PURCHASING
POWER ON THE FINANCIAL CLIFF
A l c h e m y R e s o u rc e s , L L C
Copyright Copyright @ 2013 by Alchemy Resources, LLC All Rights Reserved
www.informativeoutlook.com
I. CONTEXT: FINANCIAL CLIFF
We a r e e x p e r i e n c i n g t h e w o r s t e c o n o m i c
downturn since the Great Depression of 1929. Given that the economy has historically experienced economic contraction at least every 10 years, with notables such as the 1970s Oil and Gas crisis, Savings and Loan crisis of the 1980s and 1990s, and the Internet/Technology Crash of 2001, this is not your ordinary recession. We cannot compare this economic contraction to those we have experienced in the recent past. A “recession� is a significant decline in economic activity spread across the economy, lasting more than a few months, and impacting the Gross Domestic Product, real income, employment, industrial production and wholesale-retail sales.
Yes, this is definitely a recession, but it may be
more than the Great Recession, as it is commonly referred.
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This economic recession has the elements of
1929---stock market losses, banking corruption, housing crisis, diminished workers’ rights and high unemployment.
As in 1929, the Glass Steagall Act was not in
place. The Glass Steagall Act was a legislative move to protect consumer banking from commoditization. The Act was enacted in 1933 in response to the banking corruption and economic destruction of 1929. The Glass Steagall Act established the Federal Deposit Insurance Corporation (FDIC) which insures banking deposits and it separated commercial banking (i.e. personal mortgages and lines of credit) from investment banking (401ks, annuities, stock accounts).
It also
regulated the speculation of bank credit so that there was no undue use of bank credit for the trading of securities, commodities or real estate. All of this was in response to the rapid and high number of bank failures that occurred during the 1929 Great Depression.
In
other words, the Glass Steagall Act was put in place to stop the greedy and corrupt behavior of bankers.
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The Glass Steagall Act was repealed in 1999. With its repeal came unmitigated banking corruption that allowed houses and mortgages to be used as commodities.
We returned to the unregulated banking world of 1929.
And, the unregulated financial markets meant that
the consumer, the average American, was in peril---again. Bankers decided that commercial banking accounts could be treated in the same ways as investment banking accounts.
Why did bankers decide to take housing and turn
it into a commodity? Consider that the prior recession of 2001, the Internet Dot-Com bust, left a bludgeoned stock market.
After the 2001, Internet crash, bankers
needed a way to “recover� Wall Street.
Investors who
lost substantial wealth no longer wanted to invest in the stock market. Instead, investors chose to invest in real estate. The low interest rate environment encouraged 6
Americans to borrow money.
Those with the greatest
dreams of upscale living responded to the stimulus of low interest borrowing with high debt mortgages. As Americans left the stock market and chose to put their life savings and future aspirations in real estate, the bankers took notice.
Housing, specifically mortgages,
were no longer a protected class due to the repeal of the Glass-Steagall Act.
Mortgages instantly became a
commodity to be traded in the form of mortgage backed securities or derivatives. Clearly, Wall Street targeted the “profits� of appreciating home values.
Unlike 1929, we have the Fair Labor Standards
Act.
This Act was passed in 1938 so as to allow for
more equitable pay and regulated hours for workers. The Act is the basis for minimum wage, overtime pay, regulated hours and child labor laws.
The economic expanse of the American middle
class has greatly benefited from both the Glass Steagall Act and the Fair Labor Standards Act. The Glass
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Steagall Act protected our private personal banking accounts and the Fair Labor Standards Act gave us the ability to work with some basic protections and dignity.
Also, unlike 1929, more Americans owned homes
and were participating in a home financing and home equity loans. Additionally, today Americans have credit cards.
The modern invention of the credit card has
allowed Americans to debt their lifestyles to the gross amount of approximately $14 Trillion.
The economic downturn of 2008 was so dramatic
that Congress was compelled to act.
The rapid
deflation of assets, such as houses, created widespread panic.
In response Congress enacted the Emergency
Economic Stabilization Act of 2008, commonly referred to as “the Bailout� of the US financial system.
The
Bailout authorized the US Treasury to spend up to $700 Billion to purchase distressed assets and supply cash to the banks.
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Is this a recession or depression? Although some will engage in a lively debates about the technical differences between a bad recession and a depression, on the street and in the real living the technical differences are meaningless. This is the 2 nd Great Depression.
The Mayan calendar predicted the end of 2012 to
be the end of the world. The “end of the world” might be best understood as the end of a historical age. The prior decades had allowed for a burgeoning middle class.
In fact the time period between 1947 and 1979
are considered America’s Age of Prosperity.
