We’re enjoying our vacation but we can still take a minute to reckon. And what we’re reckoning with is a growing awareness that the U.S. boom is a flim-flam…and attempts to keep it going are a menace to genuine prosperity.
"Plunge Protectors on the job," begins an article in the NY Post. Fortune Magazine describes Wall Street as "Bailout City." "Did Countrywide get a hand from the Fed?" asks another headline.
Some financial commentators — including our old friend Marc Faber — are beginning to see the Fed’s emergency rate cut last Friday as "Bernanke’s first big mistake." He panicked, they say, and took the Fed in a direction it shouldn’t go. Instead of holding the line against inflation, the Fed is now bailing out Wall Street financiers and speculators.
Where the Fed is headed is the direction Wall Street wanted it to go. Cutting rates suddenly, the Fed has come to the aid of speculators and the financial industry. Doing so, it signaled that it offers what used to be called the "Greenspan Put" to investors — the assurance that it will always provide money on easy terms, when it is needed.
When do speculators need a helping hand from the Fed? When they are losing money, of course. And when do they lose money? When their bets turn out to be not as good as they thought they were. Why would the Fed want to protect speculators from their own mistakes?
Ah, dear reader, you must be either naïve…or a true capitalist. Otherwise, you wouldn’t ask such a question.
There was a time when the business of America was business. Americans made things and sold them at home and on the world market. General Motors (NYSE:GM) was our most important industry. So, what was good for GM was good for America.
Now the business of America is debt. Americans buy things they don’t need with money they don’t have. Financing debt — corporate, hedge fund, subprime, prime, mortgage, LBO, government — is our most important industry. So what is good for Wall Street, the reasoning goes, is good for America.
But there’s a big difference between the real business of America in the ’50s and the monkey business of America in the ’00s. The New York Times carried the story yesterday…and then, predictably, missed the importance of it.
"Average incomes fell for most in 2000—5," comes the headline.
The story is a familiar one. But here’s the latest: Average incomes in the United States have fallen every year from 2000—2005. At the turn of the millennium, the average person earned $55,714 (inflation adjusted to current figures). Today, he earns $55,238.
Naturally, the Times then distracted readers by whining about who pays the most taxes…and how the rich are getting richer. More than 300,000 people now earn more than $1 million per year — up sharply from the number in 2000. Well, bully for them. But envy is a strong emotion…it keeps the mob stirred up. And the mob buys newspapers. (Incidentally, this ‘mob mentality’ is precisely what our latest book, Mobs, Myths and Messiahs, is about. It will be available for preorder soon — stay tuned…)
But the important story is the decline in incomes themselves. How is it possible? In the entire second half of the 20th century, incomes fell only in one single year. But they fell every one of the first five years of the present century — during the biggest housing boom ever. And, oh yes, this was also the period when all those marvelous other trends were supposed to be paying off — globalization, computerization, industrialization of Asia…and most important, the spread of the Theology of Capitalism.
By the time you wade through the economic doublespeak and disinformation, you think:
Wait a minute…if we’re all becoming capitalists…how come we’re not getting rich?
Ha ha ha…the joke’s on us…find out who’s not telling you truth…
This is not real capitalism, dear reader. This is the Theology of Capitalism…and it is a fraud.
And here, a dear reader writes with advice on our move to Florida:
"I read with great amusement about your decision to not live in Florida instead of not living in Maryland, in order to save on the state income tax.
"As someone born and bred in Baltimore, I can empathize with your plight. However, while there are seven states in the U.S. that currently have zero income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming), one or more of these may have to switch in the future to an income tax, because of difficulties in obtaining sufficient funds through property taxes and similar methods.
"Florida is one of these states. Due to shortfalls for political and other reasons, as well as rapidly falling real-estate prices in that state, Florida may be forced to enact an income tax at some point. It would be a shame to not live in Florida for income-tax reasons just in time to have to not live somewhere else.
"Alaska is probably the safest in terms of always having zero income tax. Because of its heavy per-capita royalties from oil drilling and gold mining, it will always have sufficient funds even if politicians go wild with spending. As an extra bonus, as an Alaska resident, you will get a check for roughly one thousand dollars per person each year from their permanent fund.
"Texas is probably the second safest not to eventually enact an income tax. In addition to the obvious oil royalties, there are so many folks with concealed weapons that no politician would dare to even suggest enacting an income tax in that state.
"Finally, there’s Wyoming. You don’t think Dick Cheney would allow an income tax in his home state, do you?"
"Hey kids, how about moving to Alaska or Wyoming instead of Florida?"
"Great…I always wanted to live out west," said Sophia.
Our Baltimore HQ reports that the weather has been rainy and chilly…but we’re sure it’s nothing compared with our disappointing summer in Europe. When it wasn’t actually raining, the weather has been cool and cloudy. Normally, we don’t use the fireplaces until late September or October, but this year we’ve already begun making a fire in the kitchen.
Last week, we pulled the old rowboat out of the barn, painted it, repaired an oarlock, and put it in the pond. But it has been so cold and rainy that no one has used it.
Yesterday, Damien and Henry spent all afternoon, working in the rain. They were setting some large, white stones around the flower garden in order to make a border. By 6PM they were soaking wet, so they came in and had a cup of tea in front of the fire.
Meanwhile, Sophia and your editor spent the afternoon painting windows. Painting is good for conversation.
"Have you heard from Maria?" we asked.
"Not a word…I think she’s very busy."
"What is she so busy with? I haven’t heard from here in a week. Normally, she calls me almost every day."
"Well, she’s looking for work. She did that TV pilot…for example. She showed me the script. It was so trashy she didn’t want you to see it. It’s about young, airhead celebrities in London. They just talk and go to parties and events. It’s all about getting out of limousines at the right time and the right place, so the photographers will take a provocative photo and you’ll get your picture in the papers."
"That doesn’t seem like the right part for Maria."
"No. But she’s just starting out…she has to take whatever she can get. And with a little luck, the pilot won’t work so the show will never appear on TV… But I think there’s more going on…if you know what I mean?"
"No…what do you mean?"
"Well, maybe she’s not calling you because there is someone else in her life."
"What? You mean, a boyfriend? A serious boyfriend?"
"Yes."
"You mean, I’m not the most important man in her life anymore?"
"It was bound to happen some day, Dad."
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.
