ECON 201: ACORN is PEANUTS to OUR REAL ECONOMIC PROBLEMS

A response to: RUN! It’s ACORN to the rescue!

Once again, Mark Kiesling, you write a column that is supported by hyperbole and pot shots more than actual and significant circumstances. Sure, it’s funny and all, but not particularly insightful, or useful.

ACORN is by most accounts a terribly biased and poorly run organization. But even if they did somehow managed to get 100,000 families into homes at $200,000 per – as you left it open for discussion – their contribution to the mortgage piece of this economic crisis would be a miniscule $20 billion compared to the Sheriff’s new found helicopter money (not spread around by said whirly bird.) I seem to remember he bought a newer model last summer from all those foreclosures he racked up in early 2008. (Great timing to push through a frivolously expensive toy (gotta keep with the law enforcement Joneses) during a recession that started in December 2007.)

Why I say ‘miniscule’ in relation? 

This mortgage crisis, since that’s where it all ’seemingly’ began, is a multi-trillion dollar fiasco. $20 billion is like 1% of the pot – and highly unlikely for a haphazardly, easily decapitated organization like ACORN to matter one lick to this current dilemma. Bernard Madoff caused $50 billion by himself. A French trader did a French bank for $7 Bills. 

These ACORN idiots don’t amount to peanuts.

Sheriff Dominiguez probably isn’t much more than 2-3% of his county’s financial headaches (some law enforcement is untouchable), but he’s done nothing of real value to prove he deserves to take foreclosure fees and spend them like a teenage girl with a platinum card. Look!: Money!!! Gotta Spend IT!!!!

 

For the truest assessment of why America is heading for a Second Great Depression one only has to look at these things:

• Credit Growth (and Indebtedness)
•  Monetarist Policies (Reaganomics, Greenspan Turbulence)
•  Trade Imbalances (The China Syndrome)
• Risk Management (or lack thereof) 
•  Creative Finance & Derivatives (Burger Kingin’ your Bottom Line)

 

Baby GOT PLASTIC! IT'S SO FANTASTIC!

Ever since the 1^st credit card went plastic in the 1970’s – we Americans have been crackheads for credit. Funny though, we learned this from our government, who, since 1979, went from $909 Billion deficit (32% of GDP) to a current deficit of over $10 Trillion (nearly 70% of GDP.) (Statistical Abstract of U.S.)

 

They're comin' to take me away, HA HA!!!

About $7.7 Trillion of that additional budget shortfall happened on the watch of Reagan, Bush, and Bush II, with Bush II giving over to a Caligula impulse running up a debt nearly greater than all other presidents combined. (And Obama will likely increase it by another $5 Trillion…Over $1.25 Trillion on interest payments alone. Unless…Social Security, Medicaid and Defense are reduced significantly.)

Americans, as a whole, played ‘follow the leverage’ – using assets (home equity) and high interest loans (credit cards) to get what they wanted without saving, or saving less and less. (Negative savings during the Bush years for the 1^st time since the Great Depression.) As a result, this country’s total outstanding debt is greater than $55 Trillion – roughly $180,000 for every man, woman and child in America. (Kevin Phillips, Bad Money, and multiple authors, I.O.U.S.A.)

When Bush called for us to travel after 9/11, and go out and spend, while he introduced his tax holiday for the wealthy, meaning less receipts to the Fed Gov, who do you think suffered? You and I – Joes everyday. The wealthiest 1% have reacquired their lofty perch of nearly 29% of all U.S. Assets. (Wall Street Journal, early- January 2009.)  Once again, not seen since SHORTLY BEFORE the Great Depression. They lowered CAP gains to 15% so those Hedge funds could run wild too. (Oh and UBS, a Swiss bank, just coughed up some coin for allowing 19,000 U.S. citizens to park their wealth in banks there without taxation…a no no.)

Meanwhile, you and I are still busting hump for likely the same amount of dollars we earned in 2000 (adjusted for inflation), back when Seinfeld still ruled (even in syndication), Coldplay was just playing a new record, the Yankees won a World Series, Chicagoans loved Sammy Sosa, and no one besides the NSA, CIA, MI-6 and Israel knew who this Osama guy was, or really cared.

The 3rd Millennium still had Seinfeld on the brain: George is getting angry!!!

 

Talk about a time warp. Please take me back.