Working
class Americans were able to get educations, buy cars and buy homes. The purchase of a home was the hallmark of upward mobility.
Americans could work
and a number could retire. From 1980 to the present America has been in various stages of economic contraction, America’s Age of Recession.
Imagine a
world where the dream of work ethic tied to upward mobility has been quashed. We may be at the end of a
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historical age; it may be the end of middle class aspirations.
Wealthy Americans, those flush with cash, are
living better than ever.
For them this economic
downturn is like a big garage sale. They can experience America at a discount and they have the cash to enjoy it. They can even participate in the expanse of foreign economies. This is the proverbial 1%. It is the other 99% of Americans for whom the future is in question. In fact it is the very apparent wealth inequality that has made this economic recession so painful. How dramatic is the difference between the have-gots and got-nots? According the Central Intelligence Agenc y’s World Factbook, the United States ranks on par with developing countries such as Ivory Coast, Jamaica and Malaysia in ter ms of wealth disparity and inequality.
Latest reports show that middle class Americans
have lost 40% of their wealth since 2007!!!
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There are approximately 305 Million Americans.
37 Million Americans are renters. 24 Million Americans own a home with no mortgage. Among the 55 Million American households with mortgage, more than 24% of the homes with mortgages, or 12 Million, are worth less than the mortgage, meaning that they have negative equity. That number only addresses 2010 statistics and does not include mortgaged homes with the same problem in the years 2008 and 2009 where the homes may have already gone into foreclosure and more recent figures.
By most reports, real estate has lost $4.7 Trillion
in value.
Much of the worst housing problems are in
Nevada, Arizona, F lorida, Michig an, Califor nia, Colorado and Georgia, however, no one is exempt from the crisis. Additionally for those homes technically not in negative equity, there is still the issue of little to no appreciation in value in the face of continued home expenses. In other words, except for rare exception, all the homes whether with a mortgage or not, face tremendous downward pull in value.
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As of the first quarter of 2011, 49.1% of the
American population lived in a household where at least 1 member received government assistance.
The number of
Americans receiving money
directly from the federal government each month has grown from 94 M in 2000 to more than 128 M today.
Unemployment is exorbitantly high. Although the media reports it to be around 8.2%. These figures are greatly distorted. Some economists show the real unemployment rate to be 22.5%. To be more accurate, less than 59% of working age Americans have a job.
We are on a financial cliff.
Why a cliff ? We are on the edge of our reality
and facing great uncertainty. The dramatic metaphor is of a cliff because like any climatic point, the ending feels provocatively unclear.
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Fear? Well, yes. By most reports most Americans are afraid and uncertain. What are we afraid of ? Perhaps we fear the constant uncertainty. Are we facing a precipitous fall of asset values and the currency or are we facing the stagnation of wages and assets, or both? Stagnation of income may be just as perilous as a dramatic fall in living standards. Probably at the core though, we fear the further erosion of our purchasing power.
Purchasing power?
Purchasing power is related to the number of goods and services that can be purchased with a unit of currency. By definition, the purchasing power of a dollar decreases and the price for the good or service increases. If your income stays the same, but the price of goods and services increases, your purchasing power, ability to afford those goods and services, decreases. Purchasing power is the real value of our dollars in the marketplace. Our lives are shaped by our ability to afford the things we want and need.
It is the ability to afford our lives that is on the edge of a cliff. 13
In 1983 the bottom 95% of Americans had
62cents for every $1 in debt. As of 2007 the bottom 95% of Americans had $1.48 of every $1 in debt.
In 1970 1/50 Americans were on food stamps;
today it is 1/6 Americans on food stamps.
The dollar has lost over 90% of its purchasing
power since the Federal Reserve was established in 1913. Today’s purchasing power of $1 is equivalent to 4 cents. Since the 1980s the dollar has fluctuated dramatically. Many households did not immediately feel the drop in purchasing power because of the access to credit. The easy access to the credit markets masked the true cost and affordability issues of goods and services. It became oh so common to be in debt for all major purchases. In the 2000s the debt markets peaked. And, since 2007 most households have been in a state of serious deleveraging.
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The burgeoning personal debts are partly due to
the decimation of our purchasing power. Some people wonder if they are simply shopping “too much” or if their tastes have gotten “too expensive”. Maybe that is true for some. The true problem, however, is that essential items for living---items that it is difficult to reduce such as housing, healthcare and education have become unaffordable for most Americans. For most people no big ticket item, like a car or a house or education, can be purchased without applying for credit. In fact in the sale of these items, the salesperson usually presents the cost in terms of the “monthly payment”, not the total bill.
