Smashing Capitalism

Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were "NINJA" loans, for example, awarded to people with "no income, no job or assets." Conservative columnist Niall Fergusen laments the low levels of "economic literacy" that allowed people to be exploited by sub-prime loans. Why didn't these low-income folks get lawyers to go over the fine print? And don't they have personal financial advisors anyway?

Then, in a diabolically clever move, the poor - a category which now roughly coincides with the working class -- stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that "it's no secret that many customers are running out of money at the end of the month."

I wish I could report that the current attack on capitalism represents a deliberate strategy on the part of the poor, that there have been secret meetings in break rooms and parking lots around the country, where cell leaders issued instructions like, "You, Vinny -- don't make any mortgage payment this month. And Caroline, forget that back-to-school shopping, OK?" But all the evidence suggests that the current crisis is something the high-rollers brought down on themselves.

When, for example, the largest private employer in America, which is Wal-Mart, starts experiencing a shortage of customers, it needs to take a long, hard look in the mirror. About a century ago, Henry Ford realized that his company would only prosper if his own workers earned enough to buy Fords. Wal-Mart, on the other hand, never seemed to figure out that its cruelly low wages would eventually curtail its own growth, even at the company's famously discounted prices.

The sad truth is that people earning Wal-Mart-level wages tend to favor the fashions available at the Salvation Army. Nor do they have much use for Wal-Mart's other departments, such as Electronics, Lawn and Garden, and Pharmacy.

It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker's wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you'll never earn that much, but, as the lenders were saying -- heh, heh -- do we have a mortgage for you!

Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21st cover story on "The Poverty Business," BusinessWeek documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered.

Personally, I prefer my revolutions to be a little more pro-active. There should be marches and rallies, banners and sit-ins, possibly a nice color theme like red or orange. Certainly, there should be a vision of what you intend to replace the bad old system with -- European-style social democracy, Latin American-style socialism, or how about just American capitalism with some regulation thrown in?

Global capitalism will survive the current credit crisis; already, the government has rushed in to soothe the feverish markets. But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis. Who would have thought that foreclosures in Stockton and Cleveland would roil the markets of London and Shanghai? The poor have risen up and spoken; only it sounds less like a shout of protest than a low, strangled, cry of pain.

Comments

[Doubtom43]

The article asks why didn't these poor uneducated mortgage holders get a lawyer to read the fine print. Skipping right over the fact that most of them can't afford a lawyer, its precisely because of lawyers that the fine print is there!
The real crime here, is that the legal profession allows financial instruments to be written in purposely deceptive and vague terms with the sole intent of "legally" defrauding the public.
This may be a bit off the topic but it is certainly germane to it. These legal wordsmiths are ever ready to accommodate the crooks of the world with the legal means to defraud the public. They're shysters for hire!
And please keep in mind that from the best of these con artists we select our judges.

[Lane]

Try living in Las Vegas where half the U.S. population seems to have moved in the past 10 years. We have an incredible amount of foreclosures due to people rushing here to buy, and now not being able to pay their mortgages. They don't call this place sin city for nothin'! The problem I have that I haven't seen addressed here today are all those folks from other countries here on their work permits/visas who buy a house, get 20 credit cards (because they have a house) and run them up, then sell everything, take their profits and move back to their home countries. THAT is what will be the downfall of the U.S. economy.

[jbloggz]

I'm not American. But I do know of the 'buy it now' routine that has distorted the housing markets throughout the world. Easy money, unsecured loans all good stuff, when you reckon you'll cash in anyway on property rising. What the Fed is doing now is just repriming the pumps and this will lead inevitably to higher inflation. Just now the scamsters have taken over the role of banks and because of the complete lack of regulation there is now a meltdown. Because finance today is a world wide activity the effects are being felt worldwide. The only way now is to use good ole fashioned prudence. Most now, as it's been pointed out so lucidly is already happening out of necessity. It's time now to get back to those values that we all used to have. Never a borrower or a lender be is the old saying. The problem is that people these days don't have the values. There are just too many pressures. Buy the latest gizmo has become a necessity. It's time to change, to live within your means. Stop those trips to Big Mac feeder stations and try buying real food for a change. Stop buying those essential barbie dolls and conserve energy. Walk to the shop or use a bike. Get rid of that cell phone. In Europe most people rent quite happily, because it gives em flexibilty and the landlord pays for the repairs. There is another way.

[ClemTheMisanthrope]

Nothing beats combining greed with stupidity...both on the part of the borrowers and the lenders. Among the profiteers: Warren Buffett, George Sorous, John $400 Haircut Edwards and many more Gulfstream Liberals. The words of our founders continue to ring true. Benjamin Franklin said it best, "Neither a borrower nor a lender be." There are still only two guarantees,those being death and taxes.

[ImmanuelGoldstein]

First the quote is from Shakespeare. Secondly it's not a very useful motto for an economy based on credit and merchant banking.

[splashy]

I see you only mention the liberals that are wealthy, as though the right wingers were not the cause with their deregulations and allowing the corporatists to screw everyone.

Pitiful bastardization of the truth.

[ImmanuelGoldstein]

We are seeing an example of a Marxian contradiction. You cannot keep an economy based on constant expansion going at the same time impoverishing your customer base. The great credit giveaway was an attempt at Keynesian pump priming, but now the bill has come due. And since it was mostly spent on consumer goods there is no income to generate money to pay the debt.

