What Happened to the American Dream?

“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position."

--Historian and writer James Truslow Adams in his 1931 book Epic of America.

Mr. Adams penned these words in the midst of the Great Depression, the worst economic crisis in our history. It is timely to reflect on these words, as it appears that the American Dream is slipping further out of reach for most Americans. If the dream of a better life for our future generations is lost, it will truly mark a turning point for our great Republic. The reason the American Dream is slipping away is due to the actions of politicians running our government and bureaucrats running the Federal Reserve. Those with ability who have earned a better life through their hard work, intelligence and integrity should be attaining a higher position in the social order. Instead, our government is rewarding those Americans who have taken unwarranted risks, made brainless decisions, and willingly chose the course of excessive debt to climb the social ladder.

As the politicians scurry to “save” capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster’s is:

A system in which goods are owned in common and are available to all as needed.

George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to “sell” cars by giving them away with 0% financing to anyone who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China.

Now, commercial developers are trying to pony up to the taxpayer trough. These egotists used immense amounts of short term debt to overpay for malls, office towers, hotels and apartment complexes. The rental income could never cover the interest expense on the debt. The only way they could possibly make money was if the next moron developer was foolish enough to overpay for the same assets. The market was flying high as the MBA geniuses on Wall Street were able to work their magic by slicing this debt into tranches, getting it rated as investment grade paper by criminally negligent Moody’s and S&P, and reselling it to gullible investors throughout the world.

The jig is up. According to the Wall Street Journal, $530 billion of debt will come due in the next three years, with $160 billion due in 2009. Of course, in the America of today, your bad business decisions of yesterday that enriched executives like Steve Roth of Vornado Realty and who received accolades from the business press are cast aside. Just use the “Too Big to Fail” excuse and all is well. The American taxpayer will come to the rescue. The American taxpayer gets screwed no matter what we do. As Americans do the right thing and cut their spending, retailers, malls, and hotels will lose money and developers are already asking for bailouts. Our communist government will take the money from the innocent taxpayers and give it to the rich negligent developers.

Homebuilders are lobbying for a $22,000 credit for new home purchases. It certainly makes sense to encourage new homes to be built when there are 2.5 million vacant houses and an 11 month supply of existing homes for sale. I await the future bailout demands of Rolex retailers, Porsche dealers, and caviar makers.

My parents believed that they could provide a better, richer and fuller life for their three children. They worked hard, sacrificed for their kids, deferred their gratification, saved, put us through Catholic school and put us through college. Hard working blue collar middle class parents from South Philly were able to advance their children upward in the American social structure through their determined efforts. I have serious doubts about whether my three boys will live a better life than myself. I’m sure that my grandchildren will not live a better life than myself.

My parents wisely comprehended that shiny new cars and high wages were not what determined who achieved the American Dream. My Dad toiled for 42 years as a truck driver for ARCO, bought used cars his whole life, and never earned more than $32,000 in a year. My parents bought a three bedroom row home in Delaware County in 1955 and methodically paid it off over 30 years. They never borrowed against the house. We didn’t eat out three times per week. We didn’t go on exotic vacations. Two weeks at the Jersey shore was just fine. My parents had high school degrees, but were able to provide the opportunity for myself, brother and sister to get college degrees and take the next step up in the American social order.

The American Dream was not founded upon wealth and materialism. It revolves around achieving a better life based on the merits of your intelligence, hard work and contribution to the community of all Americans. There is a moral aspect to the American Dream that has been lost over time. James Truslow Adams addressed it in an essay he wrote in 1929:

There are obviously two educations. One should teach us how to make a living and the other how to live. Surely these should never be confused in the mind of any man who has the slightest inkling of what culture is. For most of us it is essential that we should make a living...In the complications of modern life and with our increased accumulation of knowledge, it doubtless helps greatly to compress some years of experience into far fewer years by studying for a particular trace or profession in an institution; but that fact should not blind us to another—namely, that in so doing we are learning a trade or a profession, but are not getting a liberal education as human beings.

The crux of the problem is that Americans, with a strong sense of morality and caring about what is right and wrong, are no longer steering the American ship. Thomas Jefferson declared that Americans had the right to “Life, liberty and the pursuit of happiness” in the Declaration of Independence. The government’s obligation is to protect the life and liberty of its people. Representative Ron Paul bluntly speaks the truth about our government:

The obligations of our representatives in Washington are to protect our liberty, not coddle the world, precipitating no-win wars, while bringing bankruptcy and economic turmoil to our people.

Supreme Court Associate Justice Stephen Johnson Field further clarified pursuit of happiness in an 1884 opinion:

Among these inalienable rights, as proclaimed in that great document, is the right of men to pursue their happiness, by which is meant the right to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give to them their highest enjoyment.

Our current system of incentives is inconsistent with the equal rights of others. I was taught the difference between right and wrong by my parents. The pursuit of happiness by Americans is where the American Dream has gone off the track. The pursuit of excessive wealth, power, influence, luxury automobiles, McMansions, and electronic devices has substituted for happiness in the world we live in today. Whatever means necessary to achieve this bastardized American Dream (Nightmare?) has been the mantra of the “Me Generation”. Every disgraced CEO of the last year was part of the Baby Boom generation. Parents, schools, corporations, media and government have taught Americans how to make a living, but have done a horrific job in teaching Americans how to live. The government and Federal Reserve have encouraged the warped American Dream through the use of insane tax, fiscal, and interest rate policies.

Federal Reserve Fraud

Thomas Jefferson, a wise man by most accounts, thought central banks were not a very good idea.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.

We did not heed Mr. Jefferson’s prudent advice. The result for the American people has been persistent inflation that has destroyed the purchasing power of the US dollar. It takes $1.00 to buy what cost 5 cents in 1914, a 95% loss of purchasing power since the creation of the Federal Reserve. Most of this loss in purchasing power has occurred since 1971. “Tricky Dick” Nixon took the country off the gold standard in 1971 and uncorked the bottle and let the inflation genie out. The unchecked issuance of debt by our government, facilitated by Federal Reserve policies since 1971, has brought our great country to the brink of financial disaster. The organization that caused the problem, did not see this crisis looming, and has utterly failed in stemming the damage, is now taking actions completely outside of its mandate, while telling the public they have the answers. They have duped the American public for 85 years through the insidious use of inflation, and now they are trying to dupe the world into keeping their Ponzi scheme going for a while longer.

The Federal Reserve was created in 1913 with the dual purpose of maximizing employment and preserving stables prices. New York Senator Elihu Root, in voting against the creation of a Federal Reserve, saw a vision of our bleak future:

Little by little, business is enlarged with easy money. With the exhaustless reservoir of the Government of the United States furnishing easy money, the sales increase, the businesses enlarge, more new enterprises are started, the spirit of optimism pervades the community. Bankers are not free from it. They are human. The members of the Federal Reserve board will not be free of it. They are human....Everyone is making money. Everyone is growing rich. It goes up and up, the margin between costs and sales continually growing smaller as a result of the operation of inevitable laws, until finally someone whose judgment was bad, someone whose capacity for business was small, breaks; and as he falls he hits the next brick in the row, and then another, and then another, and down comes the whole structure.