In the 2000s for the average family these essential
items amounted to approximately
75% of their
discretionary income. Compare this to 1973 where those same items comprised approximately 50% of their income. In other words, easy credit hid rapid inflation. With this exponential inflation hidden from the average American’s sight, they could not make a real assessment
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of costs, prices, values or their salaries and incomes. All the numbers appeared foggy.
As part of the Bailout and a stated effort to
stimulate the economy, the Federal Reserve and central banks have reduced interest rates. Reducing interest rates makes borrowing cheaper, allows banks to reserve more cash which increases the amount of dollars on the street‌.and reduces the value of currency. You know‌. the dollar.
In other words, the dollar is decreasing in
value.
T h e Fe d e r a l Re s e r v e h a s a g g r e s s i v e l y
implemented quantitative easing, the printing of money, to support growth and employment but also increase inflation.
It is the excess printing of money by the
Federal Reserve that is supporting the stock market, and related to the market, the exports of U.S. products. U.S. companies are making huge profits from the growth of exports, but at the expense of the U.S. dollar. Also the overflow of money supply is driving investors into
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the stock market. Investors cannot get any returns from saving money in the banks so the stock market where they are seeking gains. The stock market is masked. It is as much an indication of the manipulations of the Federal Reserve as it is the profits of a business or any indication of the economy. If interest rates were raised the stock market would collapse because the truth about business revenues would be evident.
The excess printing of money along with the low
interest rate means that the dollar has become worth less.
A worth less dollar signals inflation and for
Americans it means that the cost of living is rising. In this low interest rate environment, the quality of life for most Americans has been diminished. The falling value of the currency has meant the inability for a savings account to generate interest. Those fortunate enough to have a retirement now are in fear of when to use it‌..the fear of there not being enough money to afford their lifestyle.
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Dollar devaluation and hidden inflation are in a complex dance.
Americans’ purchasing power is on the rapid decline.
Congress passed the Bailout with the stated
reason that without such legal enactment the entire economy would collapse.
Remember hearing that
certain institutions were “too big to fail”. Well, we gave these institutions that were “too big to fail” what will be our future tax dollars, and then they gave us less. Credit standards have been tightened. Personal loans and credit cards have been cut. Commercial lending is at a low, and real estate lending standards are incredibly tight. Meanwhile, the banks are able to borrow money for virtually free because the Federal Reserve has slashed interest rates to almost zero. So, the banks are able to keep a reserve of money that of course they are not lending to us and get compensated for not lending that money to Americans.
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Section 128 of the Emergency Economic Stabilization Act of 2008, the Bailout, allows the Federal Reserve to pay interest on excess reserves that the US banks park at the Federal Reserve.
In other words, the banks can make a hefty profit by not loaning Americans money.
We bailed out the banks and then the banks pushed us out the door.
Since the bailout of “too big to fail” we have dealt with the “fiscal cliff ”, Congress’ response to spending and tax cuts and we continue to face political d i s c u s s i o n s o f t h e e v e r - l o o m i n g d e b t c e i l i n g. Continuously we hear about reduced government spending and increased taxation.
Nothing has brought us back from the edge of the cliff.
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II. WHAT RECOVERY?
War power the economy?
World War II provided
the business opportunity to lift the 1929 Great Depression out of financial stagnation.
World War II
was a large infrastructure program. Guns and military products had to be manufactured. Men had to be hired to go to war. Hospitals had to be built and maintained. Veterans needed assistance.
In 2012 we are already at war. In fact, we have
more than one war and the threat of escalating conflict in many regions. Theses wars are a tremendous source of debt. Unlike World War II, these wars are an economic drain. There is the actual costs of troop deployment and military tools. As a lingering problem, we have a high number of injured troops returning home who will be financially dependent upon the Veteran’s Administration for years to come. Many are returning having lost arms and legs and approximately 1 20
out of 5 returning veterans suffer from Post-Traumatic Stress Disorder and require serious long-term medical care and veteran services.
The state of the economy is not a bipartisan
political issue. Whether it be the Democrats or the Republicans, the economy has undergone a structural change.
Whether it is Occupy Wall Streeters or Tea
Partiers, there is unanimous consent that there is a loss of structural footing. The Occupy Wall Street Protesters protest high under and unemployment of the 99% and the Tea Partiers complain that the 99% have been burdened with excessive government spending and an increase of
taxes---everyone complains about the
housing crisis. In sum, neither and Occupy Wall Streeter or a Tea Partier has a net worth statement to rest their head on at night. If the Democrats increase government spending and the Republicans decrease government spending, we can all hold hands as we stand on the edge of the cliff.
