by Joyce Marcel
American Reporter Correspondent
July 6, 2006
WHERE'S JESUS WHEN YOU NEED HIM?
DUMMERSTON, Vt. -- My father was a peasant at heart. He was a first-generation American raised on these old-country rural values: trust no one except the family, the worst is always yet to come, don't trust banks, don't go into debt.
He got through the Depression by running a little Army & Navy store in Brooklyn, N.Y. He bought by weight what the War Department was discarding and sold it by the piece to his working-class customers. Even in later years, when the store had expanded and business was good, he carried his earnings home in wads of bills, stuffed them into socks and buried them under the floorboards of the house. After he died, my mother, my brother and I searched the house for days, trying to locate all his cash reserves. I'm pretty sure we never found them all.
Most people today would laugh at my father's values, but some of them (maybe not the socks) used to be the common-sense core values of America: work hard, save what you can, spend sparingly. But in the past few years, at least to my second-generation peasant mind, Americans have taken leave of their senses. Personally and as a country, we have run up unimaginable debts.
According to Chris Martenson, who runs an economic blog called Economic Weekly Wrap-up from his home in western Massachusetts, the U.S. deficit, the broadest measure of trade, was $208.7 billion in the first quarter, the second-highest ever. He quotes the Bank for International Settlements - the bank to the central bankers - as saying directly to the U.S. that financial imbalances may be becoming "increasingly dangerous as time passes."
Whom do we owe? Or better yet, who owns us?
According to John Hussman, manager of the Hussman Funds (http://www.hussmanfunds.net/wmc/wmc060626.htm), "It's important to recognize that by accumulating what is now more than half of the entire float of U.S. Treasury securities, foreign countries have implicitly funded the entire U.S. budget deficit in recent years. This has allowed us to run fiscal deficits without crowding out domestic investment (which is nice while it lasts)."
Hussman points out that "in a reasonable world, one would look directly at the huge U.S. government deficit and paltry U.S. savings rates, combined with a housing boom that's creating a growing inventory of unsold houses, and say, 'Wow, we're not saving enough, and we're investing in the wrong stuff, and as a result, we're becoming dangerously dependent on foreign savings that will be hard to repay with future productivity.'"
According to Martenson, "The Fed has now backed itself into an impossible corner. By lowering rates over the 2000-2003 time frame as aggressively as they did, all that they really did was create a false 'boom' characterized by massively expanding debt levels but no corresponding increase in productive investment. No new factories, no additional R&D, no new infrastructure, and no incremental capital investments were made. Nada. Rien. Nothing."
What happened instead, he says, was that "people merely bought and bought and bought and now we find ourselves with an enormous real estate bubble and 12 consecutive months with a negative personal savings rate."
The real estate bubble is starting to leak, but there are other danger signs. Gold, which usually goes up as the dollar goes down, finished high last week at $613.40 an ounce. At the same time, the dollar fell 2.1 percent against the Euro in just under two days. And oil started last week at $70.70 a barrel and finished at $73.70 a barrel - for a 4.2 percent gain.
We're starting to hear words like "inflation" and "recession" used in the financial press, which could mean a world of coming hurt for average Americans.
For example, there were more than 1.6 million bankruptcy filings last year, up 7.4 percent from the previous year, even with the new, more stringent bankruptcy laws favored by the credit card companies.
According to a new book, "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke," by Elizabeth Warren, a Harvard law professor and bankruptcy expert, "more people will end up in bankruptcy this year than will suffer a heart attack, than will be diagnosed with cancer or graduate from college."
Even if you want to save money, a really good interest rate on a CD will only net you about 4 percent. The interest rate on your credit card, however, is between 9.99 percent and - gasp! - 31 percent.
The word for this - although no one seems to be willing to use it - is usury. Moses, Aristotle, Jesus, Mohammed, and Saint Thomas Aquinas, among others, denounced usury as morally repugnant. Yet usurers now have a legal stranglehold on the American people.
According to an Associated Press story this week, "Rising interest rates and higher gasoline prices are putting the squeeze on consumers' budgets, and many are finding it harder to keep up with their bills. Credit counseling agencies say that consumers are coming in in droves seeking help."
The story quotes a credit counselor who says, "Consumers are carrying an exorbitant amount of debt -- and they don't have any savings to fall back on if things don't go right."
If Jesus came back today, the first thing he'd do is forget his traditional "whip of cords" and drop-kick Visa, MasterCard and American Express right out of the temple onto their butts. (For "temple" you can read "Congress.")
According to the late economist Herbert Stein, chairman of the Council of Economic Advisers during the Nixon administration, "Unsustainable trends won't be sustained." Or, put another way, "Things that can't go on forever won't."
What will happen to America's economy is anyone's guess, but it is fairly obvious that the present situation is untenable. In this instance, father certainly knew best.
AR Correspondent Joyce Marcel is a free-lance journalist. A collection of her columns, "A Thousand Words or Less," is available through joycemarcel.com. Or write her at email@example.com.