The concept of forming this central bank was to stop bank panics from happening. So far, they are 0 for 2. They were in charge in 1929 during the greatest bank panic in history. Their actions in the 1930’s exacerbated and prolonged the Depression. Alan Greenspan and the Fed are the chief cause of the current disaster. The absurdly low interest rates of the early 2000’s and the complete lack of oversight of bank lending practices caused the greatest debt bubble in history. During September and October, the country experienced an electronic bank run. Americans rightfully lost trust in all financial institutions and began withdrawing their money. The Federal Reserve has done the only thing it knows how to do. Print money. It has doubled its balance sheet to $2.3 trillion.

The overly complicated chart below shows that the Federal Reserve is a privately controlled institution that is essentially under the direction of the biggest banks in the country. Whose best interests do you think it is looking out for? Zero interest rates penalize senior citizen savers in order to save reckless borrowers.

The only competent Federal Reserve Chairman in the last 40 years, Paul Volcker, had this to say about the actions of Ben Bernanke in the last year.

The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices. What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return.

Since these words were spoken by Mr. Volcker, the Federal Reserve has gone way beyond their lawful and implied powers. Look at its balance sheet as of last week. It has more than doubled its balance sheet in the last few months. As you can see they have been busy making loans to financial institutions throughout the world. These loans are being made with your money.

The Federal Reserve is supposed to be protecting the people of the United States. Transparency is essential for financial systems and democracies to function. Instead, Ben Bernanke is withholding which banks have borrowed from the Federal Reserve and what collateral was put up for the loans. They have lent out over $2 trillion of your money with no accountability to the American taxpayer. Bloomberg News has sued the Federal Reserve to obtain this information under the Freedom of Information Act. They are covering up their actions because they know that the collateral they have accepted is worthless. These are criminal actions with the intent to deceive the American public. The government and Federal Reserve work for “We the People”, not vice versa.

Balance sheet of the Federal Reserve. (Based on end-of-week values, in billions of dollars). Data source: Federal Reserve Release H.4.1.
	Dec 5, 2007	Dec 17, 2008
Securities	779.7	493.8
Repos	46.5	80.0
Loans	2.1	1039.9
Other	92.0	733.0
Factors supplying reserve funds	920.4	2346.7
Currency in circulation	819.3	877.7
Reverse repos	36.7	71.9
Treasury accounts	5.1	484.6
Service and reserve balances	16.0	801.8
Other	43.4	110.7
Factors absorbing reserve funds	920.4	2346.7
Off balance sheet
Securities lent to dealers	4.5	186.5

Thank You Sir, May I Have Another

Last week the Federal Reserve decreased its discount rate to .25%, the lowest in history. They also announced they would use any means necessary to re-inflate our bubble economy. Deflation is not a bad thing for most Americans. Cheaper gas is nice, cheaper food is nice, cheaper cars are nice, and flat screen TVs are nice. For people and countries without debt, deflation is just fine. That does not describe U.S. consumers or the U.S. government.

Deflation when you are a country that has $10.6 trillion in debt will annihilate the debtor. Therefore, Mr. Bernanke has chosen to try and inflate us out of this mess. As an expert on the Great Depression, Ben believes that fiscal and monetary expansion will save the country. There is one significant difference. When the crisis hit the U.S. in1929, total U.S. debt as a percentage of GDP was about 200% and we were a net exporter nation. We enter this crisis with total U.S. debt exceeding 350% of GDP and we have a trade deficit of $700 billion.

The Federal Reserve and Obama administration are about to add trillions of debt when we already have record amounts of debt. The brilliant James Grant sums up the dilemma:

If the Fed is going to create boatloads of depreciating, non-yielding dollar bills, who will absorb them? Who will finance the Obama administration's looming titanic fiscal deficits? Who will finance America's annual surplus of consumption over production (after 25 more or less continuous years, almost a national trait)? Inflation is a kind of governmentally sanctioned white-collar crime. Every crime needs a dupe. Now that the Fed has announced its plan to deceive, where will it find its victims? Today's policy makers allow, there are risks to "creating" a trillion or so of new currency every few months, but that is tomorrow's worry. On today's agenda is a deflationary abyss.

Foreigners have been buyers of 70% of our newly issued debt in the last few years. Does Ben Bernanke really believe that foreigners will be willing to accept 2% interest for 10 years on bonds while we are printing trillions of new dollars? The all out assault on deflation will work. It will work so well that it will lead to a crash in the US dollar as foreigners begin to shun the debased currency. A hyperinflationary bust ala Argentina and the Weimer Republic is in our future. There is one thing for sure. Whatever happens will take the Fed by surprise. They didn’t see the credit crisis coming and will not see the inflation tsunami before it washes over us. Economist Irwin Kellner knows this will not end well. “While virtually no one is raising prices in today's depressed economy, all this liquidity will soon become an accident looking for a place to happen.”

The last 85 years of allowing our currency to be manipulated by a private bank has been a series of crisis, failure, and mismanagement. Ron Paul clearly articulates why the Federal Reserve has helped destroy the American Dream and needs to be abolished:

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Government in Action

We’ve created a behemoth government agency called Homeland Security at a cost of $50.5 billion per year, employing 203,000 people as our response to the 9/11 tragedy. How much would it have cost to have installed a $39.99 Wal-Mart deadbolt lock on every cockpit cabin door of every plane in the world before 9/11? There are approximately 20,000 commercial airplanes in the world. The cost would have been $800,000 and 9/11 would have been averted. Based on the government’s outstanding record of fiscal management ($1,200 toilet seats), we could easily assume that it would cost $1,000 per cockpit door, rather than $39.99. In that case, the bill would have been $20 million.

For a $20 million investment we would have averted 3,000 deaths at the WTC, 4,500 deaths of American soldiers, 30,000 wounded American soldiers, countless thousands of innocent Iraqi deaths, $850 billion of taxpayer funds spent on the War on Terror, and the $50 billion per year we spend on a vast government bureaucracy that is not making our lives safer or better in any way. Our government had the power, the funds, and the ability to install a simple deadbolt lock. They did not. Government fails because it is corrupt, incompetent, mismanaged, and self serving.

We are about to experience the largest government outlay in the history of our glorious Republic. President elect Obama and his team of economic masterminds are preparing to borrow and spend the country back to prosperity. Mr. Obama wants to create 3 million new jobs in 2009. Considering that there are only 1.5 million people unemployed in the construction field, it is uncertain how he will employ all of the cashiers, burger flippers, and Wall Street paper shufflers in the infrastructure build out of our country. The Obama plan to spend $1 trillion to stimulate our economy has the 17,000 lobbyists in Washington DC swarming like voracious locusts over a field of crops. It will be the biggest pig roast in the history of our country. These lobbyists will utilize the $3 billion per year they spend (bribe) to “influence” policymakers like there is no tomorrow. "The ever-increasing cost of the yet-to-be-seen stimulus is like chum in the water for lobbyists circling to snap up some taxpayer cash for their clients," said Steve Ellis of Taxpayers for Common Sense, a watchdog group.