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Exert political will? Protests or even civil
disobedience present a new problem than in the past. T h e Wo m e n’s M ove m e n t a n d t h e C i v i l R i g h t s Movement of
the 1960s represented women and
African-American integration into the broader U.S. economy.
The Equal Pay Act of 1963 was passed to
amend the Fair Labor Standards Act to make it illegal for employers to discriminate based on gender. Later, the Civil Rights Act of 1964 made it illegal for employers to discriminate based on racial identity.
African-Americans and women demanded equal
access, equal pay and equal rights ... and desegregation translated into consumer participation. desegregation of
The
restaurants, stores, schools,
employment, etc‌ meant that the potential income of African-Americans could move into the larger economy.
African-American protesters and the movement of the 1960s represented the release of segregated concentrated income into the integrated American economy.
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The Occupy Wall Streeters and Tea Partiers are
not in the same position. Most of them are heavily burdened with debt as a result of having been integrated into the larger American economy. Many of them are college students saddled with student loan debts, unemployed veterans and workers who cannot cover their living expenses. As they demand jobs and equality or even some romantic notion of the status quo, they do not represent increased purchasing power or economic leverage to U.S. businesses.
In other
words, neither represents an economic bolster for big business growth.
The growth of the American economy is the
issue. Big businesses, or even small businesses, are focused on growth and they are the large employers. American employers are looking to hire where they can capture income. Other than new immigrants to the U.S. most of the growth to the economy is captured by finding cheaper workers, many of whom do not live in America. This is why there has been the constant
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relocation of manufacturing plants, assembly divisions and call centers abroad.
America has become largely a service economy. Unlike the time period of World War II, we no longer manufacture cars, machinery, electronics, etc… Most of our manufacturing plants have been relocated to countries abroad. In the absence of producing goods, we only offer services…..curated Internet content and shopping services….. Anyone need a butler?
In a largely service economy, labor is the primary commodity.
Housing has been the cornerstone mark of
economic success. The idea that owning your own home provided the foundational security that renting never could. Well, as of 2008 we now clearly know that that is not true….if it ever was really true. Homeowners are underwater on their mortgages. Some reports indicate that as many as 1 in 5 homeowners are underwater. What would reverse the downward trend in the housing
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market is demand. We need a group of buyers hungry to buy homes so as to re-inflate the housing market. A basic principle of business is supply and demand. Things of which there is little supply may arguably be of demand and therefore value and things which are plentiful are of little demand and value.
from?
Where would the demand to buy houses come Primarily a demand for major consumption
would come from an increase in wages. House prices reflect four key factors—interest rates, borrowers’ income, debt-to-income ratios and amortization. Therefore, even if house prices decline the factors that make the purchase of
a house affordable make
purchasing a house totally unaffordable for most Americans. Home prices and affordability issues are a strong indicator of middle class living destruction. If employment increased and wages rose, then the demand to purchase large-ticket items like houses would also rise.
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III. THE WORK ETHIC
Americans are generally hard working people. In
fact Americans take the shortest vacations in the Western world.
The occupational structure depends
upon a strong belief in the rewards of work and the aspirations of people who want to better their lives. And, they want to better the lives of their children and each successive generation with a strong belief that hard work spurs progress.
This belief encourages
parents to pay enormous amounts of money to either move to “better� school district, pay for private schools and hinge a tremendous amount of gratification on the future. Most Americans believe that a higher education will secure a higher standard of living.
There is constant and intense political debate
about education. It is about public schools and charter schools and the affordability of
private schools.
Qualified and unqualified teachers, test scores, and a standardized curriculum. Then there is the legalization
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of the classroom---special education, regular education, gifted and talented. This is the initial battleground for future opportunities and the regulation of
these
opportunities has become big business.
We need more skilled workers in the math and
sciences??? That sounds good, but are we not firing skilled workers? Skilled workers have been laid off in records numbers
from car manufacturing plants. Computer engineering and programming has been moved abroad.
Not accounting for the increase in population, the
increase in the number of unemployed Americans since 2008 is THREE TIMES GREATER than the increase in the number of unemployed Americans during the entire decade of the 1980s. In 2007 more than 146 Million Americans were employed. Today, only 141.6 Million Americans are employed.
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The cost of
education has increased
exponentially. Some of the price inflation is attributable to the expansion of the Federal Stafford Loans. Since 1992, after Congress eliminated the requirement that government-backed student loans been subject to parental income restrictions, were eliminated. Loans then went to people who did not have to qualify to borrow and not have to begin paying them back until after they had consume the product.
