plan savings for both, and completely owning their home, makes the future look just fine. Life is very good.
Now we are going to walk forward in time in increments of two years to capture the evolution of the economy and the subsequent effects on the lives of the three couples, and then take a final look at the lives of the three couples late in 2009.
We are now in the fall of the year 2006. Some aspects of the economy have changed. The housing market appears to have peaked sometime earlier in the year as new housing starts are notably declining and sales of existing homes are taking longer than normal to happen. Credit card interest rates have risen, and the recently common offers for zero percent interest for a year seem to have disappeared, and for some reason bankruptcy laws have become harsh. Oddly, the Supreme Court heard a case in which the banking industry wanted 401K and IRA plans to be treated as simple savings accounts, so as to be able to collect on unpaid credit card debt by attachment. For some reason, the credit card giant MBNA® had to be purchased by Bank of America®. The job market is showing signs of stress for various reasons. Some include fewer good white-collar jobs and the continuing closing of factories due to offshoring. Some include declining sales as consumers start to delay purchases to keep up with inflation and increased credit card interest rates, not to mention punishingly high increases in the interest rates of zero equity and other variable rate mortgages. Credit defaults are beginning to become more troublesome to banks as more of their credit card customers are stressed due to inflation in consumable as well as durable goods and infrequent or non-existent raises. It is peculiar that more and more of the recently purchased appliances, electronics and cars need regular repairs or replacement. The purchasing of extended product warranties appears to be essential. Corporate profits, however, continue to look good as the cost of doing business continues to decline as labor costs diminish due to offshoring, which certainly quiets complaints from employees and unions in the USA. Accordingly, the stock market is doing well. Existing homes continue to sell for up to 40% more than their original cost merely six years ago, for very low interest mortgage money continues to be available. This is thanks to the continued Federal Reserve policy of expanding the money supply available to banks. It looks like the $400 billion spent to date via deficit spending in the Afghanistan and Iraq military ventures isnít hurting the economy at all. The automobile market, however, is showing a significant shift in market share to foreign companies like Toyota®. General Motors®, Ford® and Chrysler® are less robust, and thus layoffs and offshoring are happening increasingly to help restore profits. Chrysler® shuts down some USA assembly plants, following the lead of General Motors® some years before. Ford® profitability is declining markedly as the public seems to have lost interest in gas hog SUVs and pickup trucks. The costs of health insurance are climbing quickly as the cost of medical services and pharmaceuticals seems to be climbing at about 8% per year despite some other parts of the economy leveling off, declining or showing stress. Municipalities are raising property taxes to expand schools and other facilities to accommodate population increases in the suburbs due to the housing boom of the past six years. This would seem to be no problem as the value of residential real estate is obviously climbing. Some parts of the country are experiencing a shortage of tax revenues as immigrants, illegal or not, are causing a rapid increase in entitlement program costs like medical care, and in educational expenses. They may be cheap labor for their employers, who pay far less than minimum wage with no benefits, but they are also a large net drain on tax revenues whose source is the general population.
Now, what about the three hypothetical couples described earlier? What is their current status in the year 2006?
Tom and Mary have encountered unexpected problems. While Tomís company continues to be profitable, sales are starting to weaken and raises have been a mere token compared to earlier years. To her consternation, Mary finds that Filenes® is being acquired by Macys®, and the merger has created an organization with too many managers. As Mary reflects, sales at Filenes® have been weakening for a while to the point that Filenes® had to be acquired or go into bankruptcy. For some reason, cash sales have diminished considerably. Unfortunately, Maryís job is one of the casualties of the merger. Now Tom and Mary have no wiggle room in their budget, for Tomís income has not kept pace with inflation. Still, with some belt tightening they can do okay while Mary seeks a replacement job. Their property tax increase, however, will mean a lean Christmas for the first time in many years. It is comforting that Tom can do automobile maintenance to reduce costs in that area.
