Journal publishes obvious truth; repudiation by Journal editorial page due Tuesday

^[1]Reading the Wall Street Journal’s editorial page for insight into the economy, business or economics in general — or just about anything else except the arcane study of the Right Wing elite and where Murdoch’s head is at today — is a very strange exercise. It’s kind of like looking at a symposium on race relations and gender equitality chaired by an intern from World Net Daily where the participants are Louis Ferdinand Celine, Ian Paisley,  John Hagee, Michelle Bachmann, the Grand Mufti of Teheran, Dennis Duke and Clarence Thomas. They may have a lot to say, but it will be either ignorant or just plain batshit crazy, with a tinge of duplicity and lies. Which they all believe.

Yet, despite the failure of the editorial board to resist the call of Malthus and the Malefactors of Great ^[2] Wealth, the actual journalism remains on par with the Times and in terms of this economy, of the Financial Times. Today’s electronic version has a marvelous piece that cuts to the heart of why the economy is sputtering, ^[3]and why sustained programs far larger than the Obama stimulus or Jobs Bills are needed if we are ever to see any kind of recovery or, and this is important, sustain the wealth that does exist.

Simply stated, the American people are now terrified of debt. This is not a bad thing, per se. In fact, in a lot of respects it’s a good thing. In terms of traditional economics, the more savings, the more capital to borrow and invest. But, we have a global economy, and there are plenty of savings available for investment. There now is a definite supply problem — there is an insufficient supply of demand.

The lousy pay for the middle and working classes was something they could ignore up to the financial crisis. Net worths were growing, although that was unsupportable. There doesn’t appear to be any code of ethical behavior in terms of Wall Street or Real Estate during boom times. Well, there probably is one, but if the code of ethics is more than a few paragraphs on one side of a piece of paper, it exists primarily to be gamed. So, we borrowed. We paid more for homes than they could possibly be worth objectively — which is a philosophical conundrum in a market economy, where a good is actually worth what some fool will pay for it — and took out 10 year loans to buy cars. Credit card debt took off; the cost of education slammed past the international space station and we borrowed to pay for it. We wanted computers, cars, guitars, fast food, fine dining, vacations, fancy jeans for $150 a shot and so on. For 30 years, the US version of bread and circuses could be summed up by a librarian, in Greenwich, ^[4] driving a Hummer H3 4X4 with the winch and the towing package and all the chrome in the world to work. In Greenwich Conneticut. Somebody would loan you the money and so…and, if you refinanced your home to tap into your equity — the difference between what some fool had paid (you) and what somebody thought another fool would pay (the next fool) — you could finance your Hummer with your house payment. After all, I had a mortgage broker tell me that a five year balloon mortgage was a great idea because nobody paid off their mortgages anymore. And, I had my realtor when I left the Shire and moved to the Crossroads of Opportunity tell me that my house would go up every year by about $100k in value. I took my mortgage business elsewhere since the mortgage guy pissed me off a lot. I thought my realtor had nice legs, so I just ignored that bit of hucksterism, just saying that there was no way that was sustainable.

^[5]Well, of course it wasn’t sustainable. Apres moi, c’est deluge. Loosely translated, life is both carnival and ponzi scheme, and the goal is to be dead when the music stops…or, you’re screwed. Unless you can run the Ponzi Scheme. Like the Banks. The Hedge funds. I found it interesting that at the bottom of the page with the article that moved me to write, there was a piece about the economic uncertainty of the 1% ^[6] and how unfair it was in particular that a family was about to lose it’s unfinished 90000 square foot home for far less than they had paid for it. They needed the new digs because if they had a party with more than 400 people, it got crowded.

Versailles (Seriously? Axe incredulity added. Why not Peckerwood Nirvana?) was supposed to be done by now. The Siegels were supposed to be living their dream life—throwing charity balls and getting spa treatments downstairs after a long flight on their Gulfstream. The home was the culmination of David Siegel’s Horatio Alger story, from TV repairman to chief executive and owner of America’s largest time-share company, Westgate Resorts, ^[7]with more than $1 billion in annual revenue and $200 million in profits. Yet today, Versailles sits half-finished and up for sale. The privately owned Westgate Resorts was battered by the 2008 credit crunch and real-estate crash. It had about $1 billion in debt—much of it co-signed by the Siegels.

The banks that had loans on Versailles gave the Siegels an ultimatum: Either pay off the loans or sell the house. So it’s now on the market for $75 million, or $100 million if the buyer wants it finished. As she stands on her deck in the Florida sun, Ms. Siegel wipes away her tears. “Maybe it will still work out,” she says. “It always does, right?”

The Siegels’ Versailles may be the nation’s most extravagant monument to the debt-fueled, status-crazed real-estate binge of the past decade. Like many Americans, the Siegels borrowed too much, spent too much and bet that values could only go higher. Even in the age of excess, Versailles was excessive.

However, the author goes on to post the good news — the still have their health, most of their money ^[8] and they’ll be able to get by in their little cottage of 26000 square feet.

I actually feel a little sorry for these fools, by the way. They were encouraged by their financial success to think that they had earned this. The Time Shares they were selling were worth evey penny they got for them — well, and since we base value, ECON 101class, on what? SIR! WHAT SOME GODDAMNED FOOL WILL PAY FOR IT! SIR!” They got caught the same way the builder who built my place and five of the same value got caught. He now owns four rental properties. But, he’s funny about it — at a Chamber Meeting, he put a sign on his table saying, “Will build houses for food…” while calling himself a goddamned idiot.

