Smarter Than a Fifth Grader

Smarter Than a Fifth Grader
Dave Speck

Alright, I’m not going to quiz you on your fifth grade recall, but why not take a quick look at one of our elementary school topics, The US Constitution.

There is even more to learn about the origins of our country and the grand visions our forefathers had by doing a little poking around, and I bet you’ll be surprised. But, let’s look at the constitution first, and try to get a feel for what we, as Americans, are part of.

To start with, the preamble puts the entire concept in perspective:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Just think about that for a second. This is about “We the People”. Not about a government, but about how we the people are defining how we want our government to run. And, what is the purpose of our coming together as a government? It is to provide a court system, provide domestic peace and quiet, provide an army, and provide systems for us to help one another in times of need, called WELFARE.

Another most interesting point to note is that there is only one of the listed purposes that is not capitalized. Look back right now and see which one. Now, why do you think that is?

In fact, the word “welfare” is only used twice in the constitution. The second referece is in Section 8:

The Congress shall have Power To lay and collect Taxes,
Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

It can’t be more obvious that our forefathers were intent on helping one another and believed that as Americans, we would all want to do that.

This concept is pretty foreign for a Conservative, as they are always saying it’s just awful to think of collecting taxes to help one another.

In conclusion of today’s investigation, it’s immensly important to reflect on the concept that our government is not elected officials or politicians, but our government is “We the People”. Get out there and tell your representatives that you expect them to live up to the expectations of our forefathers. Get involved and stay involved and expect everyone else to get involved as well. Oh, and, yes, read the constitution and Declaration of Independence and The Federalists Papers (the marketing drive for the ratification of constitution) some time.

Deregulation and our Current Crisis

Deregulation and our Current Crisis
David Schlecht

Before we begin, let me suggest that you take a quick trip to Devilstower’s page and get a black and white list of America’s accomplishments over the past 8 years and beyond. It’s impressive, to say the least.

Continuing from our discussion of credit’s effect on the economy, let’s look at the disastrous effect deregulation had on the current mess.

A quick trip down memory lane, or down the pages of Google, will remind us of the rigid and difficult changes that were necessarily implemented to lift us out of the last Great Depression. Of the many regulations implemented, most were geared towards reducing risk in the banking industry.These regulations helped usher in decades of safe and reasonable prosperity for America.

Before the last Great Depression, the banks were freed up to speculate to their hearts’ content. That was Free Markets at it’s height. Many banks had invested heavily in the real estate boom of the 20s. When home prices fell, like they did here the past 8 years, many of these institutions began to falter. At that time, many of the banks were closed for a banking-holiday and restructured to stop the run on the banks and to allow the banks to understand and make changes for the new regulations.

Also, at that time, the government stepped in and guaranteed the bank accounts, helping to restore some trust in the banking industry. Many of the banks were simply bought by our government and restructured and then sold when they were, again, profitable. It worked.

Nobody ever accused George Bush or the Republican party of being intelligent, but they could have at least consulted with someone who knew how to read history books. Instead, what they did was flood the faltering banks with billions of our tax dollars and never asked the banks to make a single change in their greedy and risky ways. Herbet Hoover all over again. Bush never even asked them what they were going to do with our money or even asked the banks to report on their progress. Sounds like a scam to me.

So, what are they doing? They’re buying up other banks (speculating) and giving themselves and their investors the money, billions of dollars. Does that sound like a scam to you?

When our banks start to falter and crumble like the 30s, Americans won’t panic quite as bad since our government is insuring our savings accounts. But they will still panic and we may be looking at another “Bank Holiday” to help prevent another run on the banks.

There is one more crutial aspect of this that needs to be addressed. The people who caused this mess, besides the Republicans who deregulated the banks, are a small group of greedy financiers, who prefer to be called “master of the universe,” who have made billion and billions of dollars off of this disaster. The money didn’t just disappear. These “masters” need to be investigated, their proceeds returned to the public, and criminal punishment rendered.

