It’s remarkable how much of the punditry has been getting this economy so wrong for so long and people keep booking them as experts, people buy their books and take their advice on faith. They are condescending and so often so wrong. Here’s a Fox News tidbit: “The Dow Jones industrial average is down more than one-third from its high a year ago. The stock market lost 89% of its value from its peak during the Great Depression.”
Okay, we’re down 50% now (the article was from last month) after a single year, but from 1929 to 1932 it went down 89%. Apples to apples my journalists Chernobyls. Let check back in 2 years, shall we? Next, of course, it’s not the GD ‘cause there aren’t soup lines. A more accurate assessment would have ended that sentence with the additional word, “yet”.
Next comes “buy and hold” as an investment strategy for US equities. I got out in the 90’s and never got back in. Let’s see, I got out of stocks just about 10 years ago this month. If I had bought and held, how would I be doing? Considering the fact that it was mostly WorldCom stock, it would have dropped to zero.
How about the Dow Jones? 99% of financial advisor would tell a 55-year-old man in 1998 to be in stocks in a big way. At 65, this year, there have to be a hell of a lot of people feeling like they played by the rules, but got screwed anyway. Not even counting interest and it was not a clever move.
Here’s an average guy doing pretty well. Let’s see what he’s got. In 1998, he buys a modest $250,000 house with a 30 year fixed mortgage at 9%, with 20% down. He has a solid $100,000 in his retirement fund (above average in US), and feels better and better about life as retirement approaches. Actually, he’s feeling downright smug. Flash forward 10 years.
As the kids needed to pay for college, it was handy to refinance as the value of the home shot up, reaching $600,000 a few years back. No need to stuff as much money into the retirement fund, since we’re feeling house rich. Make contribution of $2,000 a month and enjoy the rest. You’ve earned it. Time to refi for that sporty little Mercedes he’d been eying, and the feeling that with the house getting so valuable, the $500,000 in total mortgage and home equity lines of credit was handle able.
$100,000 in the Dow on November 27, 1998 would be worth $80,909 by last night’s close. The Dow went from 9334 to 7552 in those 10 years. The $2000 annual contributions get him almost all the way back to the $100,000 he started with back in 1998, but ravaged by fees and inflation.
Now the house, valued at $350,000 is seriously underwater with $500,000 in loans on it, and his almost $100,000 retirement fund can’t cover the gap. Welcome to the new retirement folks. Entering retirement with a net worth well below zero is going to be a bitch. And common. And heartbreaking for people who just did what they were told to.
We need a better social safety not to mention a social contract, and some of the big winners of the last quarter century are going to have to cough it up to pay for it. The rich bastards talk a good game, but they’ll fold like a house of cards the first time pictures like this surface. Visualize the scene of a public barbecue. Children playing, people drinking beer and sharing potluck. Men are taking turns with the handle on the spit. There are a few cops and the ambulance guys are there and it’s all pretty festive. That’s when you notice the body on the spit over the coals with the apple in it’s mouth is the field dressed body of the abusive rich bastard who closed the local factory and sent the work to China to save a few pennies on labor. No jury anywhere in the new America would convict anyone involved. The arrogant few who have been raping America these last decades talk tough, but the tough talk stops when they stop to realize what real class warfare looks like.
2 comments:
The closing scenario has a certain savor to it, but I think it's loaded with problems. First of all, I think the rich got ready for revolution this time before they decided to trigger the most recent fall of the economic souffle. They now have microwave shit that'll make your skin feel like it's frying off your flesh, surveillance so far up the yin yang they can tie you and your sweetie up for lettin' your eyes sparkle wrong.
Secondly, the unity needed to pull of a revolution may not be easy to come by. For a century or more, Americans have been swiggin' away at various divisive cultural cocktails, including the crazy idea that competition brings out the best in you, my country right or wrong, socialism is evil and greedy (OK my sampling on that is bad, only one person said it to me, but I was so blown away I had to include it). These ideas may take a while to untangle, and the big porkers will close their fists closer during it.
And lastly (for the moment), I think there are some problems with vengeance. For one thing, it's a manifestation of one of the problems we are looking to resolve within ourselves, which is the violent harming of each other. Also, the arrival at such a necessarily temporary social solution is paved with darwinistic histrionics. Even if the worker were victorious once again, the victory would be soaked in blood and glory of conquest. When you feel that good from winning, don't you start looking around for the next opponent? I hope we will look to Gandhi and King for our inspirations in the coming battle, so that we will have experience in peaceful conflict resolution and blame dissolution when we get there, to better put an end to the short sightedness of the traditional (not) final solution to large social struggles. And finally, vengeance sows its own seed in the heart of the vanquished. I think the defeat of the monarchists two centuries ago left us with a recidivistic problem that has now arisen again to butt bite us with the current several trillion loss in our portfolios. So I am interested in solutions that contain amnesty and consensus, and which help us avoid another repetition of the historical cycle that seems to continually recommence with resurgent seeds of hatred.
Thanks for the soapboax Jeff!
I'm not advocating violence so much as forecasting it. My own Mad Max scenario has me at our (paid for) farm in Costa Rica. We're bilingual and have worked with crops and livestock, A river runs through it and a good friend is a major local employer (fair trade, full benefits, free education), so we've built up a lot of good will.
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