Pete and Sally are in trouble. Pete still has his job but his income selling General Motors® cars has declined to about half what it was in 2004. Pete knows some of this is due to Toyota® and other foreign automobile companies getting a larger market share, but something else must be happening to account for the overall decline in sales. Maybe so many people have been buying new homes that they donít have enough disposable income to consider replacing their cars. Sallyís job is secure but increasing medical costs for the public have not resulted in any significant increase in her income. She wonders why? At least Pete and Sally continue to have good health care coverage through her employment. On the bad side, the mortgage company increased their loan interest rate by 2%, making the house payment go up by hundreds of dollars that they can ill afford with the decline in Peteís income. Worse, their credit card interest rate went from 0% to 8% and now the monthly interest is larger than the payments they have been used to making. This is not good as they are going backwards and canít do much of anything about it. If they are late by even one payment their credit card interest rate will increase to 24%. Pete will have to get hired by Toyota® or get a second job to make ends meet. Worse, most of the increases in Pete and Sallyís monthly expenses are in the form of interest owed on the mortgage and the credit cards, so there is nothing gained in spending that money. Gone are Peteís plans to upgrade the house for there is no disposable cash whatsoever to purchase materials. Both of them hope the equity increase in their property, which has been good since they bought their house, continues, for once Pete gets back on track financially they want to get out of the variable rate zero equity mortgage and refinance. That will make everything okay as some of the increase in equity can pay off the credit card debt, and maybe Sally can finally get a new car, and the new monthly mortgage payment will start paying against the loan principal. Whew! If only they can hold on until things improve.
Joe and Jane are in pretty good shape. Yes, it is true that their cost for medical insurance has increased, and with Joeís recent illness they discovered their level of coverage was far from adequate, as coverage for GE® retirees turned out to be more expensive than that of employees and less generous in percentage coverage. This has been a bitter lesson as they have spent close to $10,000 for medical procedures and supplies prior to their GE® coverage and now they are learning that some medical care is not covered, or covered poorly, by their GE® retiree health insurance policy. The house, meanwhile, is a mixed blessing, for while it is holding or increasing in value expensive maintenance has been necessary, as in a new roof and a new furnace. Jane wonders if they will have to update their kitchen and bathrooms to get a competitive price when they do decide to sell their house. Changes like those are starting to look like large expenses that either bite into savings or into profit from selling the house. Still, what choice do you have if you want to attract buyers who can purchase shiny new homes with all the modern features, often for what appears to be less money? Will potential buyers appreciate the charm and the cost savings of the landscaping, which doesnít exist in new homes? Anyway, thinking of selling is premature for they still love their home and they can certainly afford the extra health care and maintenance expenses. Besides, as properties continue to appreciate the maintenance costs will be absorbed. Joe and Jane are pleased that their 401K plan investments are continuing to grow, less what they have withdrawn the past two years to cover expenses while waiting for Joeís pension and GE® health care coverage to start. Dividends on Joeís GE® stock, for some reason, have declined. Not to worry, for Janeís Citibank® stock continues to look good. Overall, Joe and Jane are financially stable and do not apparently have anything to worry about, though the town has been making noises recently about increased property assessments. Well, this all looks like a wait and see situation. Life is still good.
Now we will move on to the fall of the year 2008. Yes, you already know that period as the meltdown of the stock market and much of the rest of the economy, preceded earlier in the year with the collapse of Bear-Stearns® and the later demise of Lehman Brothers®. What is most interesting in these stories is where all of the people find themselves in the fall of 2009, but that comes later.
Tom and Mary are reeling from all the bad financial news about the economy. After years of saving diligently and working hard they finally got the home of their dreams, only to see that the current value of their home is 10% less than its original purchase price. And they had put down a down payment of 25% of the cost of the house! They did nothing wrong but at the moment they have lost part of their savings and any equity increase that happened after they first bought their house. Boy, it sure is good that they didnít have money invested in the stock market, for that is a disaster. Unfortunately, the only job that Mary has been able to land is at Wal-Mart®, and she is hoping to move into management soon so her income can at least be respectable. Her contribution to household expenses is depressingly low. Tomís job, which only two years before appeared to be stable, is now in question. His employer is downsizing to compensate a further decline in sales revenue, and Tom is working lots of overtime with no overtime pay just to convince his employer that he is too valuable to layoff. His plan might work. He knows he has no choice because in what has become a failed economy there are not comparable jobs available to him. Tom realizes that without his current income he and Mary will be out in the street, virtually broke. Life has taken on a feeling of continuous emergency. There is no excess cash for anything. Gasoline prices of up to $4 per gallon just broke the back of the American consumer, who was already under severe financial stress. As Tom reflects on what has happened he is starting to become angry, for some of the causes of this disaster are beginning to surface, and they are disgusting. Who knows what will happen next? Life is not good.