Therefore, many
graduates are burdened with thousands of dollars of debt and no correspondingly high salaried job with which to repay the debt.
Since 2008 many college
graduates have been working $9 per hour jobs at WalMart, FedEx and Starbucks.
Has education out priced the market?
Since 1986 college tuition has increased by
498%!!!
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Many alumni have started suing their educational
institutions for the deceptive advertising in terms of the employment numbers of their graduates.
There have
been more than a dozen lawsuits against law schools. A number of Brooklyn Law alumni have sued Brooklyn Law School for just this issue. The cost of attendance at Brooklyn Law School? $150,000! Although the lawsuit against Brooklyn Law School was unsuccessful, the case was most telling. In his court decision New York Supreme Court Justice Melvin Schweitzer referred to “the most severe contraction in demand for legal services this court can recall since the early 1970s.”
What about business school graduates? A number
of business school graduates are suing their business schools for also being “unclear” about the likelihood of employment after graduation.
Regardless of the outcomes of these suits, there is
no denying that the cover is being blown off !! 29
1/3 college graduates work in a job the Labor
Department says requires less than a Bachelor of Arts Degree.
In 2011 MORE THAN ½ of all college grads
under age 25 were unemployed or underemployed.
As of 2010, there were 293,029 Americans with
Masters Degrees and 33,655 Americans with Ph.D.s on food stamps.?! And, they joined the 47 Million Americans who were on food stamps in 2011. Multiple degrees will not guarantee a job in a chosen field or even above the poverty level.
Alert! Business model failure! Input exceeds output!
Skills do not secure jobs.
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Are we being trained for dead-end jobs? Since the 1980s we have battled pay stagnation with dramatically increased productivity. In other words, increased p ro d u c t i v i t y h a s n o t b e e n a re w a rd . I n c re a s e d productivity has been a curse the average worker. Employers are paying less for you labor, regardless of the skills.
1/2 of American workers earn $27,000 or less.
Today, a job must pay AT LEAST $18.50/hour to
be equivalent to hourly pay for American works back in 1979 AND it must provide employer-sponsored health insurance and employer sponsored retirement plan— under this criteria, only 24.6% of all jobs in U.S. are “good” jobs.
60% of the jobs lost during the Recession were
mid-wage jobs and 58% of the jobs created since then have been low wage jobs. ¼ jobs pay $10 per hour or less
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It’s a buyer’s market for labor.
W hat if
everyone went to school and
excelled? Imagine that we have no dropouts, no delinquents and everyone on the path to graduation. Could every go to college? Would college even be an implicit requirement? In other words, if everyone went through high school and graduated, would there not be an abundance of diverse skilled workers? If not, then college would be the finishing or supplement to an already firm educational foundation….right?
And, of
course if we are considering college, we are also considering the cost of education and, of course, our power to purchase it.
Well, even if this imagined society became real and we were flush with educational stars, would we be the designated employee?
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E ve r h e a rd o f
re j e c t i o n b e c a u s e yo u a re
“overqualified”?
It is not that businesses cannot find “qualified”
workers as much as there is a surplus of workers. There are so many people available to fill most jobs that if we did not have high school dropouts, convicted felons, housewives, etc… we would have higher unemployment. Our high unemployment rate does not even consider all the Americans that are not on the path of the occupational structure.
America has the highest incarceration rate of any industrialized nation.
1 out of every 33 Americans is incarcerated.
There is a surplus of people who are not able to work, spend, and invest in this economy. What is to happen to these extra people? Surplus people will join the welfare
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and social benefit rolls. As of 2011 there were 49 Million Americans on public assistance.
What is to happen to the increasing surplus of people on the margins of the economy?
In the midst of a surplus of Americans able to
work, why outsource work or insource in the form of hiring immigrants? American workers are now merged into a global labor pool of hundreds of millions of workers many of whom work for poverty wages.
No
legislation nor contract can protect the average worker from the downward pull of increased competition, particularly when that competition is from potential workers all over the globe who are willing to work for poverty wages and unregulated hours.
The North American Free Trade Agreement (NAFTA) and General Agreement on Tariffs and Trade (GATT) trade agreements have shuttled in globalization. Globalization is a word that sounds like inclusion and operates like exclusion. It means the extending of
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businesses to other parts of the world. In effect it is the worldwide integration of Western businesses into other regions. The West engage in trade deals with the rest of the world and in the exchange average Americans lost m a nu f a c t u r i n g, e m p l oy m e n t , a n d c a p i t a l fo r development. To be clear, Asia and other foreign nations which have financed our economy for the past bu n c h o f ye a r s h ave p u rc h a s e d t h e e c o n o m i c infrastructure and the jobs that go with it.
