C is for Credit
O is for Oil
D is for Drugs
E is for Education
1 is for what should be our first priority
PART I: Credit, Commerce and Currency
A lot of people have asked why a website that professes to tell the truth is called livinglies. Many more have sought out my political views and even encouraged and offered to back me in a run for public office. I have no doubt that I would enjoy a political campaign and very little doubt that I would win. But I have no intention to run for office and no willingness to serve in that capacity. Instead I consider myself as running for my country rather than a narrow political office. So here are my reasons for writing this blog. It is bound to offend ideologues from all parts of the political spectrum. The simple answer is we live with lies. We accept those lies because it is easier to accept them than to fight them.
I came up with CODE-1 several years ago starting with the “c” for credit. Since the late 1970’s when unions went into their death spiral caused by cheating and lying to their own membership, stealing dues and using the strength and wealth of the union was applied as political favors, median wages have gone down. The living wage with opportunities for advancement was replaced with credit. instead of having money to buy things without further consequence, consumers were encouraged to borrow the money at high interest rates that assured that they would never be able to pay it back. This is like a private tax imposed by a collaboration of government and business. The party who seeks “no higher taxes” also support no higher wages. Thus he or she is imposing a taxon consumers in the form of credit options from which the consumer will never emerge. Some call it economic slavery in the”land of the free”.
When the prime rate went over 20% around 1980, credit card companies asked for a variance so that they could charge interest rates at market level. But when interest rates went down, the credit card fees and interest rates went through the roof. Gradually every form of credit and permutations of credit convinced people that they were still OK as long as the credit kept coming — until it took more credit to pay old credit. And we developed an idiotic credit scoring system that rewarded people for borrowing and paying on time. They were rewarded not with cash but with more credit and maybe a slight decrease in the interest rate. We have grown so accustomed to this idiotic system that we value our credit score more than our savings. The person who buys for cash and never uses credit, even for large purchases, is punished with a low credit score.
The truth about most credit purchases, is that if the consumer delayed the purchase for a month or two, they could probably save up enough money to buy the item for cash, or would change their minds about buying something they don’t really need. This is “bad for the economy,” according to Wall Street economists. That is another lie. Any economy that relies on impulse purchases of stuff the buyer doesn’t really want or need is absurd. Imagine what Johnathan Swift would say about it Gulliver’s travels.
In other words we replaced independence and personal responsibility with a dependence on institutional and non-institutional credit culminating in payday loans where the annual interest rate was, along with credit card debt, far above the limits allowed by law. It was called usury and usury was in many states a crime for which the perpetrator could go to jail. Usury limits varied from 8% to 12% generally. Now some credit cards charge as much as 35% and some payday loans work out to about 400%.
The long and short of it is that the American worker has no bargaining powers, no collective bargaining powers because with the destruction of the unions the share of profits enjoyed by workers who could buy things and pay taxes with discretionary cash has plummeted and gone straight to the top of most commercial enterprises. The executives of those enterprises now make 400 times the average worker in their company. The fundamental lie here is that workers are not stakeholders. They might not be stockholders (although that is not true in many large corporations) but as workers they have a stake in the ultimate success of the business. If the business they work for is choking off the last opportunity for real sales that won’t produce defaults on a large scale, then their prospects for continued employment and advancement will disappear.
It is a going out of business strategy and it worked. We are out of business compared to the years when unions were strong. And corporate profits have soared based on the savings attributable to payroll costs. But common people, with less and less money and relying on credit that took even more out of their meager earnings in the form of minimum monthly payments are now without earnings, credit or savings to pay for higher priced items so the corporations have started selling crap made in foreign countries contributing to the gross unemployment found in this country. And now people are buying cheaper food, clothing and other things that won’t last. So the cost and quality of items goes down and so do profit margins. The effects are showing up at McDonalds, WallMart and other companies that have put the small shop out of business thus undermining the American creed of self reliance and innovation.
Small wonder we are the envy of nobody. The strength of the US’s economy is a lie although it does have some strong points. GDP for goods and services has shrunk from 80% of GDP to around 50%. Would you invest in a company like that? The other half is the trading of fictitious paper allegedly based on the actual commerce that has declined in half. We have delegated the control of our economy to those who are rich and are getting richer. The government imperative to provide for the common welfare is virtually gone.
Yes raising the minimum wage from the dark ages to the Age of Enlightenment will help, but that is not all. Too few people are alive today to remember the fact that when Unions were strong, everyone had higher wages and companies were still making healthy profits and growing. Then the bean counters took over and the short-term benefits of paying less than a living wage to workers was outweighed by giving Wall Street immediate satisfaction of higher reported earnings per share.
We need to bring the unions back (and regulate them) and we need to educate our children in a way that other countries have already figured out — their most precious human resource they have is their children. But we live in a country where for ideological reasons the quality and quantity of education of our children is constantly undermined. It is another going out of business strategy and it is also working.So instead of well rounded, inventive creative children, we get children who can neither write nor read with any clarity. They can’t add or multiply with any accuracy. The briefs filed in appellate courts are frequently unreadable because it is impossible to know what the writer is meaning to convey.
We rank below some developing countries in the quality of our education, the development of thinking process, the application of judgment based upon facts, and decisions that are designed to help everyone not just the person or committee that makes the decision. Our workers are mostly unprepared for the competition that keeps mounting. And parents, stretched out on credit and working two jobs to pay the credit that will NEVER get paid off, are uninvolved with their kids education — a sure message that kids are on their own despite the poor choices they make and the need for intensive guidance.
It is no surprise that the mortgage meltdown occurred. Whereas people would carefully consider their options before taking on a huge amount of debt, they have been sold on the idea that credit is like currency — only better. The problem is that credit is so redundant throughout our lives that we think we understand it until we find ourselves in bankruptcy. That is when we find out we borrowed multiple times on the same transaction. That is where we realize how much of our income is devoted to paying off debt. So when presented with 450 different loan products, people thought they understood when they did not. AND lenders freely ignored the requirements of Federal law (TILA) that required full and simple disclosure of the people and essential terms and the overall cost of the loan. Those lenders left out the most important disclosure — that this loan will never work and is not meant to work because we are betting it will fail and we are making a ton of money just by getting you to sign.
More to come
Filed under: foreclosure