Bill Totten's Weblog

Monday, August 04, 2008

The Next Big Bail Out

State, Local and Private Pensions

by Michael Hudson (July 31 2008)

The great economic fight of our epoch is being waged by the FIRE sector - Finance, Insurance and Real Estate - against the industrial economy and consumers. Its objective is to maximize property prices and the volume of debt relative to what labor and industry are able to earn.

Rising debts and real estate prices go together, because asset prices depend on how much banks will lend. For creditors, the dream is to obtain an ultimate backup at public expense: government insurance that they will not lose when debtors are unable to pay. The political problem is how to get the government to insure and protect bankers rather than debtors, given that debtors are much more numerous when it comes to the voting booth. In such cases campaign contributions are the balancing factor. Governments are "privatized" and "financialized", that is, turned from democracies into oligarchies. The banking system aims to make sure that the only losers are the customers it is supposed to serve: debtors, homeowners and employees of companies being "financialized" as the economy is de-industrialized. Indeed, financialization and de-industrialization are becoming almost synonymous. The trick is to get voters to think they are getting rich while actually they are being painted into a debt corner, along with their employers, local government and the federal government too.

For a while the bad-debt overhead can be bailed out by creating yet more debt, backed by public guarantees in what even the Wall Street Journal acknowledges is "socialism for the rich", that is, privatizing the profit and socializing the losses. But when has government been anything else, for thousands of years before anyone coined the term "socialism"? The so-called July 30 "housing bill" supports the price of mortgages that are the major asset base of most banks and other financial institutions today. What ultimately supports the price of these mortgage packages is the price of the real estate pledged as collateral. And despite Mr Greenspan's celebration of soaring housing prices as "wealth creation", it really was debt creation. As housing prices plunge, the debts remain in place.

The question is, whose balance sheets are to plunge into negative equity territory - those of indebted homeowners, or those of banks that have made the bad loans and the financial institutions (largely pension funds, I'm sorry to say) that have bought "toxic mortgages"?

Financial bubbles in their early phase inflate asset prices more rapidly than debts rise. This helps the financial sector encourage a belief that debt pollution is a quick way to make the economy rich - as long as one looks at financial balance sheets rather than tracing growth in the actual means of production and living standards. Living in the short run, most people do not see the financial war going on, and imagine that finance and industry, labor and capital are fighting for the same kind of economic growth and wealth. The reality is a conflict between financial and industrial growth objectives, subject to the adage that the solution to every problem tends to create yet new, unforeseen problems - ones often are larger in scale, requiring yet new solutions that cause yet larger and even more unforeseen. This is how societies transform themselves for better or for worse, crisis by crisis.

Usually each side fights for its economic interests. But it is best not to crow too loudly over victory. The financial bailout is depicted as a housing bill, not as a giveaway to financial interests. And it is best not to acknowledge that the financial system's victory now threatens to push the economy further down the road to insolvency, headed by a squeeze on state and local finances, and pension funding public and private. Problems threaten to arise when creditors win too one-sided a victory.

Here's what has happened so far. Early on the morning of July 30, President Bush signed the law that the Senate had passed at a special session the previous Saturday. Its aim was to restore US housing prices to unaffordably high levels, requiring new buyers to run even deeper into debts to obtain housing. Rather than rolling debts back to more affordable levels, the government now will use its own credit to guarantee payment on whatever portion of the unpayable exponential growth in debt cannot be sustained by the economy at large.

The new "housing law" (a more honest title would have been the "financial bailout and giveaway act of 2008") authorizes the Treasury and Federal Reserve Board to provide unlimited credit to Fannie Mae and Freddie Mac, and infuse new lending power to the Federal Housing Administration (FHA) and localities to support the "real estate market". This is a euphemism for saving mortgage lenders from the traditional response to falling property prices - defaults and walk-aways. The idea is for government loans to replace the bad loans that existing mortgage holders are stuck with, and to do so before property prices sink by another 25 percent.

The cover story highlighted in the first line of the press release was that the new act was "intended to provide mortgage relief for 400,000 struggling US homeowners and to stabilize financial markets". The real aim is to help struggling banks and institutional investors, with little likely aid for homeowners. Mortgage defaults and foreclosures were threatening to wipe out the collateral valuations for the loans packaged and sold to US pension funds, other institutional investors and foreign banks - including the $1 trillion in Fannie Mae and Freddie Mac securities to foreign central banks and sovereign wealth funds.