Pete and Sally have suffered a catastrophic setback. Automobile sales have declined to the point that it makes no sense for Pete to even go to work. Toyota® had no interest in additional salesmen, and even they are in trouble. Pete can find only jobs that pay little more than the minimum wage. Their combined income is less than their unavoidable monthly expenses, and that doesnít include eating! They decide that the only way to survive is to use their remaining credit card funds up to the limits and hope that the economy improves quickly to allow them to once again become financially viable. But wait, a letter has just come in from the Mortgage Company. It seems they have again increased the mortgage interest rate by 2%. Now it is impossible to pay even the essential bills, even if Sally gets a second, part-time job. The portent of doom hangs over Pete and Sally. They finally realize that to keep their home and to continue to eat they have to stop making credit card payments. There isnít any choice, for all of a sudden they note that they canít even sell their house as itís value has declined to less than the purchase price, and, the whole housing market has gone into the pits, destroying any hopes of getting out of credit card or any other debt. Refinancing is a pipe dream. There suddenly is negative equity, just increased payments, now more than $1000 per month greater than when they bought the house. And for what? There is nothing to be happy about. This is a disaster. Things canít get worse Ö or can they?
Joe and Jane canít believe what has happened in the space of a few weeks. The stock market imploded, and Joeís GE® stock has fallen from $40 per share all the way down to $10 per share. That is an instant 75% loss of hundreds of thousands of dollars! And it came out of nowhere with no warning! What the hell happened? Jane is feeling scared also for her Citibank® stock has declined from $30 per share to $20 per share, but that is not as bad as Joeís stock value decline. Jane wonders what to do, for even her losses are over $50 thousand dollars. Surely Citibank® stock will recover soon. But isnít that going to be true for GE® stock also? Jane doesnít understand how things could have gone downhill so fast. One day they were financially secure. The next day they became instantly poor. All of a sudden the pension and Social Security income doesnít seem like much at all. And if Joe and Jane sell their stock now they wonít be able to recover when the stock market recovers. They feel completely trapped and deceived. And this after a long life of conservative financial living and doing everything they were taught to do about saving for a rainy day and saving for retirement. No one ever said anything about their giant employers suddenly becoming weak. No one ever said they could lose their hard-earned savings in a heartbeat. So much for all the travel they had planned. Now they have to devote their limited income to medical expenses and the general cost of living just to stay in the home they paid for in entirety. Uh, oh Ö Citibank® stock has plummeted all the way down to $4 per share and Jane is speechless. Her losses are now worse than Joeís on a percentage basis. And now it looks like property taxes are indeed going to increase. Joe and Jane feel helpless and deep anger is setting in as they did everything right and according to the rules throughout their working lives, didnít they?
Now we are ready to take a careful look at the three couples from late in 2008 to the fall of the year 2009. This isnít a pretty story.
First, some changes in the economy from fall 2008 to fall 2009 must be covered to explain the endpoints. The election of Barack Obama was greeted with enthusiasm by millions, for he promised to get on the problems of the economy right away and start solving those problems. Actually, he did get quite involved prior to his inauguration in January 2009. This was unprecedented but a valid response to George W. Bush deciding not to do much of anything for his last months in office. Alas, Obamaís promises became more muted as 2009 realities unfolded. Even his touted national healthcare plan ran smack up against the will of the budget minded republicans and the medical establishment. Meanwhile, the economy continued the meltdown with anywhere from 500,000 to close to 1,000,000 jobs per month being lost. At this writing the official unemployment rate is 10.2 percent. Donít believe it. It is much higher (think greater than 20 percent) and it is going to go very much higher. The automobile companies, General Motors®, Ford® and Chrysler® were offered bailout monies to keep them afloat, but to no avail, except for Ford®. Ford® refused the bailout money to avoid government interference in running the business. Many other huge bailouts have occurred with the banking industry and with Wall Street firms, and bank failures in 2009 already exceed 100. And good old Uncle Sam is taking over all the bad stuff and promising to buy all the toxic assets (subprime mortgages and failed credit card accounts) of the largest greedy banks that otherwise would fail. That plan was modified by one in which the banks would be flooded with money from the Federal Reserve to remain liquid. Thirty percent unemployment is not an unreasonable estimate as we move from 2009 to the fall of 2010. Massive federal stimulation debt via the Federal Reserve is destroying our currency as I type. I have the benefit of knowing where we are right now so that is an unfair advantage when I discuss cause and effect leading up to now. Yet the net result is that the stock market has risen considerably for no good reason at all as the businesses are not in good shape whatsoever. Think government and Wall St. artificial supports. Bailout monies are and have been created out of nothing and in huge quantities. This is undermining the value of the dollar, and the destruction that will wreak is yet to be seen and sure to be terrible for anyone who canít ride the resulting inflation curve. Think about the folks on fixed incomes with simple savings accounts. So, job losses continue to mount, business profits are pathetic, the stock market rises strongly. What does this mean? Well, in the presence of gold and other commodities rising at the same time it means the dollar is being devalued before our very eyes. The rise simply reflects devaluation, and if you are holding dollars you are getting screwed to the wall. But now it is time to revisit the three hypothetical couples to see how they have fared on the economy rollercoaster.
