The United States is going through the most difficult economic times since the Great Depression. In fact, in some ways, it may be worse than the Great Depression.
I recall those dark days clearly. I turned 7 years old in December 1931. In those earlier times, everyone we knew was poor like the Koch family. Expectations were modest. Today, everyone I know is upper middle class or rich, living even higher on the hog. In this country, we have tens of thousands of millionaires and probably hundreds of billionaires. By comparison, there were only a relatively few extremely wealthy families during the Great Depression — the Fords, Rockefellers, Mellons and DuPonts. In those days, wealth was not usually flaunted and ostentatiously exhibited as it is today, so perhaps there were many more rich people than I knew of.
Today, we have a large middle class created by the economic effects of World War II, particularly the G.I. Bill, which gave WWII veterans like me benefits that allowed them to go to college with the government paying our tuition. I even participated in the 52-20 program that provided unemployment benefits — $20 a week — for a year. Then there were the housing mortgage assistance programs that lured people to Levittown, Long Island and many other suburbs.
Those were halcyon days. Before World War II, movies cost 35 cents. When "Gone With The Wind" opened in 1939, MGM charged 75 cents. Before World War II, we were all of modest means. Nobody thought about it because everybody they knew was in the same condition.
Now it is different. So many Americans are rich. Many — if they compute the value of all their property — are in fact millionaires, but today we all live day to day in great anxiety. We know that before the breakdown of our economic system, many of us thought we had provided for the balance of our lives in retirement and what a wonderful country this is that has allowed us to accumulate such wealth to take care of us and our children as well. Now, suddenly in about two years, starting in 2007, the wealth accumulated by millions of Americans in the stock market through 401Ks, pension plans and IRAs has literally halved in value. The largest tangible possession for many, their home, has decreased in value on average by 30 percent and in some parts of the country, even greater.
We have put our trust in a relatively young man, Barack Obama, believing his vision and intelligence will somehow, as was the case with FDR, save us. He has been in office less than 60 days, so it would be unfair to determine whether his efforts are succeeding.
Every now and then, I ask myself, does it make sense to keep giving money to the financial institutions that bear major responsibility for bringing us to this point in time? CitiBank and AIG, they said, are too big for us to allow to go under.
We live in a capitalistic society that normally employs the Darwinian axiom, "Survival of the Fittest." But when our leaders, first Bush, now Obama, faced the test, they flinched and instead applied another rule, "Too big to fail."
I'm a little guy who, after leaving the government, did very well in the stock market by my standards, and now see my estate reduced by about 50 percent. I have no desire to blame Obama - he didn't start the downfall — but it is his problem now and frankly, I don't see any of the plans implemented by Paulson and Bernanke under Bush working. I see no let up in the deterioration of my assets under Geithner and Bernanke under Obama, although some say the efforts so far have indeed saved our banking system, which was on the verge of total collapse.
It is hardly likely, no matter what happens, that I will once again be poor as in my childhood. But anxiety is not good for anyone, particularly those who have entered the twilight of their lives. I still cannot comprehend why it is that when the U.S. gives banks billions of dollars for the stated purpose of bringing credit back into the market, or as it is now referred to, liquidity, loans are not being made by banks to individuals so they can purchase housing, buy refrigerators and cars, and to small businesses so they can meet their payrolls, provided of course the recipients of the loans are creditworthy.
Those institutions have not been mandated, with the new monies given to them, to make creditworthy loans. Regrettably, many of the earlier loans were to those not creditworthy. Some say the major drag on our economy is the lack of consumer spending. Before the crisis, we spent with abandon and lived on credit cards. Today, we are saving at an unbelievable eight percent rate and spending very little on cars and refrigerators. Surely, there is a reasonable in-between. But how long before we get there?
Why have the bankers, many of whom are responsible for the current economic condition, been allowed to call the shots, as seems the case? Why haven't the Democratic legislators led by a brave new president been able to insist on conditions assuring liquidity, on banks taking bailout monies in the billions from the U.S. Treasury? Why have those same banks been successful in preventing the simple rational measure of allowing judges in bankruptcy to change and reduce all the terms of a mortgage, including the amount of principal as well as interest? Why are mortgage terms deemed more inviolate than other contracts? The latest effort to give bankruptcy judges more authority than they currently have is certainly better than before, but apparently, according to a New York Times editorial, "President Obama's anti-foreclosure plan, which took effect on Wednesday, is better than anything attempted by the Bush administration, but it is at best one step forward and, unfortunately, may prove to be fundamentally flawed. Homeowners — like the banks, much of corporate America and the government itself — are suffering under the weight of excessive debt. The Obama plan will make mortgage indebtedness more manageable, but ultimately the debt itself needs to be greatly reduced. The sooner we as a nation move in that direction, the better."
I have no doubt we will recover, but President Obama’s recent statement – “profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it” – was a little unnerving. The usual rule, that the stock market always comes out ahead if you can wait 20 years, won’t help many of the anxious ones looking at the daily Dow Jones averages.
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