Examples of the kind of stimulus we can look forward to, according to the LA Times, are as follows:

• Rather than rebuilding highways, a nonprofit group called Reconnecting America wants the government to focus on a "21st century national transportation system" of mass transit and walking and bike paths.
• The Air Transport Assn. is seeking $1 billion to upgrade airports and $3 billion to modernize avionics.
• Magellan Midstream Partners (MMP), owner of the longest refined-oil pipeline in the nation, wants to develop the first "dedicated ethanol pipeline" from Iowa to New York City. It's seeking a loan guarantee of $3.5 billion through the Department of Energy.
• The National Assn. of Railroad Passengers is pushing for $10 billion for intercity passenger rail projects.
• The travel industry wants a "multimillion-dollar marketing and public outreach effort to educate visitors about changing security policies and promote the U.S. as a destination," according to the Travel Industry Assn. The group is seeking a start-up federal loan of $10 million
• The business community is seeking a series of tax breaks that it says will foster growth and return money to the federal Treasury. It favors, among other things, a tax rebate to middle-class taxpayers, a sizable reduction in the corporate capital gains tax and a sharp reduction in the tax rate on earnings that firms in the United States get from foreign subsidiaries.
• The housing industry wants all buyers to receive a tax credit for a home purchase and to have the government subsidize mortgage rates through a "buy-down" program lowering borrowing costs.
• The National Retail Federation proposes that sales tax holidays be held during March, July and October 2009, each lasting 10 days. The cost of this program would be $20 billion.
• The National Automobile Dealers Assn. is seeking a tax break encouraging more people to buy cars and a "cash for clunkers" program that helps people trade in older vehicles for new, more fuel-efficient ones.
• "The catfish industry is on the verge of collapse," said Marty Fuller of the Catfish Farmers of America, citing high feed prices and an increase of imports. About 6,000 jobs are at stake, mostly in economically depressed areas in states such as Arkansas, Mississippi, Alabama and Louisiana. Officials are talking about seeking $50 million in aid as a stimulus.

Now that I know the catfish industry is safe I can sleep better at night knowing the $1 trillion won’t be wasted on anything frivolous. You can be sure that the more outrageous projects are not even being discussed openly. They will slide through on page 895 of the coming bill. Every congressman, except Ron Paul, will be bought off with goodies for their district.

Everybody Knows That the Captain Lied

Poet and singer/songwriter Leonard Cohen captures the current mood of the country in his song Everybody Knows. The financial and political game is rigged against the good guys. The poor will stay poor and the rich will get richer. The captain is your political leaders, fat cat CEOs, and investment professionals. The American ship of state is leaking.

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

I’m now convinced that the only qualification to be a CEO of a U.S. company is to have guts. How else could you explain John Thain’s demand that he receive a $10 million bonus from Merrill Lynch (MER) after leading that prestigious firm to losses of $24.4 billion in the previous four quarters? Steve Roth, the CEO of Vornado Realty (VNO0, raked in $71.8 million last year in compensation. His company has ridden the wave of cheap debt for the last eight years. He brilliantly doubled the debt of his company from $6.2 billion in 2005 to $12.9 billion in 2007. The firm's leverage ratio exploded from 54% to 68%. He did deals that didn’t make sense from a cash flow standpoint. His business plan was based on the greater fool theory. Now, he is the greater fool. His stock price has plummeted 46%. No bank is willing to lend a commercial developer a dime. The commercial development Ponzi scheme will collapse next year. But, not too worry. Steve and his fellow incompetent gamblers want the U.S. taxpayer to bail them out. In the America of today, the taxpayer will again be screwed and the rich ruling elite will retain their place in the social order. The government has chosen to make you the greater fool.

Thomas Friedman in a recent NYT article correctly assesses the corrupt financial system we are stuck with:

I have no sympathy for Madoff. But the fact is his alleged Ponzi scheme was only slightly more outrageous than the 'legal' scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds, which Moody's or Standard & Poor's rate AAA, and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn't a pyramid scheme, what is?

The dice are loaded and the fight is fixed. Those who played by the rules, lived within their means, went to work every day, didn’t flip condos, or use home equity to lease a Mercedes, will pay for those who lied, cheated, and cut corners. This is how the American Dream has turned into the American Nightmare.

American Dream Redux – Patriots Needed

Below is an email I received this week from a lady named Cindy regarding my last article about Bernie Madoff:

Mr. Quinn...I just completed reading your article and could not agree with you more...Possibly a word of advice will ease my pain...I am a single mother with 3 children, 23, 19, 16....I am 52, self made, and worked my entire life to achieve a comfortable level of success for my family...For years I ran side by side accounts with Paine Webber, Merrill Lynch and Bernie Madoff. Amazingly, I met an associate of Madoff's at a Church in Fort Lauderdale and entrusted him with $10,000 16 yrs ago....Nothing posh...Simply good.....In the last 5 yrs Madoff out performed all, so naturally I moved my accounts and fed my Madoff feeder...Now, $1.7M later I am destitute...I will begin fore-closure on 3 of my investment properties and loose [sic] my primary home for I can no longer afford it....Why should a little guy like me have to suffer the consequences of an SEC over site...OHHH...I’m sorry, we will do better next time???

Why is it OK for Madoff to sit in his $10M apartment out on bail, watching TV and playing on the Internet?...Why is it OK for him to afford the most powerful former SEC attorneys now in private practice that will delay his trial for 3-5 yrs...How can our government allow this to happen...How is Ok to bail out Wall St with $700B while I stress out and cry like a baby over my loss....

How is it OK for Obama to be spending Christmas in Hawaii with his family staying at a $30M mansion, while my sickly mother flies from NC to Fort Lauderdale to hold and comfort her daughter....How is it OK that we have no Xmas tree or gifts this year?...How is it OK that my and my children's trust in mankind has been shattered....

I suppose we will survive, but how we don’t know....

The evil perpetrated by Bernie Madoff and his kind on Wall Street have disillusioned the American public and have driven another stake into the heart of the American Dream. The greed, false promises and fraudulent schemes by investment professionals and bank CEOs has shattered the dreams of millions. The immoral vision of immense wages, tremendous power, and elite social status has driven many to cheat the innocent.