Tom and Mary are very depressed and angry. Mary has been unable to improve her income. Tom is working hellish hours and his employer has just announced the start of the four-day workweek in order to reduce labor costs. Thus, Tom still has his old job at which he works closer to 50 hours per week, but he is being paid for only 32 hours. Beyond that, his benefits have effectively been cut as his health insurance plan has been changed to one with reduced benefits but not reduced costs to employees. These changes are all understandable as Tomís employer is struggling valiantly to survive the failed economy. Business is actually stable with signs of improvement, but only at lower profit margins. Competition is fierce. Tom and Maryís house continues to decline in appraised value, while their mortgage remains high. Both fear what might happen if the government allowed the mortgage companies to demand the difference between amount owed and appraised value. One thing is certain; life is not fun anymore. There is no money for anything except bare necessities. One bad accident or other health problem would destroy Tom and Mary financially, and they have done nothing except be responsible citizens.
Pete and Sally are destroyed. Not only have they ceased making credit card payments, but also Pete has no income except as a part time construction worker being paid minimum wage without benefits. The increase in property tax was the last straw, and now they are not making any mortgage payments either. With their mortgage in default and failure to pay even property taxes Pete and Sally are eating well but destroyed financially. They wonder if bankruptcy will protect them. They know at some point their mortgage company will foreclose and they will be forced out of their home. This is no surprise. They have seen it coming for a long time and have been powerless to avoid it. At least they are saving cash each month to use when they are evicted to pay for a rental property, and they are not telling anyone about their stash of cash as creditors would quickly sue them and take all of it. The American Dream turned into a nightmare, and there will be no waking as if it was all a bad dream.
Joe and Jane are still reeling with the loss of the majority of their 401K plan wealth. They still own their home, but the property tax increase did happen and now they know they will soon have to tap into their depleted 401K plans to make ends meet, due in part to inflation. The stock market has apparently recovered but somehow the value of their equities is less than 25% of where they were a little over a year ago. Bailout monies have been given out by the federal government via the Federal Reserve but only to very large companies, and buying of bad debt from financial institutions has been promised Ö but there has been no help for Joe and Jane to underwrite their "toxic assets!" They arenít first time homebuyers and they certainly donít need a new car! Joe and Jane know they and most of the rest of the citizenry have been victims of fraud on a gigantic scale but they have no recourse or means to change that reality. The scary part is the devaluation of the dollar is already occurring, Joeís pension isnít increasing and there is no inflation adjustment scheduled for Social Security for the year 2010. Joe and Jane realize that while there will be major inflation due to devaluation alone, they have no protection whatever. Worse, somehow the housing market remains very depressed, so their only solid asset is going downhill in value at the same time the dollar is devalued. Property taxes and costs for house repairs, however, keep going up. Something is very wrong with that picture. Joe has a gut feel that a very complicated grand theft has occurred and is continuing, but what can he do about it? Joe and Jane feel helpless and very disillusioned about their country, to which they have been unswervingly loyal for their entire lives. Joe goes back in time to when he and Jane were paying into their 401K plans to check the numbers and he is aghast. He bought GE stock at anywhere from $30 to $40 per share and today with a "recovered" stock market it is worth only $16 per share. Janeís situation is even worse. Back when she was buying shares of Citibank® for her 401K plan the price was $40 to $50 per share. Today her stock is worth a few cents over $4 per share. Given what may be as much as a thirty percent devaluation in the dollar during the next few years, and considering the "recovered" price of their stock holdings today, their 401K plan assets will have been devalued to less than twenty percent of what they paid to buy them. Yes, they feel cheated, financially destroyed and powerless to do anything about it, for they are no longer young enough to start over.