 

If Reagan was a savior, give me his devil. The much bally-hooed economist Milton Friedman favorite President started a conservative agenda that has turned America’s Midwest into a Wasteland that only T.S. Eliot could write properly about. While we injected capital into the financial paper market place (usually going to the top dogs) we forgot to rebuild or inject enough into the manufacturing veins of what kept America rolling throughout the 1920s-1970’s.

 

As unions got busted, and immigrants, who were conveniently let into the country (to reduce high wages on menial tasks) came about, the Wall Street hustlers of Michael Milken and Ivan Boesky would be at the forefront of shady and illegal practices that became common place as the unholy trifecta was completed by deregulation. Take away worker’s rights and benefits, find cheaper, more manageable, preferably illegal labor, cook your books (or trade on the inside knowledge), stir well, and simmer for five to eight years. Repeat as needed. Market should soar 100% in five years.

 

Meanwhile, also create a Globalization model that while sounding cool and progressive is usually exploitative and undermines social stability in multiple countries. (Using China as an example we import more in a day from China in 2006 than we did in a year in 1978. But as a result, 70% of Walmart stuff is from China, 75% of your toys are Chinese, and most ($180 Billion) of the world’s electronics are now made in China. (The Elephant and The Dragon, Meredith )  Meanwhile, your son or daughter doesn’t even get the chance to make parts for the China man – unless he or she is frying up rice and chicken down on Crenshaw in LA.

 

Which is a great dilemma to our national security: we pay China in U.S currency for those goods. They hold now somewhere in the neighborhood of $1.3 Trillion in our U.S. debt because they don’t hold all our money, but reinvest it back into America, subtlety, usually as a mixture of short-term and long-term T-notes. (Because we pay our bills…but as our credit worthiness gets worse, those interest rates go higher…more debt to pay…and more assets they hold claim against, in practical terms.)

 

Then, as if by some miracle, the Financial Modernization Act of 1999 came into being allowing banks to deregulate and become anything to anyone. Thrifts, insurance, investments and all shades of gray in between were encouraged.  The big, got much, much bigger, and more confused about the process. (Like a Viagranaire does when a hot, young dumb woman doesn’t think a 55-year old guy should last for 4 hours in the sack, and leaves him without taking his ill-gotten, mother load of money.)

 

(Note: Clinton signed the act with a likely ‘Monica issue’ used as leverage by lead Republican banking member Phil Gramm putting the banking plan together…which isn’t to say Clinton wouldn’t have signed it anyhow. Clinton was far from an ultra-liberal. Some of Clinton’s Economic team is helping Obama…)

 

Risk Management became a joke from all accounts – as interest rates dropped like a stone in 2002-2005 – the money poured out to the public in the form of high-risk, soon-to-be-bundled, sliced-and-diced loans. Cock “Teasers” went to the high school prom with the “Predatory” lending, and banks made God-like fortunes, and Wall Street buzzed with a melodic sound of: “We’re in the money!!! We are wearing… The Money!!!”

 

G. W. Bush is seen as genius by his Lafferite cronies on stock market-focused shows. 

 

But the bets made on the market – Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO) – would be the undoing of Bear Stearnes, Lehman Brothers, Merrill Lynch, Indy Mac Bank, WaMu, Countrywide Financial, Northern Rock, and a host of others that would soon realize the risks taken on Joe American were indeed about as stupid as giving five 400 lb. brothers all-you-can-eat passes to Red Lobster for life in a town of 500 with only one restaurant.

 

Those boys will eat you out of business.

 

Those boys DID eat you out of business.

 

The start of the unraveling came with Lehman Brothers with Assets of 600+ Billion!

The CDS market makes the U.S Economy look like a 150 lb. cocky QB with a rust-n-ready truck. While it, the CDS market, is upwards of 44 Trillion in size. (New York Times) In the past, only .2% defaulted on their bets. But this total has risen, but how far? What if 10% defaulted? 4.5 Trillion is something the World Market can not handled – no one country could take that catastrophe.

 

And what else do we have for our guests in the Second Great Depression but a helping of 1980’s revisited. Ponzi schemes are just another financial scam instead of insider trading. Bush Era deregulation left the SEC (Securities and Exchange Commission) fellas, who, must be the lowest paid, most ignorant, and most unqualified MBAs on Earth to never come to a situation before the financial cow has been milked, stolen, butchered, and eaten, with only with the feces of the humans left as evidence.

 

Lots of crap from lots of people.

 

Ready to get down and dirty???