Piercing the cloud of public relations rhetoric, the actual impact on strapped mortgage debtors is that the increased funding for Fannie Mae, Freddie Mac and FHA are part of a $1.4 trillion emergency supply of government credit intended to keep housing prices from falling back to more affordable levels. An alternative use of this funding would have been to save individual debtors from foreclosure and re-set their mortgages at more realistic levels. But the constituency of the Treasury and Federal Reserve is Wall Street, not homeowners. This is not a constituency whose interests reflect those of the economy as a whole over the long run.

Finance and real estate extract interest and rents from the rest of the economy, shrinking rather than expanding it. This causes property prices to fall. Speculators (who have made up about fifteen percent of the housing market in recent years - one out of every six buyers) stop buying, while an over-supply of foreclosed or abandoned properties come onto the market. Falling prices push debt-leveraged homeowners into negative equity, followed by banks and the hapless buyers of the mortgages they have sold off.

During the real estate bubble homeowners, commercial speculators and corporate raiders were able to borrow the interest charges by refinancing their properties at higher and higher appraisals. But banks now are pulling back from mortgage lending, largely because buyers of packaged mortgages find themselves stuck with paper that is a far cry from the security its AAA bond ratings implied. Companies that have insured these mortgages are far undercapitalized to sustain the risks, and themselves are threatened with bankruptcy. So the mortgage packagers and insurers Fannie Mae and Freddie Mac are being kept in business to "save the real estate market", by which is meant the exponential growth of debt.

The parties being bailed out are the large institutions that hold the bad mortgages extended and packaged in recent years, and companies on the hook for having insured the face value of these mortgages. The growth of real estate debt has been achieved by the semi-public Fannie Mae and Freddie Mac providing "liquidity" not just by buying up and packaging mortgages in bulk, but by insuring their income streams. As William Poole, head of the Saint Louis Federal Reserve Bank from 1998 to 2008, points out: "Fannie and Freddie exist to provide guarantees for mortgage-backed securities trading in the market. The business is simply insurance." This insurance against mortgagees defaulting (and ultimately against banks and mortgage brokers making bad loans beyond the home buyer's ability to pay) is what has made their sale so irresponsibly liquid. And matters have reached the point where between two and three million US homeowners are still expected to default this year, leading to foreclosures.

Mr Poole adds that the government's assumption of the mortgages underwritten and guaranteed by these two public agencies technically doubles the federal debt, from five to ten trillion dollars. The asset side of the government balance sheet also rises, but there may be a substantial shortfall. Private bondholders and stockholders of Fannie and Freddie also have claims on these assets, so any attempt at real-world accounting becomes thoroughly tangled.

A deeper problem is that Fannie and Freddie underwrote and insured a debt increase whose continued exponential growth is unsustainable, because it causes domestic debt deflation. What Mr Greenspan called "wealth creation" - pumping up housing and stock market prices on credit - was actually debt creation. Asset prices are a function of how much banks will lend. If they lend more money on easier and easier terms, property prices will continue to soar. This is why the economy is facing debt deflation. More and more money will be diverted from being spent on consumption and paying taxes, in order to pay creditors. This will shrink the domestic market, squeezing profits, and also will squeeze state and local finances.

The government will not solve this problem by providing yet more loans for stronger parties to buy the existing supply of homes otherwise in foreclosure. The dream is to keep housing high-priced to support the mortgage lenders, not for prices to fall so that new buyers do not need to run so heavily into debt to afford housing.

Supporting real estate prices thus entails keeping the existing volume of debt on the books, and indeed running up even more debt. This levies an enormous charge on the economy to pay interest and amortization. These payments leave less available to be spent on goods and services or paid in taxes. The economy shrinks, leaving it even less able to carry its debt burden. Many individuals no doubt will default on their credit card debt, auto debt and other debts, but the largest remaining debt consists of pension and health care obligations to the private and public sector work force.

This problem has been growing beneath the view of most public media. Private-sector pensions are insured by the federal Pension Benefit Guarantee Corporation (PBGC), which is substantially undercapitalized. A much larger problem is state and local pension programs. not only are underfunded; they have no insurance at all. The expectation was that public-sector pensions would be paid out of rising property tax revenues and capital gains. But taxing property now threatens to cause defaults on mortgage payments. This is the corner into which the economy has painted itself by trying to preserve the exponential growth of mortgage debt.

