A pitch to the board....

If you look back in history, what's happened in the last couple of years has happened before. Look back to the "gilded age" when wealth grew so outrageous that many rich people ended up having to leave the country because they became scorned by the masses.
We all saw the growing disparity between the wealthy and the poor, and that's not the mark of a healthy society. Particularly when the wealthy are getting richer BECAUSE the poor are getting poorer.
When you read about changes in accounting rules, legislation that favors a particular company or industry, and the Dow replacing weak companies in the index with stronger ones, it's not a surprise what we're facing now.
In a lot of ways, what's been going on in Wall Street the last 20 years isn't a whole lot different from what happened to baseball with steroids.
People knew what was going on wasn't healthy, or at least chose not to find out as long as the money was coming in.
The good news is that while pretty much all that was "built" in the last 15-20 years is gone, most of that "wealth" was fake anyway.

Those Biz shows are a joke. If I was running one, I'd give each regular analyst "$10,000" on their first appearance and along with their name and occupation, I'd list their "current portfolio" to give folks an idea about how smart they are.

 

What has been destroyed most vitally is the notion of a political commonwealth -- that there are some things -- in fact, many things -- that we hold in common for ourselves and our posterity, as the powdered-wg guys put it in Philadelphia. The most important of these is The Government -- which is all of us. It's basic purpose as a commonwealth is laid out quite plainly in the preamble to the Constitution.

"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.”

First three words are the most important. (Also why states rights loses most of the arguments, but that's neither here nor there.) No American can talk about The Government as though it were some distant, alien entity. Not without abandoning the fundamentals of what makes the country unique. Yet that has been a presiding dynamic of the political system for nearly 30 years. Self-government has atrophied -- through neglect and abuse. To talk about The Economy as wholly divorced from the political system is equally destructive. Economic oligarchy breeds political oligarchy, with which latter democratic structures cannot survive.
None of this is partisan. (Although I think history argues that modern "movement" conservatism used all of these destructive tendencies to selfish partisan advantage. Another thread for that, though.) It is past time to realize that this system doesn't run on automatic pilot.
Conclusion of the foregoing.

 

The steroids in baseball is a good analogy.

For a few years Barry, Mark and Sammy were putting home run numbers on the board that were illogical. Of course we look back on it all now and cannot believe that Brady Anderson hit 50 home runs in a season.

As we look back on a couple who makes a combined $75,000 owning a $500,000 house, we have to know that this cannot continue. You cannot gamble your financial future on simply flipping your house in a few years if you have a subprime mortgage.

Starbucks is another perfect example. Their business model is based on people terribly overspending for something they can easily buy elsewhere for 300-400% less. The gross overexpansion of corporate America should have been a red flag as well and it's not just coffee.

For example, I was invited to go fishing with a bunch of buddies this past summer. I do not fish, so I needed to buy some gear. Here were my choices withen a three-mile drive from my house.
Target
Gander Mountain
Bass Pro Shops
A local outdoor place
Wal Mart (two)
Dicks

Plus, I had the internet if I needed it. Anyone can tell you that these are way too many places for me to buy a product. If I decide to drive 10 minutes, that list doubles.

 

Their supply is outweighing the demand in the area.

 

For the action part, let's all start making donations and convince others to make donations as well to homeless shelters, soup kitchens, food banks, etc. to give a helping hand to those who need it.

 

Doesn't it depend on the product?
Within a 3-5 mile radius of me there are half a dozen convenience stores, 5 or 6 supermarkets, a Target and a Walmart, I can go to if I need to buy soup, cereal, milk, toilet paper, etc.
So that's over 12 stores I can go to for those products. Would you say that supply of those products is outweighing demand?

 

You need to eat everyday.

You do not need to fish or hunt everyday.

And yes, you might have too many grocery stores in your area.

 

"To shop or not to shop" -- that's a major part of the problem.

Bush told us to go shopping after 9/11. That propped up the economy temporarily-- but what we were buying wasn't made in the USA. So American companies (like Wal Mart) might have taken a cut, but China also took a big cut.

That's the crux, folks.

Obama et al is asking us to "behave responsibly," and Americans are doing just that-- not spending.