As my father crosses the threshold into the final stages of his ultimately losing ten year battle with Alzheimer’s disease, I can’t help but contrast the compassion, care, empathy and love that my Dad has experienced from nurses, doctors, aides, and ambulance drivers, with the coldness, selfishness, materialism, egotism and narcissism exhibited by Wall Street scam artists, power hungry politicians, and pompous government bureaucrats. Dedicated caring nurses are paid a few thousand dollars per year. Criminally incompetent bank CEOs are paid hundreds of millions per year. Who benefits society more?

I’m convinced that the majority of Americans are decent human beings. They want a richer and fuller life, with a legitimate opportunity for advancement. The last 25 years of materialistic psychosis was a temporary deviation on the road towards the American Dream. If the authorities would let capitalism run its course and allow the painful deleveraging that is needed, we could get back on course. If it takes a depression to accomplish this required deleveraging, so be it. We’ve survived depressions before. It is time to resist the Federal Reserve criminality and government abuse of power. Ron Paul’s call for new patriots must be our rallying cry to reclaim the American Dream:

The original American patriots were those individuals brave enough to resist with force the oppressive power of King George. I accept the definition of patriotism as that effort to resist oppressive state power. The true patriot is motivated by a sense of responsibility and out of self-interest for himself, his family, and the future of his country to resist government abuse of power. He rejects the notion that patriotism means obedience to the state.

Many people are looking for an easy answer to the tyranny that is being imposed upon us by the oligopoly of government, corporations, and media. There is no easy answer. The original patriots struggled for 14 years to free themselves from British tyranny. Failure meant the hangman’s noose. Our politicians, corporate CEOs, and media pundits will provide comforting “solutions” that have been crafted by PR maggots. Their crafted talking points are lies. They have no idea what they are doing. The only question is whether rational change will come when the existing system collapses under the weight of its lies, or we take back the country through grassroots efforts and spreading the truth through the internet.

Disclosure: No position in any stock mentioned.

Comments

[redbaron:]

Great analysis, but very short on solutions.

2008 Dec 25 07:02 AM

[redbaron:]

I should also add the political over-tones bother me with this article, as he promotes Ron Paul, and bashes Obama (before he is even in office), while completely overlooking the Bushies of the last 8 years.

I find much to agree with in the analysis of the past, but that does not give a clear pathway for future economic decisions.

I would prefer to give Obama a chance here in this situation, as he has Paul Volcker as an economic consultant here and now. As I see it, we Americans have very little choice now, but to put our efforts and our faith behind the new administration. To do less than what we have done in previous administration changes, is not right, fair, or in our national interest.

2008 Dec 25 08:13 AM

[Ferdinand E...:]

I'm glad that Christmas only comes once a year, because while waiting for my wife and children to return from their Christmas walk, I decided to glance at my computer.

Yes, Bernanke was the wrong man to put in the Fed, but if he thinks that foreigners will buy enormous amounts of US debt while more is being cranked out, he is very very very correct. Who do you think bought the debt that Ronald Reagan and his government sponsored?

As for your concern about Senator Obama's vacation, I had a 5+ year vacation in the US Army. According to what I heard during the election campaign, Senator McCain was willing to supply hundreds of thousands of American soldiers and marines with a 100 year vacation in Afghanistan. Accordingly, I wish the President-elect Aloha, and wish that I was there too.

2008 Dec 25 08:18 AM

[Alan von Al...:]

redbaron said: "we Americans have very little choice now, but to put our efforts and our faith behind the new administration."

By doing or refraining from what? How is your faith going to help?

The one best thing Schwarzenegger can do is fire some of his 200,000+ salaried state government workforce. The one best thing Obama can do is bust up and auction the GSEs. Zero chance of those happening, right?

So, how is faith is bigger fatter government going to help?

2008 Dec 25 08:40 AM

[Prudent Man...:]

The Baby Boomers, that is what is wrong with America today. They are self-centered, wasteful, irresponsible, disrespectful, vulgar and self-indulgent.

The Baby Boomers squandered the legacy of the "Greatest Generation". Bring back compulsory military service for everyone over eighteen, no exemptions as everyone can do something for the good of the country, and we may get some discipline back into the country.

The Obama/Hillary Administration will be the worst since Carter.

2008 Dec 25 09:19 AM

[cabaretewil...:]

redbaron: There are many suggested solutions in the article. Read it again. The most basic oneis a retunr to capitalism, rejecting defacto communism, which Clinton/Bush/Obama all support.

2008 Dec 25 09:35 AM

[John Lounsbury:]

James - - -

A number of comments come to mind:

1. To Red Baron (and anyone else who is offended by the implied criticism of Obama) I say: Mr. Quinn has eloquently outlined the problem. Without a thorough understanding of the problem, effective solutions are not possible. This article is necessary because too many are still in denial about the problem we face.

2. More on Obama - I believe he is the first president in a long time who appears to me to be a pragmatist rather than an ideolog; to be the first president in a long time who has both the intellectual capacity and the openness to ideas to address issues rather than just maneuver them into a more comfortable position; to be the first president in a long time to be inclusive rather than exclusive; to be the first president in a long time to have the potential for enormous success or catastrophic failure; and to be the first president in a long time to be a leader. It is admirable to recognize the merit of Ron Paul's ideas, as Mr. Quinn does. However, if I were to chose someone who might be able to rally the American people to the extent needed to survive the very possible disaster in front of us, I would chose Mr. Obama and not Dr. Paul. I have always avoided making political statements on SA, and do not like it when others do, so please just let this one pass as a Christmas favor.

3. In a discussion earlier this year I asked: Where is Paul Volker when you need him now? Shortly thereafter I learned that he was a central Obama advisor. Maybe a glimmer of hope? How inclusive is Obama? Inclusive enough to get Ron Paul as an advisor?

4. I always apologize in advance when I attempt to summarize thoughts I glean from an article, especially one as outstanding as this one. Apology made, here goes:
(a) I see a base cause of the current problems as the concentration of "wealth creation" from transfer fees rather than from the production of goods. This wealth is illusory and not real, because it is derived from the construction of financial paper pyramids rather than items of utility. This diminishes the equal rights of others, referred to in the article, because those rights are strengthen when items of utility are available and diminished when the efforts off commerce produce no utility.
(b) "Inflation is not a bad thing for most Americans." I would restate this to change "most" to "some". If you have a job, or if you are retired and have a source of retirement income, deflation is great. If you do not have a jobe and need to get one, deflation is bad. Economic expansion is difficult in a deflationary period because risk taking is penalized and few new jobs are created. Only the absolutely sure things receive an investment dollar when the holder of that dollar knows prices will be lower later. Riskier start-ups are not attempted and the creation of new jobs is curtailed.

I could ramble on, but the house is stirring and it's time to go to the tree.

Great article!

Merry Christmas to all.

2008 Dec 25 09:41 AM

[investor88:]

Reading this article, it would seem that things will get worse before it gets better. Brace for tumultous times ahead.