Well, the Siegel’s were insane to co-sign loans for their corporation. That indicates either really bad management or some serious underlying flaws. Steve Ballmer hasn’t co-signed anything for Microsoft lately; Bill Gates and Paul Allen never co-signed anything after they actually got customers. That’s the beauty of corporations. Even private corporations — you have limited liability unless you do something stupid.

However, the difference between the incredibly wealthy and the 99% is simple — while their net worth ^[9]
will fluctuate, and the Journal sees that as a bad thing — even at it’s worst they’re still far better off than the folks in the 99%. If the head of the family has to shift from a chauffered Maybach to a AMG to get around, well, that’s not exactly the end of the world. But, if that librarian gets her Hummer repossessed, it might be for her.

Now, had the demand for the damn time shares stayed solid, we wouldn’t be having this conversation. At some point, people back off and economize. We got involed in two very costly wars plus an exploding universe of homeland security and world-wide COIN and at the same time lowered taxes. Remember Tom Delay’s plaintive 2003 pre-invasion cry that ”  “Nothing is more important in the face of a war than cutting taxes.” – ^[10]“or W. saying, “ Now, the American people have got to go about their business.  We cannot let the terrorists achieve the objective of frightening our nation to the point where we don’t — where we don’t conduct business, where people don’t shop.  That’s their intention. “ ^[11]

Well, we are a consumption driven economy. Without the demand for goods, there is no need for capital investment. Giving more tax cuts to the Seigels isn’t going to produce a lot of American jobs unless you think Versailles is a good idea. And, you put American quarry workers to  work digging up the Italian marble. In order to increase demand, which will stabilzie the economy, we need to get people spending again. It is unreasonable to expect salaries to increase to the point where American workers can, as a rule, pay cash for everything. But, if people are put back to work at meaningful jobs that pay reasonable salaries, they will start to overcome their fear of debt, particularly if the debt load on homes goes away or goes down.

How to do it? Well, keep the people who are employed employed. Do big things like fix roads, bridges, sewer and waterlines and so on with the requirement that if you get funding for your project, you’ll buy American materials. Do soemthing big on mortgage debt for the country — the worst places are in pockets although the entire country could stand the relief. Figure out some way to do it.

Oh, this will all cost a lot of money. Raise the taxes to pay for it, over time. 10-20-30-60 year bonds…do the financing that way for the American renewal. Fund R&D; fund education.

One of the things that I find interesting about the Occupy Movement is that so many of the folks ^{[12] [13]}
are recent college graduates working as barristas or clerks in Barnes and Noble or some other thing trying to find a way to survive and help each other survive. There are no jobs. They have a mountain of debt from college, which they went to based on some underlying American ideology that says something about good jobs, good education. They borrowed the money, their parents borrowed the money. They got the degree…and no one is interested in hiring them. There’s nothing to hire them for…in places like South Africa, Greece and Western China, this results in riots and virtual insurgencies. How do you think movements as bizarre as Al Queida and Shining Path get going and maintained. There are young people who can’t find work so they become disaffected and things go south. The basic undelying premise of the Occupy Movement is that things will get better if we demand redress of grievances — no revolution required. These are all problems we can fix if we try so why are we waiting?…so fix them.

Now, I started to lose my temper the other day at all this. “Why the fuck do I care? I’m sixty years old, and I have no children. 20 years after I’m gone, which will probably be in 40 years, nobody will know I existed. What the fuck do I care for?” Well, I felt a Koch Brother, Newt Gingrich and Herman Cain trapse over my grave. I care because it’s part of the human condition, the underpining of western philosophy and culture, and, ultimately, caring about others, the future, the past, right and wrong is all that separates us from the goddamned lizards.

Various_12_The Sermon On The Mount ^[14]

It is not about winning…it’s about the fight.

 

What can you do? Bug your elected representatives, friends, family — Obama is nothing but two things – ^[15]– better than McCain would have been and better than any alternative. However, he was so busy being a statesman he forgot to be politician. He was so interested in Kum bah Ya that he forgot to drag people into the tent so they could sing. If McConnell had thought there was a price to be paid, he wouldn’t have blocked everything. Now, they’re stuck…so, we not only need to re-elect Obama, we need to have a fire-breathing dragon of a Democratic-progressive Congress. And, we need to make certain that the Senate is forced to change it’s rules to limit personal privileges and crap like filabusters. I know that lots of people, including me, have at times sweated the potential tyranny of the majority in the Senate. Well, we need to ensure better Senators. We need to ensure better Supreme Court Justices. Why has no bill of impreachment been filed against Clarence Thomas? Of course the Republicans will block it, but make it clear. Make the goddamn choices stark, clear and accurate.

For about 200 years as the British Constitution evolved, the House of Lords existed primarily to block things that the Commons wanted but the wealthy, the Aristocratic and the Clerical classes did not want. However, when it lost the power to stop things permanently, and became a debating club, things went fine. Increasing democracy is generally a good thing…if people are ready for it. Libya, probably not so much…West Virginia, we can take the risk.