To cap matters, this threatens to push state and local budgets into deficit at a time when their pension and medical insurance payments are soaring. On the expense side of their balance sheet, localities must spend more money to cope with the consequences of empty houses being stripped of building materials, occupied by squatters, burned down and generally becoming a source of blight. On the fiscal income side, states and localities are facing populist political pressure crafted by large real estate interests and promoted with the usual flow of crocodile tears on behalf of retirees and other homeowners whose debt squeeze prompts them to support politicians promising to reduce property taxes.

At first glance the connection between bailing out Fannie Mae and, behind it, the real estate market to keep prices high for American homeowners might not seem closely linked to corporate, state and local pension plans. So let us trace the linkage. Bailing out mortgage lenders ultimately must be achieved at the expense of state and local property tax revenues. Revenue that is used to pay interest is not available to pay taxes. If debts are to continue to grow exponentially and extract more carrying charges, this forces a tax shift onto labor and industry.

For the past century the financial sector has made steady incursions to take over what used to be the role of government. Today's libertarian anti-tax "free market" rhetoric is simply a cover for the financial sector's replacement of elected democratic government. Forward planning is being distorted to serve the financial sector, not aiming to promote long-term growth and raise living standards, and certainly not to protect the public sector's fiscal position.

One of the lesser-known features of this week's real estate bailout is the endorsement of "negative mortgages". These debt agreements add the accrual of interest onto the principal. The cover story is that this enables low-income homeowners to keep their houses with a lower carrying charge, borrowing the interest rather than paying it. But this means that what used to accrue to homeowners or their heirs as a "capital" (land-price) gain henceforth will accrue to the mortgage lender. For over a century, the main way that most American families have become rich has been by the free lunch of exponentially rising land prices. What is to rise exponentially in years to come is now their debt overhead. It is the financial sector that will get the free lunch of land-price gains.

Adding the interest charge onto the principal is how Ponzi schemes work. They cannot work for long, because no real economy can keep up with "the magic of compound interest". The Bush-Paulson bailout plan calls for mortgages to become larger and larger, regardless of whether property prices keep pace. The interest is to accrue to the federal government as mortgagee at first, but this innovation is really a test run. It is the path of least resistance for private banks to start making mortgage loans that give them a return in the form of "capital" gains as well as interest.

These gains consist of the inflation of land prices in cases where state, local and federal government fails to capture this gain for the economy at large. So the scheme obliged the public sector to turn elsewhere than property for its revenues - namely, to consumers and industry.

Who is not going to get paid: bankers and bondholders, or pensioners?

From corporate balance sheets to today's state and municipal fiscal crises, what appears at first glance to be a pension and Social Security problem turns out to be a financialization (debt) problem. In an attempt to maximize dividend payouts, companies in the auto, steel, airline and other industries made a bargain with labor to take its wages in the form of deferred pension and health-care payments. And labor - being much more farsighted than corporate financial managers - chose to defer the latter.

In the case of public sector pensions, the problem is the anti-tax ideology promoted by the financial sector, which prefers government to borrow from the wealthy rather than tax them. Cities from New York to San Diego chose not to raise taxes but to promise public sector employees future retirement income and health care. Also like companies, they chose to finance their budgets by borrowing, by issuing bonds rather than by taxing their traditional real estate tax base. In a nutshell, they chose to borrow from the rich rather than tax them.

Corporate and public bond issuers point out that there is not enough revenue to pay all claimants. But rather than blaming the lenders for making loans to be paid by carving up and selling off assets rather than by producing more, financial lobbies are taking a neo-Malthusian position. They are blaming the corporate and public sector cost squeeze on pension obligations stemming from the fact that people are living longer. The number of retirees per employee or taxpayer is rising - and the much-vaunted rise of science, technology and productivity is not supposed to be able to carry this extra load.

Or rather, economies cannot carry this load and also pay exponentially rising debt service and money-management fees. But this blame-the-victim logic ignores the fact that today's debts - and property prices - are growing at compound interest, beyond the ability of economies to produce a net economic surplus to pay. Something has to give. For the financial sector, what gives is supposed to be labor's wages, industry's profits and the government's taxing power.