2008 Dec 25 09:58 AM

[Distinctive:]

James, my lad, there is no hope for you or your patriots. The U.S. has sown the seeds of its current dilemma a long time ago. Its arrogance and its hubris have been driving it for so many years I'm surprised that any of the decent Americans it was my pleasure to meet are left standing. Regrettably, your sentiments are hollow bromides from a past era. A time long gone. Whereas Jefferson might have once been the essence of America, Bernie Madoff is America's essence today.

2008 Dec 25 10:00 AM

[OldLimey:]

The answer to the question posed by the article's title is pretty simple: a nation of producers with aspirations became a nation of consumers with a sense of entitlement.

It's not a uniquely American problem; much of the English-speaking world seems to have succumbed.

2008 Dec 25 10:29 AM

[msoori:]

Thank you for a well written article about the crisis we are facing today. America is being pillaged, plundered and raped financially by the very same people who are supposed to protect it. I asked this question in October in my blog xmplary.blogspot.com/2... You mentioned awaiting the future bailout demands of Rolex retailers, Porsche dealers, and caviar makers. This is not too far fetched... the Italigan government already bailed out the Cheese makers xmplary.blogspot.com/2... So not only America, but the whole world is being taken to the cleaners by the rich bankers with assistance from world governments. The new WMSs are not weapons, but fincancials as Warren Buffett stated. We, the consumers, have a huge blame in this as well, but those who engineered these Ponzi schemes has an even bigger blame for taking advantage of the uneducated and helpless.

Two movies that we should all see
tankthebank.com/
www.zeitgeistmovie.com/

and some interesting articles
seekingalpha.com/artic...
www.ritholtz.com/blog/.../
seekingalpha.com/artic...
www.youtube.com/watch?...
www.youtube.com/watch?...

2008 Dec 25 10:40 AM

[a. palmer jr.:]

Another problem could be put squarely on the shoulders of the "little guy" and that is the little guy trying to keep up with his neighbors by borrowing money that he hasn't the means to pay back. We all think we are entitled to a new car and house as soon as we graduate from high school. Earlier generations wouldn't dream of those purchases until they had quite a bit of money in the bank and a decent job. The best thing to happen to us would be for banks to refuse loans to people who can't show means of repayment.

2008 Dec 25 11:04 AM

[{5U}:]

Great article.

These bail outs are attrocious as the responsible are being punished. And it is disgusting the commercial real estate developers will get bail out money under the guise of promoting "jobs."

What we have all learned from this experience is that it helps to push things so large it is too big to fail and to always keep some spare cash to lobby your local congressman.

Merry Xmas!

2008 Dec 25 11:54 AM

[mskypek:]

Remember that history shows when numerous people are deprived of shelter or food for long periods of time, regardless of whether or not they deserve it, social unrest and some form of revolution are likely. The best way the wealthy and rich can insure they get to keep their money in these types of times is to make sure conditions don't get too bad. .... And, the economy continues to worsen.

2008 Dec 25 11:59 AM

[Ricard:]

Great article by Mr. Quinn, as usual.

I have a couple of thoughts to balance this article in my mind, first on the title:

Tragically, most people realized the American Dream of homeownership these past few years - now they woke up. As far as Adams's quote in the beginning is concerned, it is so subjective that one can say that every moment every American is living the American Dream, including the moments in this catastrophic nightmare. People obviously thought they were "innately capable" of affording all of the goods and services they bought under the monthly payment plan, a lie encouraged (but not created) by banks on Wall Street. People have themselves to blame for that one.

I do like your own interpretation much more: "The American Dream was not founded upon wealth and materialism. It revolves around achieving a better life based on the merits of your intelligence, hard work and contribution to the community of all Americans." Well said.



"Deflation is not a bad thing for most Americans. Cheaper gas is nice, cheaper food is nice, cheaper cars are nice, and flat screen TVs are nice."

True as this may be, deflation also comes with the toxic logic of "why spend today when my dollar will be worth tomorrow?" People with this kind of logic would generally not buy anything but the bare essentials, in hope that tomorrow will be a better day. Well, tomorrow gets better and better each passing day, until there are no businesses left to build those TVs, cars, and even food (think Oreo cookies). While you may argue this would weed out the financially weak-minded in this new Darwinian society, it would weaken our economy as well, and in due time, destroy it.



"The concept of forming this central bank was to stop bank panics from happening. So far, they are 0 for 2. "

I understand you are making a point, but this is flat out unfair. It's easily possible to see that the Fed may have prevented far more potential panics than anyone knows about (LTCM comes to mind, and of course Volcker's record). By definition, a panic that didn't happen is not a panic, and if there were only two in 100 years, they seem to have a pretty good record in my book.



"Rather than rebuilding highways, a nonprofit group called Reconnecting America wants the government to focus on a "21st century national transportation system" of mass transit and walking and bike paths."

I see this as being productive, and perhaps a better investment than just highways. This public good would detract Americans from being forced to spend on gas and automobiles, putting that private capital into something else, something possibly more productive than a depreciating asset...something like an education, perhaps.

I'd really like to see an infrastructure plan on the information superhighway...but I can see how in this environment that would be politcal suicide. No one is thinking about downloading more video when they can't pay for their house.



My last point unfortunately adds to your pessimism - I know of one great figure in the past that spent his way to success, that ran up huge debts and nearly bankrupted himself and the republic in his excesses...this man is none other than Julius Caesar. It's unfortunately hard-wired into our society that the man who spends succeeds, although we can hope that more take your advice to heart.

I know that your articles are rather bleak, intelligent as there are. I hope that you find some reason for good cheer today, and that tomorrow will indeed be better than yesterday.

Merry Christmas!

2008 Dec 25 12:09 PM

[faithmore:]

You hit the nail on the head. What you said is all true and could not be stated better. Unfortunatly our leaders could care less. You are a nobody like me just trying to squeak in a few insights of truth before the next shoe falls.

The only thing you forgot is the truth that Washington, Franklin, Lincoln, Jefferson, Madison and other of our great leaders relied on when the chips were down. They relied on a God which they believed was real, not some fairy tail or flawed religious church. And they prayed. All were prayer warriers.

Need I say more. Only when God intervenes directly will America be restored to its roots. "In God We Trust" is our motto, but our mantra is "Me First". The squeeky wheel gets the grease. The rest of us get screwed. How stupid to trust those that betray and hate God.

2008 Dec 25 12:59 PM

[aware:]

How much longer are you going to trust? Your blind to,thats the problem people listen to jerks like you,to the american people open your fucken eyes.


On Dec 25 08:13 AM redbaron wrote:

> I should also add the political over-tones bother me with this article,
> as he promotes Ron Paul, and bashes Obama (before he is even in office),
> while completely overlooking the Bushies of the last 8 years. <br/>
>
> I find much to agree with in the analysis of the past, but that does
> not give a clear pathway for future economic decisions.
>
> I would prefer to give Obama a chance here in this situation, as
> he has Paul Volcker as an economic consultant here and now. As I
> see it, we Americans have very little choice now, but to put our
> efforts and our faith behind the new administration. To do less than
> what we have done in previous administration changes, is not right,
> fair, or in our national interest.