So what next? Why the price of all those houses is going to have to come WAY down. And WalMart is going to have to reduce it's margins even more to keep it's sales up.

[TheIndependenceParty]

Truer words were never written of the current predicament we have allowed for ourselves as a nation. Thanks!

[sa]

loved it how the "fed" came to the rescue of wall street - saving rich people's profits: extra money making extra money. yet, new orleans was left to drown.

the unfed are left to starve.
ain't america keen.

you're either rich and corrupt,
rich and pretend delusional,
not rich and fooled,
poor and racist,
or smart, soulful, caring but maligned.

welcome to the united snakes -
land of the thieves,
home of the slaves.

[rgriego]

I've tried to tell everyone I know who bitches about the state of this country, that it is the skewed capitalist that is really the problem; if you really want to make a difference, DON'T BUY STUFF!!! Barbara was spot on, the direct correlation of failing mortgages and people not being able to buy more stuff and Walmart profits being down; that is powerful stuff!!! Use the power, stick it to the man by not buying the man's stuff. Cmon, it won't hurt, do you really need that 42" plasma tv? Think before you step out into the marketplace. Buy what you NEED, not what you WANT, and never buy stuff just to keep up with the Joneses; chances are, the Joneses are up to their eyeballs in high interest debt. When the revolution comes it will be the folks who "invested" in real things that make a difference, like solar energy, alternative fuel , and know how to use resources (food, fuel,urban farming,etc...) who will survive; the rest of the nutheads will be looting the mall..."whoo-wee Jughead, all the plasma tv's we can eat!!"

[woodywood]

If We want to change who really owns and runs Our America; WE MUST TAKE BACK THE FEDERAL RESERVE. in 1913, Woodrow Wilson gave the Key's to Our Money Making Federal Reserve to 3 Men , Warburgh, Rockefeller and Morgan. He later lamented on His Death Bed How tragic His Decision was to give this Power of the Purse to Private hands.
Our Federal Reserve must be a Government Institution. As long as a few hold the Power and Money in Our Country, even Our Elected Congress and Senate has no REAL POWER.

[Sidewhispers]

I think it is fitting in this conversation about the haves and have-nots to pay tribute to that fine have, responsible citizen, Leona Helmsley, who passed away today and who once so infamously said "Taxes are for little people." Perhaps we, irresponsible little drudges, can put down our selfish burdens for a moment of silence in memory of that fine model of achievement and altruism.

[RGT17]

No surprise here...when you see and hear ads that tell people how to avoid paying your debts.

[noblabla]

Capitalism, as sort of a scientific economic model and doctrine, is far from being a gambling adventure or adventures

The promotion of it is done using the same language of the used-car salesman, and that explains a lot about the difference between capitalism and pure gambling and risks involved

Ownership Society was the mantra - proved now to be annother hot-air delusional tip, sold as divine message and the cure-it-all pill

Not much has changed since the times of the medicine-men in the travelling shows

[bigbear]

You said the Government gave taxpayers money to wallstreat to save crooked Corps.(What is wrong with this picture?).

[ERose]

As a real estate broker I am proud to say that I never had one buyer who signed on for one of those hopeless ARM's or interest only loans....though I did talk several out of them. (And no, I am not a wealthy set-for-life broker; it did hurt my business and ability to feed my family by not just going along with the lenders supplying bad loan packages to unsuspecting borrowers.) I advised them to save money, ignore new offers of credit, pay down loans or credit cards. Two of them are now shopping for homes, with a down payment, closing costs saved. This did require some sacrifices and going without on their part.

The National Association of Realtors fell short on this issue. They are NOW preaching that Realtors have a responsibility to inform all buyer/borrowers of down-the-road dangers, without giving them legal advice. We are trained and cerified in the finer points of real estate law, finances, and practice...but we're not allowed, by law, to dispense legal advice! On the other hand we owe them fiduciary duties, and must give them the highest standard of care (a legal term) in our dealings with them. In many states we have laws of agency & disclose which agents represent the sellers & buyers. We owe honesty and fair dealing to all parties involved.

But the NAR is now closing the barn door after the horses are loose. Obviously many agents and brokers were complicit in the financial rape of low and mid income buyers, simply by not making sure they understood the fine print and implications of sub-prime hybrid loans.

I've always looked at it this way: When I represent a client or customer, I know in most cases, these people are trusting me to assist them in managing the bulk of their life savings, which is tied up in their real estate holdings....their home. That fact deserves my utmost respect and consideration, and my best efforts....even when it is not to my financial advantage.

Barbara E. is an American Hero.

[Purple Girl]

Waht goes around comes around.
Unfortunately as usual those of us in the middle will be picking up the tab.

See Post on Ariennas regarding who is responsible for the current state of affairs, get out your bell bottoms and love beads, you may want to burn them. What was the saying - trust no one over 30 (I'm 44 and I'm finding that prophetic looking at my older 'brothers & sisters' cluster)
New name- the 'BABY DOOMER' generation.

[egallery]

do you think americans are capable of a revolution? americans love to repeat the mistakes of the past, because the money is too good not to screw up. how about all those real estate commissions that were paid to agents who love to jack up the market value of homes.