I took my kid to the mall yesterday to play in the free kids area-- it was packed, but the rest of the mall was a ghost town. And it was that way over the holidays, too.

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I bought my kid a fleece jacket for Christmas. Got a great price on it.. $19 I think. I noticed it's been holding up pretty well, so I looked at the tag. Made in the USA. You've got to be shittin' me. That is the first item of clothing that I've seen 'Made in the USA' in friggin' years. I wonder what the story behind that jacket is. Why so inexpensive? How did it end up in that store with mostly Made in China and Made in India stuff?

Why can't what made it possible for that jacket to exist be applied to other industries?

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I'll tell you what's going on in the Lugnut household right now.

We've been planning to do some work on our fixer-upper house for about 6 years. We finally got the approvals, permits, plans, etc. We sent the project out to bid-- and 6 contractors wanted the job-- which is a lot.

The winning bidder is basically doing the project at cost. He's a smaller operation, and without this job, he will go out of business. He simply wants to keep his guys working. He had recently been awarded a 1.5 million dollar job, but the brakes were put on it when the economy turned bad.

So we felt like we were doing something positive and contributing to the economy by doing this.

Amazingly, we have found 2 different banks that will loan us the money to do it. We initially tried to get it done through our mortgage company, which had given us the best rate on our current mortgage, but they simply couldn't do the deal. A friend suggested we try a bank. Huh? We keep hearing banks aren't loaning. Well, they are. Not as much as they would have a year ago, but enough.

Well, Mr. Lugs's job is as unsafe as anybody's. We have spent some sleepless nights the past few weeks trying to figure out if we should pull the trigger on this or wait.

We are people with a job and with a bank that will loan us money, and we are scared shitless to spend. And it's money that would be well spent, because it would keep local, legal workers in business-- and many of the materials used for the project would be regional as well. But we're scared to do it.

Multiply that feeling over an entire nation.

 

We have had some recent building projects (around 10 million dollars a a pop) come in 20-25% below what we anticipated.

In the past 10 years, everything, and I mean everything, came in at 5-10% over what we thought it would cost.

The sad thing is, though, we are finished building for at least five years after these two projects.

Hopefully we will have the funds to upgrade our existing buildings, which we are hoping will follow the same trend of being much cheaper than the past 5-10 years.

 

We're putting off some work (windows) on our fixer-upper home iand instead paying off all non-mortgage debt and we'll likely consider a mortgage refi to a 15-year at some point this year if rates go down a little more. And we're in very good shape (safe steady income, manageable debt) compared to most of the folks we know, many of whom are concerned about job cuts, etc.

What I don't think anyone in Congress understands, however, is that a $500 or $1,000 tax cut isn't going to get get middle-class people spending more. OK, maybe for about a week people who don't have kids or own homes will run out and buy a new flat-screen TV or game system.

People should be saving and paying off their debt, though and it's irresponsible not to encourage that behavior. For a period of years, folks overspent their means. Much of it was sheer stupidity, of course, but a lot of it was because the false/inflated economy (stock and home values) caused them to think they were wealthier than they were. Sure, values go up and down in markets and people should understand that and people should have seen it coming. I'm glad I was more cautious than most.

But, to me, there was also an element of fraud involved in the way the markets were driven up and the way in which a small, privileged element of our society in concert with corrupt political practices knowingly creating this false market and took full advantage of it. So, yeah, a lot of people were stupid but a lot of people were victims, too.

Regardless of who is to blame and there's plenty to go around, we need solutions that go far beyond piddly tax rebate checks and more supply-side economics that fatten the rich and never seem to work their way to the middle class. My feeling is that the country isn't getting better economically until their is a direct and dramatic infusion of capital to the middle class. I don't know what form this takes but it's the only way consumers are going to regain confidence.

To me, making low, fixed interest loans widely available -- not just to those facing foreclosure -- would be the one thing that would help get me spending again. But that doesn't seem to be happening despite all of the bailout money we've given to banks.

 

Scribe,

Just wanted to say I appreciated your original post. Didn't really know how to respond, other than taking a wait-and-see approach. Thanks for your effort.

-Beetus

 

What in the hell was "prophetic" about foreseeing last spring an economic collapse of this magnitude? The train has been rolling down the tracks for years. I'm only surprised it isn't worse than it is.