2008 Dec 25 01:06 PM

[gordon:]

Did you all forget the 5-YEAR TAX LOSS CARRYBACK?(2007)(inste... of 3 yrs) that was supposedly
snuck-in or is still pending? That means homebuilders will be REFUNDED ALL INCOME TAXES PAID back to 2002, including BOOM YEAR 2003! Mortgage companies and others may have gotten this. It's estimated that $1-2 TRILLION in
Federal income taxes will be refunded in 2009, not sure if this is phased or
was passed yet.
Is this why not more homebuilder BKs/mergers? Are they waiting for this windfall?

2008 Dec 25 01:39 PM

[silverwood:]

Here is an article written by Darryl Robert Schoon which I believe compliments this authors excellent article.
----------------------...


The American Dream

-- Posted Monday, 22 December 2008 | Source: GoldSeek.com

An obituary


The American Revolution was an extraordinary event. The idea that freedom was an inherent right, that tyranny could be successfully opposed, that government could serve the people, not the few, was truly revolutionary in 1776—as it is today.



The American Revolution, however, has run its course; and unless resuscitated and given new life, the American dream and the dreams of America’s founding fathers will soon be only a memory. Dreams rarely come to pass and those that do rarely last. The American dream is no exception.



What happened in 1776 has been subverted by the passage of time and the inconstancy of later generations. Those who rule America today have subverted the principles enumerated in the US Constitution; principles the Founding Father hoped would guide those who followed them through the crises yet to come.



The principles were not many, e.g. fiscal prudence, sound money, separation of church and state and a limited military and limited government. But even those few and clearly stated principles succumbed over the years to the imposition of policies that had given rise to the need to revolt in 1776.



Now, in 2008, tyranny and government excesses are again upon America, but this time it is by America’s own hand. The policies of King George III were no more egregious than the policies of President George Bush II.— taxation without real representation, e.g. TARP (80 % Americans opposed), the imposition of policies contrary to the will of the people, e.g. US presence in Iraq and Afghanistan (70 % opposed), and the loss of individual freedoms under the Patriot Act (60 % opposed).



The difference between 1776 and 2008 is that America is now tyrannized not by the King of England but by its own government. Today, the US government does not represent the will of the people. It represents instead the special interests that control the US government through the buying of votes—America is not for sale only because it has already been sold.



The difference between 1776 and 2008 is not only 232 years. It is the difference between the dream of the Founding Fathers and the shadow of that dream in whose increasing darkness Americans now exist.



THE FEDERAL RESERVE BANK IS THE REASON FOR AMERICA’S

FALL FROM POWER AND THE SOURCE OF ITS INCREASING PROBLEMS



Thomas Jefferson warned 200 hundred years ago that if private bankers were allowed to issue America’s money, indebtedness, foreclosure and suffering would follow. Yet, in 1913, private bankers gained control over America’s money by the passage of the Federal Reserve Act.



We are now suffering for ignoring Jefferson’s warnings. Jefferson was right in predicting our problems but his words were overridden by those who had other plans for America, plans that would increase their profits at the expense of the nation.



It is no accident America is now an empty shell of the great economic power it once was. Bled dry by debt imposed by those whose sole intent was to profit, the US is now bankrupt at a time it desperately needs the resources it no longer has.



The US Treasury is now empty except for IOUs and only if others continue to buy America’s debts can America continue to go forward. Once we were creditors, now we are debtors. America cannot escape the consequences of what has been done but we can limit our problems if we undo their cause.



The Federal Reserve Act was enacted by Congress and signed into law by President Woodrow Wilson who later bitterly regretted what he had done to America.



I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

Woodrow Wilson, US President



The power of the Federal Reserve System—a system controlled by a small group of dominant men—derives solely from is power to issue debt-based money in the form of US dollars and to charge interest on their issuance. We are paying our jailors for our enslavement and are fools for so doing. Who would have thought—except Jefferson.



FRANCE AND AMERICA’S FIGHT FOR FREEDOM



This article is being posted from Paris, France; a city and nation that supported America’s War of Independence against England. Over time, Americans have forgotten this important fact.



Following the Declaration of Independence of the thirteen colonies, the American Revolution had been well received in France, both by the population and the enlightened elites. The Revolution was perceived as the incarnation of the Enlightenment Spirit against the "English tyranny". Benjamin Franklin, dispatched to France in December of 1776 to rally her support, was welcomed with enthusiasm, and numerous Frenchmen embarked for the Americas to help the war, motivated by the prospect of valor in battle or animated by the sincere ideal of liberty and republicanism, like Pierre Charles L'Enfant, and La Fayette, who enlisted in 1776.

en.wikipedia.org/wiki/...



In the last two centuries, Americans have come to identify more with England (perhaps a cultural variant of the Stockhausen syndrome) than with its first ally, France—the lure of a good Burburry overcoming its love for the great cloak of freedom. Unfortunately, Americans have forgotten their history and what they haven’t forgotten they have now reinvented.



Freedom is always fragile and is always under attack from those who would enslave others for their own ends, including profit; and, the present crisis is as threatening to America as was the crisis of 1776.



Now, as then, the cause of America’s problem is English in origin. But this time the cause is England’s central banking system, recreated on our own shores as the Federal Reserve Bank, a private central bank masquerading as a US Federal government institution.



But America does not own or control the Federal Reserve Bank. The Federal Reserve Bank is owned and controlled by a small group of dominant men— private bankers who through their control of the Federal Reserve now control America.



GOLD IS FREEDOM

THE 5 % SOLUTION



Gold is freedom because gold is the antidote to the debt-based money of private bankers issued by central banks such as the Federal Reserve, debt-based money that has been destroying America’s wealth, savings, and productivity for almost one hundred years.



Since the Federal Reserve began issuing debt-based US dollars 95 years ago, the US dollar has lost 95 % of its value. The whiff of the dollar’s demise is now in the air and unless something is done quickly, its end is imminent. There is only 5 % left to go.



Only if America returns to the principle of sound money enumerated in its Constitution, will the abomination of unsound money and unsound governance end. If the Federal Reserve is allowed to continue, so too will our problems and the now 95 year downward spiral of America.



The choice is clear: End the Federal Reserve or the American dream will end. End of story.



Five….four.…three....t...



fini

2008 Dec 25 01:39 PM

[Lars39:]

Wow, Mr. Quinn details issues I have thought about, but not outlined as well as he has. James Quinn expresses concerns that many of us have, and seems to be looking for ways to reverse the problems and actions leading to the perilous situation we are facing. It is doubtful that leaders of the country have any real solutions or even fully recognize the problems.
Relying on grass roots efforts is noble but it is unclear if enough of the citizenry is ready or willing to "take back the country". There is a lot of hand wringing and worry around the nation, but I'm not sure if we are ready to save, sacrifice and reconcile "needs" vs "wants" in defining the American Dream.
If the existing system collapses though, choices will be taken from us.

