Wow, sure has been a lot of weird shit to comment on in the last couple of months, but I was on my annual stateside trek and don’t function well as a writer without my space.
It was a great trip and included a whirlwind swing around 9 cities in about 18 days – three planes, one train, two buses, two hitches and two rides from people I was visiting. It was like a reunion tour, hanging out with friends and relatives, some of whom I hadn’t seen in more than 20 years. It felt like a coming together even while the world seems to be further falling apart.
Most astounding, on the political front, is that nearly 30% of the US population still thinks the doofus in the White House is doing a good job. Much more distressing, but not at all surprising, is the continuing fecklessness and spinelessness of the Democratic Party.
One could understand, even sympathize with an opposition party that was disinclined to challenge a popular president, but to cave in to the worst president in history while he carries an historically low approval rating is incomprehensible.
In the latest sordid episode congress gave attorney general Gonzales the authority to spy on Americans at his sole discretion. This is the same guy who called the Geneva Conventions ‘quaint’, who said it isn’t torture until it results in organ failure or death, who participated in the firing of several federal prosecutors because they weren’t playing partisan politics with their offices.
The Democrats will justify this latest abdication of principle by saying the bill sunsets in six months and they can revisit and amend it then. What they don’t say is that built into the legislation is the ability of president to extend it at his discretion. They didn’t have the votes to kill the bill outright because of the defection of too many Democrats, but they had enough in the Senate to stop it by filibuster. Bush timed his demand for urgency with the Congress’s recess so it could be railroaded through, knowing the Dems would roll right over without much debate.
To non-Americans on this list, the filibuster allows 40 of the Senate’s 100 members the right to block legislation by talking it to death. It used to be that one senator could filibuster a bill to death if he could stay awake and talk long enough, now it takes a minimum 40.
Two other recent events of note, the subprime mortgage meltdown and the coal mine disaster in Utah, are both related to a neo-con government’s desire not to govern.
The mine in question had received hundreds of citations for safety violations in the past few years. You have to wonder how many it would’ve taken to shut the place down. Considering cutbacks in funding for regulation that’s a hallmark of the neo-con philosophy, the transgressions of this mine had to be flagrant.
The mortgage problem is another example of how financial markets have been turned into casinos. In the past a mortgage lender would hold on to the debt until it was paid off. This gave them a strong incentive to be frugal in their lending policies. Today most mortgages (we’re talking the US only) are sold to holding companies, that is, ‘securitized’. Once they’ve earned their fees, if anything goes haywire, it’s someone else’s problem.
Enter sub-prime mortgages. Bad credit? Low income? We’ll just charge you extra and you can be a property owner. We’ll even give you a low rate for the first couple of years to get you started. That may mean you’ll not be accumulating any equity, but with property values always rising, you’ll still come out way ahead.
This works out very well as long as values keep rising, but since that’s only a hope and a wish, and ultimately a Ponzi scheme, the whole edifice crumbles when the opposite is true. Now with real estate falling, a lot of people are finding their homes are worth less than they owe. Many also are being hit with very high increases in their payments as the initial low teaser rates are replaced with adjustable rates more in tune with the market.
In fact, one of the biggest props to the American economy over the last few years has been the ability of property owners to refinance mortgages to take advantage of rising equity. In many cases people have taken on long term debt to finance short term consumerism. I learned long ago that it’s much easier to borrow money than to pay it back. My first scrape with buying on credit involved an item purchased on a six month contract which broke after two months. It seemed absurd to still be paying on something long after I had use of it and that convinced me never to buy unless I could pay for it up front.
Pretty much that’s what’s happening to the American economy: The cost of living beyond one’s means is beginning to be felt. The breakdown of the sub-prime market and other ‘creative’ types of lending are only the first inklings of the problems in store. Even people who are not in danger of defaulting on their obligations will sometime have to pay them back. Without equity booms to pad their incomes, Americans are going to have to cut back on daily living to pay their debts. Their disposable income is going to be sucked right out of them.
So to with the government itself. Part of Bush’s legacy will be a three trillion dollar addition to the national debt. The trade deficit is now up near $800 billion annually, requiring massive borrowing from foreign countries to pay for consumption. Many Americans are over their heads in credit card debt, much of it at fantastic interest rates with obscene additional fees piled on at every opportunity.
Obviously, this all must be paid back. In the case of credit card debt, the recent Republican congress, with the collusion of many Democrats, changed the bankruptcy laws to make it harder to get relief from such debt. They could’ve cracked down on predatory lending while they were at it, but that wasn’t going to happen concurrently with feeding at the corporate campaign contribution trough. In the past most states had usury laws; in Ohio when I grew up it was illegal to charge more than 10% interest. Today the sky’s the limit.
The point is that unregulated markets are like a combination of crap shoot and roller coaster. Though the wins can be great, the downs can be devastating, especially for the little guy. If only the fat cats felt the heat, you could say, well you gambled and lost, that’s the breaks. Unfortunately, the high rollers, who caused the problems in the first place, usually get bailed out while the commoners lose their jobs, their houses, get saddled with massive debt that takes many years to retire.
A solid and sustainable economy would be far safer and saner with none of the big downturns but it also would not enable great returns so that’s the last thing we can expect from the current system. American public radio’s business program plays happy music when the stock market goes up, sad when it goes down. But if the market’s already overpriced you should actually want it to go down so the economy would be more stable and destabilizing crashes would be less likely . Never happen: In today’s world there’s no option but the roller coaster.