Did we elect politicians to send money offshore?
Jobs from the West have been outsourced to India, China, Malaysia, Turkey and other areas of the world. At the same time, increased numbers of immigrants have come into the West. The high influx of immigrants have allowed for a large underground economy.
Who
w a s h e s t h e d i s h e s, d e l i ve r s t h e f o o d , p rov i d e s housekeeping, babysits children, tends to the elderly, etc‌. On the higher skilled end, technology companies, are constantly using H1B visa workers. The nature of the H1B visa is the idea that an immigrant must be hired because there is no suitable American for the position. Certainly an H1B visa hire is not in a position 35
to demand high pay or employment perks. When your ability to stay in the country legally is based upon your employer sponsoring you, to some extent your employer owns you. In most of these places the “designated employees” have had to be trained and in particular they have had to be trained in English. This accounts for the increased demand for English as a Second Language (ESL) teachers. The increasing need for ESL teaches both at home and abroad makes clear that we are training our replacements. If this happened on the job, the training of your replacement would be an essential part of a wrongful termination lawsuit. The fact that you trained your replacement is in your face as evidence that you were qualified and competent for your job. On its own, training your replacement, is part and parcel to the globalized workforce, it can happen as part of the “progress”.
We have trained our replacements.
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IV. RIGHTS FOR SALE
Voting is a constitutional right. However, if you want your vote to count, you better exercise some purchasing power. Campaign finance laws strongly influence elections. In 2010 the Supreme Court held in Citizens United v. Federal Election Commission that campaign finance laws prohibiting corporate and union political monies were unconstitutional. Now corporations and unions can spend from their treasuries to fund campaigns. This has lead to the rapid rise of SUPERPACS (political action committees) or corporate funded campaigns. These S U P E R PAC S h ave g r e a t l y m o b i l i z e d c o r p o r a t e influence over elections. In many instances who wins an election is about who spends the most money. It’s not so much the issues or solution to public problems as much as it is about who can fund the strongest marketing campaigns.
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Now, cor porations such as insurance companies, pharmaceutical companies and the banks are enabled to spend millions of dollars in corporate funds to elect or defeat a candidate. This empowers these corporation to buy influence over the candidate’s position on issues of economic importance to their corporations.
Is democracy for sale?
Democracy, by definition, is designed to prevent
corruption and unfair influence. The individual citizen can clearly doubt whether the government is acting on behalf of their interests as opposed to the nation’s corporations. Citizens United confirms that the vote is empowered by the aggregation of financial resources to a chosen end. Money is more than just an issue. Money is speech and it is the ballot. The Supreme Court has affirmed the monetization of electoral politics.
In a system that has been completely monetized, vote with your dollars.
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V. SURVIVAL AT THE CROSS ROADS
The future is unclear; the present is hemorrhaging
losses; and, the past looks like the gilded age; survival is at the crossroads.
Of the 305 Million Americans, 146 Million are
now in poverty or low income.
Unemployment is unbearably high.
Current
unemployment numbers only reflect those people receiving unemployment insurance. The numbers do not include those who no longer are receiving u n e m p l o y m e n t b e n e fi t s , n e v e r q u a l i fi e d f o r unemployment benefits and have simply given up looking. Additionally, the numbers do not include the number of persons underemployed.
Most of the labor market has been working with
the hope that at some point, their money would work for them.
All the conversations about retirement are
essentially about saving and investing money that you worked for until the day when the money would work 39
for you. It has worked for some….mostly state and government workers who have had the benefit of unions and defined benefit plans to secure their labor and thereby their retirement investment.
The loss of union labor negotiation power has
increased over the past 30 years.
Unions have been
losing power since the 1980s; today, only 7.5% of all Americans are workers in union. Unions can no longer protect worker’s conditions.
The loss of union power
makes almost all employment strictly “at will” and very perilous for the employee. In the absence of regulated hours, vacation time and hourly pay, workers are in a perilous position.
The recent protests in Wisconsin
really showed the tension between workers and unions. It also showed where the power rest----legislation.
Since 401ks, retirement vehicles that require
personal contribution and equity investment, were created by Congress in 1978 traditional employer provided pensions have declined.
Today, ½ American
workers have no retirement plans through their jobs. 4/5 private sector workers with retirement plans at work only have 401k type plans, as opposed to guaranteed
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income defined benefit plans. Most Americans are left to themselves to save for old age.
We are at the crossroads. We are living through
one of the most historic wealth transfers. As wealth leaves the hands of the working and middle class and goes to the corporations and banks, we are at a point of serious question and powerful decision.