2008 Dec 25 01:39 PM

[unclej0:]

Bitter experience has amply demonstrated that unregulated capitalism is inherently and painfully unstable. It is a license to cheat on a very large scale.

Regulated capitalism could work if it were properly regulated in the public interest.

Human beings are incapable, by virtue of greed, fear, and appalling incompetence, of regulating a banana republic, much less a global economy. The most greedy inmates are in charge of the asylum.

I suggest that, if a decent future is to be created, it must rely upon the automated regulation of economic activity, including taxation, monetary policy, fiscal policy, and regulations to suppress economic criminal behavior This would require the development of good (psychologically realistic) economic models and a lot of simulation, the cost of which would be relatively modest.

Why won't it happen? Well, possibly because the inmates would have to relinquish control and find some honest work.

2008 Dec 25 01:50 PM

[nukldrager:]

Gordon, would you say a little more about that? 5 year tax loss carryback...

2008 Dec 25 02:04 PM

[Jplout:]

So many people spending time & energy in telling us what we already know. We all need to put our heads together and start coming up with solutions to this mess. We need jobs soon!! Successful American companies that manufacture products overseas should be able to get tax breaks for bringing manufacturing here in the US. Maybe the Government instead of subsidizing big banks, they should start subsidizing American made products. Just like they subsidize, Big Sugar, Big Corn, the energy companies & the Milk industry. Companies that buy American made products, like Walmart, should be able to get special tax breaks.
Another change should be the way we selct our elected officials. Any elected official that takes money from special interest groups should be inmediatelly dismissed from their job.

2008 Dec 25 02:06 PM

[unclej0:]

Jplout, subsidizing American made products would be very easy. It is really a matter of subsidizing American labor. To do that, we must pay for medical care and pensions as social costs instead of burdening the employers' cost of labor and the employees' wages with these items.

The social costs can be paid by means of a VAT, which taxes imports as much as American made products.

We must teach the unenlightened that the VAT may be less of a burden than unemployment and carrying a huge trade deficit and inflating our currency and watching American factories fold their tents and steal away across the Pacific.

There is no free lunch but we can at least be rational about how we pay for it.

2008 Dec 25 02:51 PM

[scotty1560:]

"Me" thinks the resource issues are not going to go away- the ultimate
supply and demand factors. Populations continue to grow and "cheap"
resources like oil, fresh water, foods like fish and grains are vanishing.

Human societies can't sustainably grow without "cheap" resources. It's
a slow cancer, tucked away by governments and corporations that
desire to keep growing (profiting).

So they get creative via adjustable rate mortgages, 100% financing, liar loans, hedge funds, bailouts, stimulous, currency manipultion, inflation, margin, reserve requirements . These are simply gimmicks and short term stimulus.

So ok, smart guys like Steve Jobs or Bill Gates advance societies with the internet and pc. Toyota has it's Prius. New drilling techniques. Great- these are helping to fill resource gaps. I do not believe technology will keep up with resource depletion. For every disease solved by medicine, three more diseases arise. Staph infections, cancers, birth defects- all out there and growing.

In the long run of say 10-25 years the cancer "resource depletion" is still there. Cost of water, oil, food take up more and more of daily living expenses. The financial world runs out of giimicks and the cancer still exists.

So my question is at what point does the cancer force hard decisions?
World Wars, famine, failure of government. Something has to give.
Humans like any species have a tipping point at which it starts to
decline. Just take a look at the ancient societies that governed the
planet, or go look at "Easter Island".

My point is short term, they can hopefully prop of the system for a few years. Long term of say 10-25 years down the cancer will still be there and parts of society will start to disappear- look at Detroit or look at New Orleans.

Governments need to start planing on longer term scales. It will take "considerably" more pain for this to happen. The two party system is nothing more than representatives for corporations. They talk intelligently and make a nice little presentation, but the big "cancer" remains unaddressed.

So I say "stagflation" is here and has been here. Just masked by gimmicks the last 7-8 years. Things humans need will continue to inflate (real foods, fresh water, cheap oil and energy), while real estate and stocks and metals go sideways.

Government won't be the answer- ultimately society will reshape itself around it's precious resources and move forward. This will take a while because of the steady diet of MSM. In 10 years or so if gas is $10 gallon or water is rationed, or bread is $7-8 dollars, than eventually the masking of the scam gets exposed. The current model of finance and government is doomed- when I don't know, but the model doesn't work- courtesy of MSM propaganda, tax
loopholes, inflation, The FED, government, lending policies.

The flaws are starting to show, we'll see how long they can keep the system "propped up". Conservative people don't borrow money to live on- and they rarely get caught in financial turmoil. Leveraging at any level is unsustainable long term.

2008 Dec 25 03:03 PM

[tdillian:]

To the author:

a very well written article.

I am an immigrant from a communist country in Asia. We, my parents and I, came to this country with very little money but they sacfriced, spent months in line at a US embassy in my birth country, to obtain our visa to come here.

I have lived here for about 15 years now. I paid my way thru undergraduate, and graduate engineering school, bit by bit, this year, I finally paid off all my student loans this year. This meant sacrificing alot of material things that might have looked good. I am sure I could have gotten a loan for these material things, but perhaps it might be b/c of the way my parents raised me with the true asian culture even here in the US, none of this material stuff means much to me.

I have friends who I went to school with in other fields, they make $60000 a year, yet they had no problems buying a $60000 decked out Mercedes. They had no issues taking 2 or 3 vacation to places I would be embarssed to go to , why? b/c it would mean taking out a loan to take these vacations.

Will I ever own a Mercedes? chances are very low..
Does this bother me? nope
Will I ever own more than 1 house? chances are slim to none..
Does this bother me? nope
Will I ever ever drink Crystal champagne? nope
Does this bother me? nope

All I want is to be judged on what I know and not who I know (like princess caroline's bid for her first fulltime job as a US senator)... what I want is a fair playing field.. I do not begrudge people who took a chance, were successful and are rich now.. this is what capitilism is, on a level playing field, someone had the guts to take a chance on an idea thru hard work were successful.. why would I be upset at someone like this? why would want their money? why would I want them to "spread their wealth" to me?

What I have huge issues is, these companies that took chances and yet thru their won mismanagement, lying, gross neglience, ran massive debts, and them comning to taxpayers like me to bail them out.. and yes it is a BAILOUT! b/c the taxpayers will never see this money..

Also, I completely agree with the author about the Obama, the man has run nothing in his life.. and yet even at the slightest complaint about him.. all these Obamabots come running to rescue..they seem to be blindly following the pied piper.

They had a person like the Obama run in my birth country.. no one questioned him, no one critized him, no one scrutinized him.. and that will led this country's demise. And he basically ran the country into the ground. and now I am seeing the same thing with the Obama here..