 

Millions of jobs lost only add into this downward spiraling plane that has seen Irrational Exuberance of Stock Pricing, mixed with Catastrophic Failure of Banking, Tinged with Turbulent Politics, and Sheer Greed and Avarice from Market Makers to Average Joe Bakers.

 

It will take a ‘Sully’ Sullenberger water landing by President Obama to keep this plane from disintegrating on impact…

Can President Obama do what Capt. Sullenberger did?

 

When that final impact is will be determined by the ability to sacrifice and set aside our bitterness about things no longer changeable, but possibly, correctable with time and planning.

 

It is up to all of us.

 

God Help the United States of America…

Weekend Mega Posts: A Nation of Whiners and John Hancock

Since I last left the building, a few things have happened:

A Nation of Congressional Idiots, Sir.

Former Texas Senator Phil Gramm called us a “Nation of Whiners.” I wonder why, sir. I wonder why a man who has been a key ingredient in the mixing bowl of economic disasters, from Enron’s rise and fall [wife tied to that mess] to a lobbyist in the subprime arena at banking giant UBS would be so utterly contemptuous as to say, “we are a nation of whiners.” Yes, we complain. About 4,100+ troops dead on a battlefield of disgraceful miscalculation and subterfuge. We complain about the billions in taxpayer’s money spent funding that war of idiocy and ideology. We complain that our infrastructure, schools and healthcare are much less that ideal, unless you make a significant salary, get bennys and can spend your off time dabbling in the stock market, that’s off 20% from it’s highs.

That you are complicit in this whole economic malaise might not be so troubling if it were not the fact, now, you are implicitly blaming us, the victims of this mess. That our nation is in the early-middle, not the end, of this current fallout, one triggered by idiot politicians, like you, that dropped the regulatory ball, former federal reserve Alan Greenspan’s ultra-low interest rates in the wake of 9/11 which gave way to a train of abuses in offering loans to under (and unqualified) applicants and this whacked idea that you can spend thrift in a time of war, lower taxes and just not hurt us economically. (Value of the U.S. Dollar anyone???) But you, sir, are a twit. Leading a septuagenarian’s campaign to nowheresville. Hocking us and hocking America right down the drain. Sure, your well-educated, well-to-do and wealthy-to-no end golf buddies and fav 5 additions are tickled pink-o to be at the trough of these ‘fast money’ ideas. To just forget the details of how to build a logical and trustworthy financial system is Bad Money policy.

Read up here on the debt, economy and a train of abuses...

Meanwhile, we are back to the future. You remember 1987? Bailing out savings and loans? I was 15 – and understood that wasn’t something to be happy about. But the seeds of that fiasco were sown in a multitude of policy gaffs – like now, Dr. Phil Gramm.

If you do read Bad Money by Kevin Phillips (I read the first 150 pages), you will get (from reviews):

• In the last 30 years, financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%.
• in the last 20 years public and private debt has quadrupeled to $43 trillion.
• Cognizance of our problems has been somewhat covered up with revisions to the CPI (understating costs of home ownership) and unemployment measures (not counting those who gave up and quit looking). Thus, the 2-4%/year CPI increase 2005-2007 would have been 5-7%/year, and unemployment would have been 8%.
• OPEC has reduced its foreign-currency reserves held in dollars from 75% to 62.5%, and Iraq and Venezuela began selling oil in euros and yen (admittedly for political purposes, at least at first). Meanwhile, the U.S. has antagonized major oil producers (Iran, Russia, Venezuela), and effectively dismantled Iraq - raising the risk of nations being unwilling or unable to supply the U.S. as supplies grow tighter
• That securitized debts or CDOs (collaterilized debt obligations) were sold and resold throughout the global financial system and no longer did anyone know how to measure their value or their risk. Add to this the fact, that homeowners were using the rising equity of their homes as atms and pumping another $4 trillion into the economy.  Also add to the mix $700 billion annual trade deficit that indicates that much more consumption over production.

These are but a few of my favorite highlights, Dr. Phil.

That over the past 30 years, America, has been sold like a slave in the common market. We aren’t stupid or ignorant. Unfortunately, those in power stay in power because the spine needed to stop their abuses is not readily present. That our will is shattered because you forgot that this is America.

Many here won’t get rich, or have multiple homes or send their kids to some private brainwashing school, but instead will be working 50 hours a week for 50 years of their lives and might get a death bed at the nursing home. It will be their American Dream because they hope for more, and sometimes, might have received it.

 But That’s the problem.

If only John Hancock could see us now.