You must be wondering, by now, exactly what happened to all those regulations put into place after the last Great Depression. Remember all the cries for Let The MARKET Decide? Remember, all the huffing and puffing about “The FREE Market will fix it”? There have been numerous safeguards loosened up and many more just plain ignored by the Bush Administration, but the worst thing was actually done by a Republican Congress and a Democratic president, Bill Clinton. He allowed the repeal of the Glass Steagall Act which allowed the banks to get back into doing the same greedy things they did in the 20s and they have gotten stinking rich while our economy crumbled.

The Effect of Credit

The Effect of Credit
David Schlecht

As we’ve discussed before, the redistribution of 90% of our country’s wealth to the top 1% has been a fundamental contributor to our current economic disaster. Dropping the top tax rate from 90% for billionaires, which it was in the 60s, to less than middle wage taxes has both helped cause this redistribution and helped cause the economic disaster by moving the tax burden onto the backs of the workers.

As the middle and lower wage earners income dwindled, the workers have been making up for the shortfall by borrowing more. The average American family today has $230,000 in debt, including home mortgage. That’s roughly six years of gross wages of the average wage earner.

Compare that with 30 years ago, when the average family debt was less than three years income.

Keeping this additional $200,000 in play has helped keep the economy looking good. However, eventual, the average Joe would reach a limit and would no longer want to or no longer can continue to borrow that much. When that happenes, which it has, then the economy grinds to a halt.

The only way to get the money back into the water hose is to push it in from the bottom, the low and average wage earner. These people will spend 100% of what they make where the billionaires will only spend a small fraction. A small fraction won’t do anything for the economy.

Before the era of Voodoo Economics, it was difficult to get a credit card, and it was almost impossible to get a loan for more than 80% of the value of the home. Today, everybody’s shoving credit cards at you and most people have their equity loans on their homes, charged to the maximum. What a contrast.

if it wasn’t for our credit explosion, we would have felt the effects of Voodoo Economics much sooner. Now, however, those responsible for this mess can say it wasn’t their fault since it didn’t happen immediately. Don’t be foolish enough to believe them. Voodoo Economics is the cause of this economic disaster just like it was the cause of the last Republican Great Depression.

We’ve so far discussed most of the major contributors to this mess we call the current economy. Next we’ll discuss the last major contributor that helped cause this mess as much as it helped cause the Great Depression of the 30s: Free Markets, ala deregulation.

Oh No, Liberal Commies want to Redistribute Your Wealth

Oh No, Liberal Commies want to Redistribute Your Wealth
David Schlecht

That is what the conservative parrots keep screeching. Liberal Commies want socialism.

For anyone who has been paying attention, we have been experiencing wage redistribution since the Reagan years. Just look around you. The middle class has lost over $4,000 per year in spendable wages over the past 30 year. The number of families in poverty has skyrocketed. All this time, the wealth has been redistributed upwardly with the top 1% of our population hording 90% of the wealth in the country.

This isn’t the way it was 30 years ago. We have had a major redistribution of wealth upwardly and the economic meltdown is a major symptom of this.

Yes, most Americans want things to go back to a reasonable distribution.  But, the top 1% are doing everything they can to keep the money flowing out of our bank accounts and into theirs. I guess billions of dollars just isn’t enough for some people as long as someone else isn’t yet starving before them.

It’s time for America to take back their economy and stop listening to the billionaire corporate media telling us how it’s communism to expect them to share with us the millions they are making off our labor.

We need to redistribute the billions of dollars that have been stolen from the workers and stolen from the coffers of our government. It’s time to re-implement the 90% tax rate on all income over three million dollars, and make it effective today.

That, my gentle readers, is the only way out of this depression.

Next post, we’ll discuss the impact credit cards have had on the current financial meltdown.

Demand-Side Economics

Demand-Side Economics
David Schlecht

Revisiting the previous post, Supply-side, or Voodoo Economics is the Trickle-down disaster that our world is currently suffering through.

