Will People Sit and Let Things Disintegrate?

     Hat tip to Alexis for posing a thoughtful question that deserves a thoughtful answer.  Unfortunately, I think the answer is "maybe".
    
    A Brief History: with thanks to Professor Robert Reich, and Professor Elizabeth Warren. Their work on this subject, particularly Reich's, is much more erudite than my synopsis.


    Beginning in the 1970's... some say with the passage of ERISA in 1974, which began the shift from Defined Benefit (pensions) Retirement to Defined Contribution (IRA's, 401 (k)'s, etc.) Retirement. Some say it really started when President Nixon de-coupled the dollar from the gold standard.  The upshot is, that the standard of living in this decade was about as good as it was gonna get for the middle class. Everything after has been a decline, and the middle class has been systematically gutted. In the '70's, if there was an added expense, Dad could work overtime for a while, or work a second job, and the savings would add up, and the purchase - say a car, or a vacation - would be paid for, and things would then normalize.

    By the 80's, women began joining the workforce to add to needed income.  There's some evidence that this tipping point was hit in the late 70's, for those of us old enough to remember mortgages with 18% interest rates, and the oil embargo. Either way, women entered the workforce in greater and greater numbers during this decade, and as the culture adapted, it became expected that both spouses would work - think "latch-key kids".


    By the 90's, the Great Run Up in credit and house prices got wheels.  Why? Because the concentration of wealth had sped up.  Sure, you can buy a new car and a new house this year with your millions in executive pay, but can you really buy a new house EVERY year? These folks, the top 3% of earners, needed some investment vehicles, and the demand grew.


    And grew.


    By the first of the "aughts", the credit frenzy was on, and every house was an ATM.  Liar loans, securitizations, and many, many other investment vehicles had been generated.  And then you had the other shift reaching a tipping point: we began out-sourcing - like crazy.  What better way to shift the concentration of wealth than by hiring some 6 year old with NO standard of living to make your tennis shoes? An American worker would want health care, a living wage (remember, there's that McMansion that has to be paid for!), and some vacation time, and an 8-hour day, etc.


    All the alarms went off in my head the day I read that Wal-Mart was the country's LARGEST PRIVATE EMPLOYER. I could go on about that for a while, but won't. The year was, I believe, 2006, and it marked the end of our base of employment in manufacturing. We had become a series of Service Workers, from grocery stores to mortgage brokerage houses. 

    No one needs a long explanation of the beginning of The Great Recession at this point... but I will clarify one issue: it began in the spring of 2006, when all of a sudden credit started to tighten up. By mid 2007, the "velocity of money" was slowing to a crawl, and it really hit the fan in 2008 when everything froze.


    I draw all this out because the question seems to demand it.  Folks, we sat idle for FORTY YEARS of declining standards of living.  We got mad, we got drunk, we got depressed, but we kept on pushing, grumbling that "something should be done". We had recessions, we had booms, we had - and have - a series of "jobless recoveries". 


    Enter the Tea Party.  Some folks are standing up and shouting; the problem is their shouting vitriol and obscenity, not reason.  As I said in another post, I agree with them on one issue (and one ONLY!); we SHOULD be mad. Two generations of proof that the American Dream is a farce, and will be visited upon our kids and theirs in greater and greater hardship.  Aside from that, however, the only thing I've seen the Tea Party do is inspire uneducated folks to be venal and atavistic. Rage is NOT a long-term solution to anything.


    Some further bad news: The US Treasury is now the largest holder of national debt in the world.  The upside: at least it's not China anymore.  The downside: we're just printing money, and other countries are beginning to doubt us as a good credit risk. I say, what took so long?  But, the risks increase the more we monetize (print money) our debt, and recycle it back into our economic engine.  Think sugar in the gas tank.


    Social Security/Medicare went cashflow negative in the 2nd Quarter of THIS YEAR. Not 2025, or 2040, but 2010, and we're not into the bulk of the Baby Boomers retiring for 2 more years (tapering off by 2016).


    There are growing signs that the US is de-coupling from the larger world economy.  We are beginning to be shadowed by other economies.  This does not bode well for the value of the dollar as the world's reserve currency.  Watch oil prices; they are great indicators not just of supply and demand, but of the clout of the US Dollar.  I believe oil capped out at $84.00 a barrel this morning, from a mere $72.00 a barrel a few short weeks ago. Add in a couple of unfinanced wars without end, and you've got a hell of a set of problems.


    On the flip-side, up to 40 states' Attorneys General are banding together to bring legal action on what is becoming known as Foreclosure-Gate.  While this process will actually put a drag on the economy in the short term, the sooner it flushes out the Bad Actors, the better things will be in the future.  This debt, and everything with it, eventually has to be flushed out of the system.  This is the slow, painful way to do it, but it is a move in the right direction.


    President Obama did a brave thing: he pocket-vetoed HR 3808, which basically would have let every one of those 'Robo-Signers' off the legal hook. What scared me about it was the fact that both the House and Senate passed this piece of crap WITH NO PUBLIC DEBATE WHATSOEVER.  I'm glad the President decided to step up.  Score one for the "good guys".


    I would suggest a google search of The Coffee Party.  They have quietly grown a large following, and are dedicated to civil discourse in government, and issues-based voting versus personality and party-line.  Will they get the publicity they should be getting?  Probably not, but it refreshes me to know that smart, educated people are starting to have a dialog about the problems and potential solutions.


    And, there is always the possibility of open rebellion... the seeds are spreading, and while I'm not a nihilist, I quote a dear friend when I say, "Bureaucracies are NEVER fixed from within". What form will that rebellion take, and when?  I don't know, but I do know that not all rebellions are violent, and not all leave a power vacuum.  If we come to that, I hope those things would be true for all of us.




Brutal Truth