We got into this mess by giving special tax breaks to real estate and finance at the expense of labor and industry, and warping the tax system to favor debt over equity. Financial managers and politicians conformed to type by living in the short-run. Labor did not demand that government take responsibility for what is commonly provided to employees and retirees in most civilized countries: a living income and health care. Instead, both labor and its employers took this responsibility on the private sector itself. It was a cost that other countries are spared from having to bear - and from having to "financialize" by pre-saving in the form of financial speculation, to pay pensions and health care out of capital gains that are to be ensured by the government cutting taxes to leave more profits and other revenue to capitalize into yet higher loans to bid up asset prices. The entire detour of financialization has added a vast non-production cost to the expense of doing business and hiring labor in America. To put matters bluntly, we have taken a wrong path - yet hardly anyone in authority is explaining how to retrace our steps to get out of the present dilemma.

As long as one believes that government can only add to overhead waste - and that the financial sector can only "economize" and make the economy more efficient - there will be little motivation to seek an alternative. Without doubt, one can point to exorbitant retirement giveaways such as New York City's pension arrangements for public transport workers, policemen and firemen. Their craft unions obtained pension and health care rights substantially above those of the labor force in general. But such deviations from the norm are inevitable in a system where pensions and health care are left to company-by-company, city-by-city and state-by-state negotiations rather than negotiated nationally as is the case in social democracies. The situation is the same with taxes negotiated at the local level. Companies and real estate investors play states and cities against each other to extract special tax breaks for locating in their areas. Political lobbying and insider dealing become rife under such conditions.

At the root of America's pension and health care problems is an ideological opposition to public services and taxation at the national level. In the aftermath of World War II, corporations opposed "socialized medicine". This left companies to pay for health care out of their earnings rather than leaving it to government to organize and pay out of the general tax base. This probably made sense to the vested interests when they bore the brunt of progressive taxation. But they seem not to have noted that this attitude has ceased to be self-serving now that the richest families have shifted the taxes onto the lower brackets. General Motors recently has protested that health care costs more money per auto than steel. Yet someone must pay for health care and retirement. If not the government, then who - besides one's employer? So one wonders just what General Motors wants more: the luxury of an obsolete anti-Bolshevist rhetoric, or to make consumers pay for their health care and Social Security as "user fees" without the upper tax brackets taking the responsibility that they take in countries with more progressive tax systems.

In retrospect it would seem that companies did not act in their self-interest when they insisted on taking responsibility on themselves for providing medical care whose price has soared, largely because the medical profession itself has been taken over by financialized health management organizations (HMOs) in the insurance sector (an increasingly prosperous element of the FIRE sector). They have put doctors as well as patients on rations - fee-for-service in the case of physicians, and rationed care for the hapless insured. And this is supposed to be the free market alternative to centralized planning!

The explanation for companies acting this way is to be found in the era of progressive taxation. More than two centuries of classical economic analysis had shown the logic of taxing predatory wealth (land ownership, monopoly rights and financial claims on the economy) rather than labor and industry. The objective was to tax all forms of income that were not necessary for production to take place. Above all were rights to land, which is provided by nature, for the purpose of charging an access fee, and other extractive property rights and financial charges loaded on top of what actually is needed to be spent on production.

The early income tax captured such "unearned income". The wealthy classes thus opposed public provision of services, including medical care as well as basic infrastructure, in an epoch when they were the major parties being taxed. But being sclerotic and rigid, the rentier classes failed to shift their attitudes toward public service as they moved to free themselves from taxation. Ever since the United States enacted its first modern income tax in 1913, finance and its major clients - real estate and monopolies - have lobbied to distort the tax code to make their gains tax-exempt. Rather than declaring taxable income, they count as a cost of production interest and over-depreciation for real estate, as well as payments to corporate shells in offshore tax-avoidance centers. The finance and property sectors also take their returns in the form of capital gains rather than as profits, trading through financial hedge funds whose revenue is taxed at only half the rate of normal income.

The wealthiest one percent take their returns in the form of bonuses, not wages, and enjoy a cut-off point of only $102,000 for FICA Social Security and Medicare wage withholding. When Wall Street Journal editorials assert that the richest one percent earn "only" a small portion of taxable income, all this really means is that a shrinking portion of their economic returns are deemed subject to the income tax. Their buildup of wealth takes a form not classified as "income". Inherited wealth meanwhile is the great loophole for avoiding ever having to pay capital gains that have accrued on real estate and other assets rising in price.