Okay Ö if you followed the evolving financial situations of the three couples closely you will realize that being financially responsible or irresponsible or anywhere in between made no difference. Everyone of the class of common citizens got hosed, in all adult age groups. And, in the real world that is absolutely true, for the only true bailouts have occurred only for the very wealthy banks and corporations and individuals that were complicit in creating the failed economy. There was no protection from government to keep job-destructive and irresponsible financial practices of the corporations and banks under control. Indeed, the federal government was complicit, even supportive of destructive and fraudulent or deceiving practices, by stimulating Federal Reserve policy to create money out of nothing, to keep the economy growing between 2000 and 2008, at the end of which it all fell apart. Those who were responsible for the disaster continue, for the most part, to be in power today, and they are the recipients of bailouts to compensate them for the failure brought on by their own stupid greed. The vast majority of common citizens, however, have been criminally abused by government and business. Think fraud. Such programs as have been put in place to help the common citizens, like mortgage relief, are a tiny drop in the bucket compared to the bailouts. Only 500,000 homeowners have been assisted through renegotiated mortgages, and that marginally, while many millions, with the numbers increasing every month, havenít been helped at all. Even the touted new healthcare plan, if it makes it through the Senate, will turn out to be a disaster for small businesses and financially responsible common citizens. Who will make out? The indigent non-producers and the medical businesses will gain the benefits.
If the realities I have described in this article and earlier articles do not constitute high crimes in government and business then I think in all fairness we should release all prisoners incarcerated for any form of theft. If there was ever a time in USA history for the citizens to rise up and to stop their federal government and major businesses from committing any more crimes against the citizenry it is now.
How could the common citizens force a corrective change to our federal government without a full-scale revolution? By the voting process? NO. That simply will not work, and all of you know why. I described that hypocrisy in multiple earlier articles. The best means to fight nonviolent crime is with nonviolent protest, where the form of the protest resembles what French citizens do regarding national strikes. Strikes are far more powerful than simple demonstration gatherings, and they are easier to conduct, as no one has to travel to a central meeting place. And they do have real teeth that bite, not just words.
Citizens might better use the barter system and passively refuse in part to pay income taxes (by reduced withholdings) or they might fail to claim any income from cash transactions, and indeed move to use cash instead of credit cards. These are good moves, and some of them are technically illegal, but they can be quite effective if done on a scale that completely overpowers the ability of any police agencies or courts or prison systems to do anything about it. It is the peaceful but massive demonstration of thoroughly justified anger, and proof of the weakness of government in dealing with popular nonviolent disagreement, that is the very thing to be used to disempower the worst parts of our government, and thus change it to reflect the will of the people. That is essential so that it may be modified in itís laws and lawmakers by popular demand/vote/recall vote and in the process be replaced with an honest and fair government/legislature that once again follows our Constitution and our Bill of Rights. If police or military forces are used against the common people Ö well, you know where that will lead. Incendiary moves like that will quickly create chaos that will further incense citizens and further undermine the authority of present repressive government. The key point is that all things done to punish the crimes of government must be done on a massive scale, and in a nonviolent manner, so as to deny government the ability to respond with force effectively without enraging even larger segments of the population nationally.
Lest you are concerned with violating the law, simply consider that our forefathers who formed this country would all have been hung for treason if King George could have gotten his hands on them. Yet we call them heroes. They were criminals relative to the prevailing government and itís laws at that time. It is thus essential to realize that peaceful disobedience defined as illegality is necessary to promote the greater good for all the citizens of the United States of America. That is a hard pill to swallow for most of us have very deep and strong feelings about loyalty to our country. It is a conflict problem when we are forced to realize that a cancer has to be cut out of our government to keep us from perishing or returning to being subjects like we were in the 1700ís. Think deeply about the fact that we would not be in the terrible shape we are in, economically, if the voting process worked.
I am disgusted with the economic evolution of our country and especially with the underlying lack of morality of people in power. We have been taken over by criminals who would harm all of us with no remorse. They are in business and government. That they wear expensive suits and have high sounding titles and ill gotten wealth and positions of power means exactly nothing. They are not worthy of respect. Actions alone define the person and the right to command respect, and these people are criminal in their negative effects on the common USA citizens. It is time for our own actions to begin, in the name of enlightened self-interest and in a spirit of fairness to all who have not been an intentional contributing cause of this evolutionary economic disaster. As detectives often say Ö follow the money and you will find the criminal. That will be easy in our situation, for greed and military adventurism have names of responsible individuals attached.
Well, I started this article with some definitions of crime, I continued with an unarguable demonstration of our rights and I explained how those crimes did in fact impact common citizens. The character names were fictional but the overall events were not. I concluded with a call for strikes and other actions to force major change in our federal government and in turn in our major businesses and financial institutions and their practices. I believe that any population that can experience the abuses that have happened here and fail to take overwhelming corrective action is lost. I wonder where we will be in another five years? Or how will we conduct our lives in another ten years? Perhaps I will rub my crystal ball and forecast our future in a later article. Perhaps not.