The Roller Coaster from Hell

It looks like it is going to be a Wiley Coyote ride and if you are not really scared yet, maybe it’s because you are not paying enough attention, because the signs all say we all ought to be scare s**tless.

“One really gets the sense of an economic system spiraling out of control.”

That warning comes from leading economist Richard Wolff, author, lecturer and Professor at The University of Massachusetts and the New School University in New York.

 

Wolff cautions that the global economic meltdown is not limited, not temporary, and not easy to fix in his latest book Capitalism Hits the Fan which is also available as a DVD. You can also find him on the internet at www.rdwolff.com.

 

How far out of control is the economy? How bad can things get?

The way things are going now you don’t need a crystal ball to see the future. You just need to look at Japan over the last 20 years, the lost decades of a one-time economic super power. The Tokyo stock market crashed 20 years ago and it is still down at a quarter of its peak. Tokyo real estate, once the most expensive in the world with prime property approaching $100,000 a square foot remains submerged in the same sinking ship.

 

When we talked to Wolff he warned that the current situation is not sustainable. How many of us can hold our breath underwater for 20 years waiting for the stock market and the real estate market to recover?

 

John Boehner cries crocodile tears over American kids not getting a shot at the American Dream. But that dream has never been more threatened and the threat comes from people like Boehner. Wolff makes it very clear the American Dream began to turn into a nightmare 30 years ago. That is when real wages in America stopped rising and flat-lined while corporate profits, executive salaries, and productivity soared. In other words the rich started getting a lot richer fast while the rest of us started getting nowhere fast. So how did we keep the illusion of the American Dream looking good? Wolff explains it this way. More and more women went to work, which meant more families had two paychecks instead of one. Americans worked harder and they worked longer hours. But most of all they borrowed more and more money to try to keep up.

 

“Credit cards created something that had never existed before, huge amounts of unsecured debt. People could borrow money with no security, no guarantee that they could repay the money.” Wolff explained. Finally average debt climbed to 125 % of income. Unsustainable.

 

The amazing thing is that Wolff says the big bankers and brokers, the financial elite, know that things can’t go on like this. But so far, every time they have pushed a little bit harder, demanded a little bit more the American people have stepped up to the plate and borrowed more, worked harder, worked longer hours, boosted productivity and kept going.

 

The question is where is the outrage? Why aren’t Americans demonstrating and manning the barricades like students in England and unions in Greece protesting austerity measures?

 

The economy is in a state of collapse and from Washington comes a hue and cry to cut spending, cut, cut, cut. But as Wolff points out, “the vast majority of Americans are paying for this, paying for something that is not their fault.”

 

And at last other people are beginning to question the moves to blame the victims and reward those responsible for the damage. As Gretchen Morgenson wrote in the New York Times in a piece called “So That’s Where the Money Went” “Clearly, the federal government was much more willing to deliver mountains of money to big banks that made big mistakes than it was to lend a financial hand to rank-and-file Americans struggling through foreclosures.”

 

And when it comes to unsecured debt there remains no debt more unsecured than the trillions of dollars sucked out of the economy and into the pockets of the financiers through sliced and diced mortgage derivatives and CDOs not to mention Credit Default Swaps with no regulation, no reserves and no transparency. And you can bet your last borrowed dollar that this is a profit center the financial elite wants to keep secret, unregulated, without reserves and about as transparent as a brick wall.

 

These guys are the real welfare queens, and the mythical middle class is stuck subsidizing them and paying for their Cadillacs and MacMansions.