If the rentier classes act flexibly, they will see that as they shed their national, state and local fiscal burden, it is time to "socialize of the risks" as a travesty of true socialism by passing the costs of pensions and health care off of companies and localities onto the federal government. After all, now that labor and consumers are paying the lion's share of taxes, is it not all right to extend public spending to take over areas of cost hitherto borne by corporate business and other private-sector employers? This promises to be the next big political fight.

But ideological sloganeering dies slowly, and corporate business and the financial sector continue to oppose "big government" even as they are un-taxed. That is the problem with the vested interests: they live only for themselves in the short run. The financial mentality is opportunistic ("after me, the deluge"), caring little about the future. Labor cannot enjoy this luxury. It needs to look to how it will live after its working years end and health care becomes a rising expense. This perspective involves a more far-sighted economic and social contract.

Meanwhile, property taxes continue to be phased out as the basis for state and local finance. The tax burden is being shifted onto income and sales levies that fall on consumers, not on the preferred tax status of high finance and property. For many years now, the political drive to un-tax real estate led cities such as San Diego and entire states such as New Jersey to pay their work force in the form of retirement and health care obligations rather than current wages, while borrowing from the rich rather than taxing them. The income hitherto paid as property tax was available either to pledge to bankers for loans to buy property rising in price as it was untaxed.

All this was fiscal and economic madness from a long-term vantage point - not the madness of crowds, but that of self-serving lobbying by the financial sector. The result has been a trend that cannot go on for long. But having managed to free themselves from progressive wealth and income taxation, the vested financial and property interests evidently believe that they can pull the same trick again and free themselves from the obligation to live up to the pension and health care promises that corporate and public-sector employers have made to their work force.

Such evasion requires a populist rhetoric. Malthusian doctrine worked well two centuries ago, so why not try it once again? Blame population growth - in this case, not the tendency of the poor to have more children, but the ability of employees to live beyond the retirement age at which they were supposed to die if they had conformed to the models used so hopefully by their employers in explaining their financial position. The claim is being made that paying business and public-sector commitments to labor will bankrupt both. There is no mention of debt payments to bondholders for funds borrowed to cut progressive taxes on the rich. Nor is the burden of high housing and other real estate prices that the July 30 bailout of mortgage lenders aims to create.

Something has to give, but it is this old worldview. No doubt when the next financial crisis hits we will see all the usual journalistic adjectives: "unexpected", "surprising everyone by the depth of the problem", et cetera. Give me a break! Can no major media see the obvious trends at work?


Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world's first sovereign debt fund for Scudder Stevens & Clark. Dr Hudson was Dennis Kucinich's Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the US, Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new edition, Pluto Press, 2002) He can be reached via his website,

Bill Totten


  • Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any 'humanitarian' progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. We still are. Even now, they claim to be 'hurting' right along with the rest of us. As if gas prices actually effect the lifestyle of a millionaire. ITS A LIE. IN 2007, THE RICHEST 1% INCREASED THEIR AVERAGE BOTTOM LINE WEALTH AGAIN. On average, they are now worth over $4,000,000 each. Thats an all time high. As a group, they are now worth well over $17,000,000,000,000. THATS WELL OVER SEVENTEEN TRILLION DOLLARS. Another all time high. Which by the way, is much more than the entire middle and lower classes combined. Also more than enough to pay off our national debt, fund the Iraq war for twenty years, repair our infrastructure, and bail out the US housing market. Still think that our biggest problem is China? Think again. Its the 1% club. That means every big name celebrity, athlete, executive, entrepreneur, developer, banker, and lottery winner. Along with many attorneys, doctors, politicians, and bankers. If they are rich, then they are part of the problem. Their incredible wealth was not 'created', 'generated', grown in their back yard, or printed up on their command. It was transfered FROM US TO THEM. Directly and indirectly. Its become near impossible to spend a dollar without making some greedy pig even richer. Don't be fooled by the occasional loss of a millionaire's fortune. Overall, they just keep getting richer. They absolutely will not stop. Still, they have the nerve to pretend as if they care about ordinary people. ITS A LIE. NOTHING BUT CALCULATED PR CRAP. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Oil 'futures'. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. Excessive medical testing. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, medical testing, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the 'charitable' contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and 'good will' all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to 'federal tax revenue'. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN'T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can't afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. Anyway, when you account for all federal, state, and local taxes, the middle class actually pay about the same rate as the rich. The devil is in the details. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, doctors, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, credit crunch, weak US dollar, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can't even afford basic health care. ALL BECAUSE OF GREED. I really don't blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can't be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about 'jealousy', 'envy', or 'socialism'. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