If education does not provide job security, then
what does?
Is labor our sole commodity?
If labor is our sole commodity then wage earning
has no end.
If your purchasing power were not devoured by
large retailers, where would you shop? Shopping at these large, globally contracted businesses devours your marketplace and economic status. Ok, you are going to talk of the good bargains, everything is something and 99 cents. Of course, the cheaper price that you pay may mean that your own goods and services are further devalued.
Your individual desire to get the “cheaper�
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price is at odds with your individual desire to live in a strong community. Don’t these large retailers hire American workers? Yes, but the majority are workers at low paying functions. The products are manufactured abroad where the hourly salaries of workers is dramatically lower and therefore the cost of production is relatively minimal. Essentially, these are high priced goods, even if they are marketed at something and 99 cents.
The purchase of high priced imported goods has denied you of the profits needed to invest in your own community.
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VI. PURCHASING POWER
When finance dictates everything in America, it regulates power also.
We cannot simply vote, legislate or shop our way
to wealth and security.
Many politicians are talking about austerity. All
the talk about fiscal cliff, budget meetings and deficit reductions are really code words for austerity. Austerity is an upscale word for downscale living---poverty. need austerity to save the economy?
We
The fight for
economic justice has largely been reduced to one about taxes, incentives to buy homes and raising the minimum wage.
Spending cuts and tax increases disproportionately place the burden of balancing the American budget on the average American citizen. 43
We have been legislated into a marginalized position.
Purchasing power?
How does the average American get empowered?
“The economy” and its condition is a by-product of active people engaged in real daily activities. “The economy” is a set of human interactions. Money is only the exchange of the interactions. Purchasing power is at the individual level of choice and decision. We decide where we spend our money, how much and with whom.
Power is the result of the nature of social relations between people.
Our behavior, whether we spend, what we buy,
where we save, etc… is the power.
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The American consumer, our spending habits,
reflect 70% of the U.S. economy. Yes, our spending accounts for 70% of the Gross Domestic Product. The behavior, particularly the spending behavior of average Americans shapes our economy. We have the ability to influence supply and demand….and the correlated pricing of goods and services. To some extent the hiring, firing and not hiring is reflective of our spending habits.
Allow the money we spend on our tastes, interests
and passions to reflect our best interests.
We cannot behave as individuals and fix our
economic issues. Individuals have limited power. They only have power when they are a part of a collective that has organized itself. Although there is plenty of mythology about the rugged individual who “pulled himself up by his own bootstraps” this is more myth than reality. You need a supportive community that has
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structured an environment where you can “pull yourself up”. The individual stands strong in a connected community. Freedom comes from solid economic footing.
The collective structures its empowerment. A strong American economy, meaning set of social relations and the related policies and laws, created the middle class. It is not in an office in Washington, D.C. or even a bank “downtown”. Each community needs a barber, dry cleaner, locksmith, etc.. And we commit to doing business and building each community. The solution is at the local level. It is right at your doorstep.
Power is behavioral organization.
Start businesses and then hire your friends. If you
don’t start a full-time business, consider part-time businesses. For those not interested in the time commitment of
running a business, what about
investing in each other? Service every need that your community has at the local level.
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Fairness is an attitude. It is the compassion and
connection that you have for those around you.
Start
co-ops for groceries and basic supplies. Look towards each other to service your needs. Find ways to have your friends participate in projects.
Vote to create your own market place. Discern the
messages of elected and want-to-be elected officials. Alert elected officials that you are only in favor of policies that support your community‌ and that you are making decisions, exercising power, to purchase supportive policies.
Vote with your dollars; spend and withhold so that you can gain the power to regulate opportunities in your own interest. Business opportunities are created. You spur the opportunity when you create the demand.
Demand is the emerging market.
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Support your local community.
The economy is
our relationships with each other. Stay connected. It is our purchasing power that is at stake. Our ability to create demand, to purchase voting power, to purchase goods and services, to secure our jobs is at stake.
Purchasing power is the number one political, economic and social issue.
Whenever you go shopping consider purchasing your power.