When money is directed at the top of society in the hopes that it’ll trickle down to the rest of society, the economy suffers a reduction in spendable wages, thereby causing recessions and bubbles and bursts from speculation.

Viewing economies from the perspective of demand, the more spendable income the spenders (lower and middle class) have, the more money that goes through the economy. When the greedy get in power, they start taking more and more of the spendable income from the other classes until the system melts down.

That’s were we are, today.

Where do we get enough money to give to the spending classes to reinvigorate the economy? Before saying, borrow it, realize that in America, every single working family pays on average, $3,000 in taxes to pay for nothing more than the interest on the deficit spending of the prior three Republican presidents, Bush, Bush, and Reagan. Borrowing another trillion dollars will only cause greater problems as less money is spendable since more has to go to pay the interest.

The only way to correct the imbalance is to correct the distribution of wealth. While the rich have been getting richer off the backs of the workers, they’ve been giving less and less for their work. Repaying the debt to the working class is the only way to get the economy back on track. This means the corporations must not only start paying a living wage ($40,000 minimum wage) but pay back what they’ve stolen from the workers through immediate tax increases. We need to return to the 90% tax rates from before Reagan.

Another available source of revenue which won’t add to the interest burden is to increase tariffs. This will help raise the wages of the spenders while bringing in tax dollars to help with the works projects.

Sure, this is painful, but fair, and furthermore, the only real solution to this disaster. Roll back the wage distributions and repay the money stolen from the workers.

So, what is in store for our world economy? A lot of short term pain and suffering, but within a year or two things will start to turn around, given the right decisions by our leaders. In the short term, the governments will find difficulty in getting credit for further deficits and interest rates will climb considerably.

This increase in interest rates will hurt those who have maxed out their credit cards and maxed out their mortgage lines of credit. However, most people have quit borrowing for everything and so the interest rate increase will not affect them as much.

Since governments won’t be able to borrow more money, they will have to resort to printing more money (or issuing credit to the lending institutions). This will add more to the interest rate increases.

Is Obama up to the task? If not, then what should have been a 1-2 year turnaround will become 4-5 years. That’s an eternity living out of your car.

Voodoo Economics 101

Voodoo Economics 101
David Schlecht

Voodoo economics, also referred to as Supply Side Economics is one of the primary causes of our current financial disaster and many of the state governors are intent on using this same Voodoo to get us out. Nonsense!

In short, Supply Side Economics is built on the premise that “If you build it, they will come.” In other words, directing money at the wealthiest fraction of people and corporations will provide more jobs. Let’s see how this plays out.

Imagine that you’re a multi-billionaire and the US taxpayers give you an additional million dollars. You already have just the right number of employees in your corporation. What would you do with your extra million? Hire more employees? Of course not, you already have the right amount. Would you pay your employees more? Don’t make me laugh. Would you provide more benefits or a better work environment for your workers? Of course not. If they’re content to work under the existing conditions, you wouldn’t waste a million dollars changing it.

So, what would you do?

The same thing our ultra-rich have been doing with their increased revenue, speculating. Over speculation in technology sectors was the primary cause of the dot-com bubble and burst. Speculation is the cause of last year’s oil price spikes.

In conclusion, Voodoo Economics causes no benefit to the economy by way of citizens buying more things and stimulating the economy, but cause devastating bubbles and bursts.

Is this starting to sound familiar, yet? It should.

We all know that economies are driven by supply and demand. The supply must balance the demand. When there is more supply than demand, prices drop and businesses go broke, laying off workers. When there is more demand (from increased middle-class wages, unemployment benefits, higher minimum wage…) than there is supply, prices go up and new businesses open up to provide more product, thereby causing the supply-demand dichotomy to balance and prices to fall back to normal.

So, if you were a governor in a state where the economy was failing, what would you do? Reduce the spendable income of the average person or increase it? What are the governors doing in the US? Many are cutting wages and laying off people. What is this going to do to the states’ economies?


Next post, let’s talk about demand-side economics and see if this will really save us from the next Republican Great Depression or is it too late? What’s in store with our economy?