August 18, 2017

Make it Real, Mr. President

The Quote of the day in the New York Times reflects the main sentiment: to most people the economic recovery doesn’t look real. REALITY is what I’ve been seeking from government, the marketplace and the judicial system, but we just can’t seem to get it.

  • They want a housing recovery but there is no plan in place to increase median income, which is the only reliable indicator or predictor of housing prices. Increase jobs, increase income, and you increase economic activity, tax revenue and the economy thrives.
  • They measure and proclaim rising reported profits under a wink and nod accounting system that began in the 1960′s and which led to items being taken off the balance sheet or income statement if they looked bad on a company’s financial statements — but they don’t talk about median income which has shrunk for more than three decades, “offset” they say by rising debt. Exactly how is a lack of income offset by increasing debt. Could someone explain that to me?
  • They want people to have confidence in the financial system that has tricked, scammed and stuck American and foreign citizens with a bill whose proceeds went into the pockets of the management of companies whose sole purpose was to get people into more debt. For every dollar spent by a consumer, business or governmental entity, $10 in fake and real money went into the pockets of “financial innovators.”
  • They want people to have more confidence in the marketplace and start buying things they don’t need, when they don’t have the income, the savings or the credit to buy the things they DO need.
  • They see the problem with mortgages and foreclosures but their plan is to get them modified without actually changing the terms.
  • They send money into the financial system to get the players to modify the mortgages, but the players they are talking to don’t have the mortgages, don’t have the authority, and make a lot more money by (a) pretending to modify mortgages and then taking federal money and (b) foreclosing on property so they can apply unconscionable fees to the detriment of both the borrower and the lender (investor) who advanced the funds for the deal.
  • They want more jobs created but they don’t do anything to stimulate the creation of small businesses which for 2 centuries have been the sole engine of economic growth and median income. Liquidity from the Fed has been reserved for financial institutions to keep trading with each other creating fictitious profits, creating no added value to society or the marketplace — no service, no products, just trades that give the appearance of profit.
  • They want the deficit down which has largely resulted from a decrease in REAL economic activity, so they want to cut expenses which will decrease economic activity even further. Just what do you think those people losing jobs are going to buy? What businesses are they going to start? How will they capitalize their businesses or their life-style with no money? What we are seeing is an instant replay of the 1937 error, which FDR admitted, when he finally gave into the deficit hawks and the Country plunged even deeper into depression.
  • What business has ever prospered by cutting revenues, channels of growth, innovation and employment? NONE. But that’s the plan that is being seriously considered for government by people more interested in their election prospects than they are in the prospects of the country as a whole.
  • What business allows it’s biggest customer to not only skip paying their bills but gives them more money without any hope of getting it back? NONE. But that is what the State and Federal governments are doing when they fail to collect taxes, interest, fees, costs, penalties and damages from enterprises doing business, making money and not even reporting the trade as a profit, much less paying taxes, recording fees etc. That is what they did when they pumped $5 trillion into the financial sector to prop it up so that the world would not see how stupid and greedy our financial geniuses were and how relentless they were at pursuing and creating even fake money at the expense of the welfare of the entire world?

The problem is not that we are broke. The problem is that Wall Street has our money and won’t give it back. The problem is that they did it by tricking citizens into fake deals (stealing the purse) and making a culture out of life-styles of debt. The problem is that they took the one asset consumers had left — their house — and inflated the apparent value using sophisticated means far beyond the ability of the understanding of the average person, and then had these hapless people sign onto deals that were “backed” by property that was not worth half of the deal. Both the borrowers and the investors got stuck with the same lie.

So, Mr. President and the rest of your genius dream team of economic advisers, I realize that you are trying to do your best to avoid drama. I realize that you are trying to prop up an unsustainable economic infrastructure in which more money was created ($600 trillion) than we could ever hope to cover in a world where the real amount of government issued currency is less than 1/1oth that amount. And I realize there is no precedent for what has occurred here and the magnitude of the problem. It is brand new in human history. It is a fraud of unimaginable scope. But using old techniques of trying to kick the can down the road is not going to work. It can’t.

The likelihood is that if you let the bubble burst, which most people don’t realize exists, but investors are starting to get nervous about, the real loss is going to fall on the financial players who created this mess and who incidentally are holding the real money; the counter-party trades will neutralize a large part of the apparent money bubble that looks like it is there (but isn’t); and demonstrating that you are dealing with truth and reality will allow people, companies and government to deal with reality instead of maintaining the fantasy of Wall Street infallibility. THAT is when people will have confidence — when they know they are being told the truth.

If you have guts in addition to hope, if you have grit in addition to steadiness, if you have imagination in addition to your formidable intelligence and knowledge, you know that eventually REALITY will govern whether we like it or not. The quicker we get there the fewer people will suffer. The faster we take the brave steps amidst loud crises of “traitor!” the faster will have REAL RECOVERY. There is nothing in the world that is ever going to bring home prices back to where they were quoted when these deals were done. We ALL know that. The economy cannot really recover until median income and housing needs are fixed.

The goal here is not to assess blame but to QUICKLY spread the risk of loss in a fair and equitable way — just like derivatives were supposedly doing but in the hands of liars and cheats did quite the opposite. Right now the consumer is taking the brunt of this in debt, taxes, expenses that can’t be met and loss of self-esteem. American ingenuity has taken a direct hit and it is up to you, Mr. President to revive it in a wholesale shift, not in your favorite incremental steps.


Filed under: foreclosure

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