    So what can we do about it? Well, not much. Unfortunately, we are stuck on a runaway train. The problem has gone unchecked for too many years. The US/global depression is comming thanks to the 1% club. It would take a massive effort by the vast majority to prevent it. Along with a voluntary sacrifice by the rich. THATS NOT GOING TO HAPPEN. But if you believe in miracles, then spend your money as wisely as possible. Especially in middle and lower class communities. Check the Fortune 500 list and limit your support of high profit/low labor industries (Hollywood, pro sports, energy, credit, pharmaceutical, cable, satelite, internet advertising, cell phone, high fashion, jewelry, ect.). Cancel all but one credit card for emergencies only. If you need a cell phone, then do your homework and find the best deal on a local pre-pay. If you want home internet access, then use the least expensive provider, and share accounts whenever possible. If you need to search, then use the less popular search engines. They usually produce the same results anyway. Don't click on any internet ad. If you need the product or service, then look up the phone number or address and contact that business directly. Don't pay to see any blockbuster movie. Instead, wait a few months and rent the DVD from a local store or buy it USED. If you want to see a big name game or event, then watch it in a local bar, club, or at home on network TV. Don't buy any high end official merchendise and don't support the high end sponsors. If its endorsed by a big name celebrity, then don't buy it. If you can afford a new car, then make an exception for GM, Ford, and Dodge. If they don't increase their market share soon, then a lot more people are going to get screwed out of their pensions and/or benefits. Of course, you must know by now to avoid those big trucks and SUVs unless you truly need one for its intended purpose. Don't be ashamed to buy a foreign car if you prefer it. Afterall, those with the most fuel efficient vehicles consume a lot less foreign oil. Which accounts for a pretty big chunk of our trade deficit. Anyway, the global economy is worth supporting to some extent. Its the obscene profit margins, trade deficits, and BS from OPEC that get us into trouble. Otherwise, the global economy would be a good thing for everyone. Just keep in mind that the big 3 are struggling and they do produce a few smaller reliable cars. Don't frequent any high end department store or any business in a newly developed upper class community. By doing so, you make developers richer and draw support away from industrial areas and away from the middle class communities. Instead, support the local retailer and the less popular shopping centers. Especially in lower or middle class communities. If you can afford to buy a home, then do so. But go smaller and less expensive. Don't get yourself in too deep and don't buy into the newly developed condos or gated communities. Instead, find a modest home in a building or neighborhood at least 20 years old. If you live in one of the poorer states, then try to support its economy first and foremost. Be on the lookout for commercial brainwash plots on TV. They are written into nearly every scene of nearly every show. Most cater to network sponsors and parent companies. Especially commercial health care. Big business is fine on occasion depending on the profit margins and profit sharing. Do your homework. If you want to support any legitimate charity, then do so directly. Never support any celebrity foundation. They spend most of their funding on PR campaigns, travel, and high end accomodations for themselves. Instead, go to and look up a top rated charity to support your favorite cause. In general, support the little guy as much as possible and the big guy as little as possible. Do your part to reverse the transfer of wealth away from the rich and back to the middle and lower classes. Unfortunately, there is no perfect answer. Jobs will be lost either way. Innocent children will starve and die either way. But we need to support the largest group of workers with the most reasonable profit margins. We also need to support LEGITIMATE charities (Check that list at This is our only chance to limit the severity and/or duration of the comming US/global depression. In the meantime, don't listen to Bernenke, Paulson, Bartiromo, Orman, Dobbs, Kramer, OReiley, or any other public figure with regard to the economy. They are all plenty smart but I swear to you that they will lie right through their rotten teeth. IT MAKES THEM RICHER. Like I said, you are welcome to run this by any professor of economics or socio-economics. If thats not good enough, then look up what Einstein had to say about greed, extreme wealth, and its horrible concequences. I speak the truth. GREED KILLS. IT WILL BE OUR DOWNFALL.

    By Anonymous Anonymous, at 6:33 AM, August 18, 2008  

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