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Sunday, June 05, 2005

Economic Bulls or Blunders

Last year at this time I made a blunder and figured interest rates would not spiral upwards. Because of the Fed interest rates are continuing to rise, while mortgage rates are just where they were a year ago. The wealthiest Americans are being bailed out while the middle class already deeply in debt is going to take the full force of the Greenspan correction. The cat and mouse game of oil prices and rate increases continues with no one knowing who’s the cat and who’s the mouse. Bankruptcy legislation, credit card spending and huge deficits have the Washington Elite running scared ready to pull the plug on the middle class.

Economic Bulls or Blunders 04

By Randy Lockdall

When I was a boy I saw most of the people around us worked for factories or in schools or on farms. Not so different from today except for the a few simple changes in the economic structure in Indiana. Smaller farms have been replaced by bigger more efficient farms, which of course use fewer people because of larger combines and tractors.

Schools have also followed the same patterns with smaller schools being replaced by larger more efficient schools. Factories too have been gobbled up in corporate mergers. Many jobs have been sent overseas or down to Mexico. In the early seventies a few farmers had large debts, but fewer people used credit cards except for fuel credit cards and shopping credit cards like Sears.

Ironically, this means our schools should be better than ever. Our farms should need fewer subsidies as they have become so much more efficient and Americans should have saved more money as they have reaped the harvest from these corporate mergers. Without a second glance most people would agree that none of this is true. Our schools are generally not performing, where we would like in comparison to our foreign friends in Europe and in Asia. Manufacturing jobs have been replaced with generally lowering paying service jobs with less job security. Yet things are still very good for most of us.

Why are things still better for most of us than our parents? The answer is debt? The ability to finance, refinance, educate and then finance some more is very common here in the United States. Why would this method be successful when all matters of logic tell us this simply cannot be the state of affairs. What is the truth? The simple fact is that the trickle down Reaganomics philosophy has worked, but not in the way that one would have thought at least not for many Americans.

True, many corporate mergers have produced rich stockholders and company CEO’s. There are fortunate farmers who have doubled and tripled the size of their farms and now have more equity, but more debt. Our schools have increased pay to teachers, professors and instructors and these types of positions are as hard as ever to receive even with the right qualifications.

Suddenly there are more billionaires willing to loan their funds to keep the process going. Our politicians realize that economic failure means so long from a political standpoint. Economic theory allows us to see that lower interest rates continue to stimulate the economy. We continue to finance, refinance and spend. Many people in the US have even declared bankruptcy, but this no longer means that borrowing money is over like thirty years ago. Today the lack of spending sends fear through Wallstreet like never before. So we again lower interest rates and more people go deeper into debt, spending and quite frankly enjoying the good life even more. So what could possibly be wrong in the Bush Clinton Bush Camelot?

Nothing as long as the bank continues to loan money and people like me continue to increase my assets. The Billionaires have become even more plentiful for there philosophy looks like it could go on and on. In fact these Billionaires now have created something close to monopoly, but usually it’s more like oligarchy (meaning a few companies control certain industries.) Coke and Pepsi, General Motors and Toyota, Citibank and Chase, Comcast, Cox and Insight. Microsoft and Microsoft. Is all this so bad? Not really. Of course there is the old proverbial quote that the borrower is servant to the lender.

Banks do own the title to numerous homes, cars, boats and even churches. We the people in turn give them what these billionaires want even more; Peace, Power and few problems. Suddenly tolerance is expected for almost anything which might change the status quo. We create more right wing radio stations to pound the truth about how much good unlimited prosperity by the Billionaires of the world do for all of us. We must constantly be reminded that professional salaries of athletes and corporate CEO’s should have no limits as they pound into our brains the laws of supply and demand.. Camelot is saved and the possibility of rebellion has been squashed again for the time being. Yes life in America is good, but there is this feeling, this knowledge of truth which we know we shouldn’t ignore.

Like playing Monopoly we know that there is eventually one winner. Monopoly of course in the real sense is the ability to take over a market completely. This is done by always being able to lower our price significantly to drive out competitors or providing regulations which create this pure monopoly through government. Creating the monopoly is an art designed ultimately to own something that we control completely and then we can demand whatever price we choose that the buyer is able to pay. I notice this when I want to buy certain software as a small business owner. The price for the same product to the government, military, large corporations or even educational institutions is significantly lower. They pass this regulation which says if your not one of these guys you must pay a lot more. Paradoxically, those that are employed by the institutions who make far more money than I are then given more privilege so they can enforce monopolistic behavior and more discrimination, which of course they vehemently say they oppose.