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ACKNOWLEDGED RESOURCES The research for Purchasing Power on the Financial Cliff was extensive and the financial and legal facts were well sourced. The following sources are acknowledged:
CIA: The World Factbook CNN C-SPAN Economic Policy Institute Lexis/Nexis National Bureau of Economic Research The United States Constitution Wikipedia Webster’s Dictionary A Bunch of Young Lawyers are Suing their Law Schools Because They Don’t Have Jobs, by Vivian Giang, Business Insider, February 15, 2012 America’s PhDs On Food Stamps, by Tyler Durden, Zero Hedge, January 8, 2013
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Banks Who Received Bailout Funding Made Riskier Loans and Investments, by Bonnie Kavoussi, The Huffington Post, September 17, 2011 Citizens United Shakes Up Montana’s Independent Political System, by Amanda Terkel, The Huffington Post, February 15, 2013 College Graduates Starting Wages Drop in Last Decade, by Harry Bradford, The Huffington Post, September 1, 2011 Debt Dynamite Dominoes: The Coming Financial Catastrophe Assessing the Illusion of Recovery, by Andrew Gavin Marshall, Global Research, February 22, 2010 Dismal Prospects 1 in 2 Americans are Now Poor or Low Income, by Associated Press, U.S. News on NBCNews.com, December 15, 2011 Economic Scene: Necessities, Not Luxuries, Are Driving Americans into Debt, a New Book Says, by Jeff Madrick, The New York Times, September 4, 2003 Economic Scene: The Earning Power of Women Has Really Increased, Right? Take a Closer Look, by Jeff Madrick, The New York Times, June 10, 2004
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Employees Work Longer Hours, Take Less Time Off Since Recession’s Start, Study Says, by Tara Kelly, The Huffington Post, October 11, 2011 Even More Millionaires Defaulting on Mortgages: Homeowners with Loans of More that $1 Million Default More Often than Owners with Loans Worth Less than $1 Million, by John Blackstone, CBSNews.com, January 30, 2011 Federal Reserve Money Printing is the Real Reason Why the Stock Market is Soaring, by Michael Snyder, The Economic Collapse Blog, January 29, 2013 Firms Keep Stockpiles of ‘Foreign’ Cash in U.S., by Kate Linebaugh, The Wall Street Journal, January 22, 2013 Foreclosure Crisis Erases Hard-Won Wealth, Dreams Even in Center of Black Affluence, by Janell Ross, The Huffington Post, January 31, 2012 Goldman Sachs Made $400 Million Betting on Food Prices in 2012 While Hundreds of Millions Starved, by Michael Snyder, The Economic Collapse Blog, January 24, 2013 Harvard, NYU Law Students Left Hanging As Firms Slash Offers, by Cynthia Cotts, Bloomberg, September 23, 2010
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Have B-Schools Become Debtors’ Prisons?, by Mica Bevington, CNN.com, August 18, 2011 Homeless Children an Unintended Casualty of Economic Downturn, by Chelsea-Lyn Rudder, Money Magazine, December 14, 2011 Payroll Tax Saps Consumer Outlook, Sudden Return Erases Gains, by Patrick Hill, The Washington Times, January 29, 2013 Retirement Savings Accounts Draw US Consumer Bureau Attention, by Carter Dougherty, Bloomberg, January 18, 2013 Rich Americans Ditch Home Ownership for Renting, by Joseph Pisani, CNBC.com, November 26, 2010 Real Estate Price Plunge Makes US Homeownership Perilous Path, by Kathleen M. Howley, Bloomberg, November 3, 2009 Rising Interest Rates Mean Falling Home Prices, by Just the Facts, NPR.com, February 13, 2011 Shocking Numbers that Show the Media is Lying to You about Unemployment in America, by Michael Snyder, The Economic Collapse Blog, February 2, 2013 Soaring Suburban Poverty Catches Communities Unprepared, by Peter S. Goodman, The Huffington Post, October 13, 2011
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Underwater Homeowners Walk Away to Stay Afloat, by Jim Axelrod, CBSNews.com, June 16, 2011 Unemployed Workers Face Tough Competition: Underemployed, by Paul Wiseman and Christopher Leonard, The Huffington Post, September 4, 2011 Unemployment for Women Not Getting Better, by Janell Ross, The Huffington Post, December 2, 2011 U.S. Dollar Is ‘One Step Nearer’ to Crisis as Debt Level Climbs, Yu Says, by Shamim Adam and David Yong, Bloomberg, September 28, 2010 U.S. Household Wealth Takes Biggest Hit Since 2008, by Associated Press, Los Angeles Times, December 8, 2011 Wages in America: The Rich Get Richer and the Rest Get Less, by Jack Rasmus, 2004 Walk Away: The Rise and Fall of the Home Ownership Myth, by Doug French, Mises Daily, December 1, 2010 Wall Street Sees World Economy Decoupling from U.S., by Simon Kennedy, Bloomberg, October 4, 2010 Why Your Home Is Not the Investment You Think It Is, by David Crook, The Wall Street Journal, March 15, 2007 53
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