Bush was given sort of a free pass like this after 9/11, and it was not until the Katrina moment, people saw him for the imbecile that he was. But I will give credit to Bush where it is due, Bush kept this country safe for 7 years, and he tried to deflate the housing bubble in 2006 , but with the democrats in congress it was not possible. I suppose we will have to wait for the conman Obama's "katrina moment", I would guess with will come sooner than later.. when the hope ballon is filled so much, makes it a much easier ballon to pop.

As for the question posed "what happened to the american dream?" It still exists, but the candle is being slowly exhinguished by the political class.

I will never care if I never have any material wealth that the american society deems important, my self worth is not determined by that.. but I will care if my children are not allowed a fair playing field where they determine what they want to make of their lives.

This is one of my fauvarite quotes:
" Decide to construct your character throughexcellent actions and determine to pay the pay the price of a worthygoal. The trials you encounter will introduce you to your strengths.Remain steadfast...and one day you will build something that endures,something worthy of your potential." "

Will the american dream still exist? perhaps... but it may not exist in America, it might be exported to another country.

2008 Dec 25 03:09 PM

[tdillian:]

I also wanted to add... I am not a democrat or a republican any longer.. I used to be a democrat.. and voted as one as soon as I got my citizenship.. now I realise that they are both parties catering to the same lobbyists, the same corporate leads, the same small group of powerful people..

I reregistered with the Indepedent party now.. although dems and repubs have differing roles in government's place in a country.. before I can vote for a person of a certain party affiliation, their first test ,for me at least, is that they are not completely corrupt and bought off.

What is needed is a third party made up of good hard working people who understand the struggles of the middle class and the poor and will turn this country around and bring it back to what our forefathers fought so hard for ...and I will do my part to keep the american dream alive for the future generations.. calling politicians and holding them accoutantble..

2008 Dec 25 03:53 PM

[sleepless_o...:]

I like this article and the comment stream, especially the comments of Ricard and John Lounsbury. These comments, and many of the others, make points critical of some of the author's statements, but most of the comments do more to round out the positions expressed by Mr. Quinn than to contradict him.

We have a crisis. Remember the Chinese symbol for crisis is compounded from the symbols: disaster and opportunity. If we can define the disaster sufficiently we will see opportunity.

2008 Dec 25 03:58 PM

[Teutonic Kn...:]

As Billy Graham once said it in one of his books, the American experiment is one of the crown jewels of human history. Washington et al. founded this nation when monarchs and royalty were still in vogue.

We dreamed of such characters as Batman, Superman, Micky Mouse, and Wonder Woman, among so many. People from around the world of all races and cultures could come to enjoy such great upward mobility.

Whatever your ancestors's reason for coming, be it religious persecution, political turmoil, economic devastation, genocide, we call this place our home and strive to build it and preserve it as exemplary for the rest of the world. People are willing to wait for 10, 20, or even 30 years in line for the quota to come up to take their turn.

Yet, in the past 8 years or so, never have I seen a country so blessed with its democratic traditions, so rich with natural resources, so envied for its law and order, so endowed with such innovative and entrepreneur talents, so technological advanced, and so militarily strong, and yet, so determined to blow it.

2008 Dec 25 04:00 PM

[notsosmart:]

as an independent all i can sayis you eleted this jerk twice.happy holiday.

2008 Dec 25 04:48 PM

[Sonia:]

If the Federal Reserve did not control the money supply, Congress would control it. Politicos and lobbyists would have their fingers on the the switch of the printing press - and oh, wouldn't they just love to make use of it!

People resist VAT by buying downscale, buying less, resulting in reduced employment and a lower standard of living for all. England has a 17% VAT, not only at the point of sale but on every step in production. Since VAT does not provide the government with enough money to satisfy their insatiable appetite for spending, England also has an income tax. The result? My $1000 refrigerator sells for the sterling equivalent of $3000 in a London chain store, due to VAT on mined ore, steel production, plastic production, etc. My mother, who lived in London, had only a 10 cu ' refrig - and on her small retirement income, she paid income tax. VAT is just another way for politicians to take the working people for a ride.

Cindy's ripoff - my sympathies - exemplifies why nobody should ever put all their eggs in one basket. I've been bitten this year by Fannie Mae preferreds sold by USB in May (Government agency bonds are safe, right?), and a gas bond issued through Lehman that went belly up - but because of diversification we'll go on eating - and by living low on the hog, we paid off our house long ago. Anybody can do well in this country if they are willing to thrift shop and yard sale, buy three year old cars, and send the kids to state college instead of going into debt for Ivy League - but "make do and mend" is not in this generations' vocabulary, unfortunately.

2008 Dec 25 05:50 PM

[Vern Gilmore:]

If it were not for the inflation of the money supply, no middle class family would have a college graduate. This "wellfare" (government guaranteed loans for college expenses) has built our economy. So now, do we want to go back to an economy of "he who has the gold rules and everyone else can suffer"? I don't think so. We can and will inflate ourselves out of this mess and we can and will pay it back in the future with a rebalancing of our tax system. To allow a depression to occur would be an incredibly stupid thing to do. Much more stupid than anything Bush or Clinton did.

2008 Dec 25 07:38 PM

[CanadianInv...:]

When did this "unregulated capitalism" exist...I must have been a sleep cause as far as I can remember government has always had it's hands in the markets, and they've accomplished nothing but distruction of wealth! The Madoff scandal provides a good example of the effectiveness of government regulation. People have to start learning how to invest and not rely on the government to mitigate risk....cause they are too inept to do it.

We have a "mixed economy", or alternatively government sponsored capitalism. The economist Von Mises called it socialism by installments.


On Dec 25 01:50 PM unclej0 wrote:

>
> Bitter experience has amply demonstrated that unregulated capitalism
> is inherently and painfully unstable. It is a license to cheat on
> a very large scale.
>
> Regulated capitalism could work if it were properly regulated in
> the public interest.
>
> Human beings are incapable, by virtue of greed, fear, and appalling
> incompetence, of regulating a banana republic, much less a global
> economy. The most greedy inmates are in charge of the asylum.
>
> I suggest that, if a decent future is to be created, it must rely
> upon the automated regulation of economic activity, including taxation,
> monetary policy, fiscal policy, and regulations to suppress economic
> criminal behavior This would require the development of good (psychologically
> realistic) economic models and a lot of simulation, the cost of which
> would be relatively modest.
>
> Why won't it happen? Well, possibly because the inmates would have
> to relinquish control and find some honest work.

2008 Dec 25 07:51 PM

[Steven Hansen:]

"The crux of the problem is that Americans, with a strong sense of morality and caring about what is right and wrong, are no longer steering the American ship. Thomas Jefferson declared that Americans had the right to “Life, liberty and the pursuit of happiness” in the Declaration of Independence."

this is the problem. all the others pale in comparision.

2008 Dec 25 08:46 PM

[Al-USA:]

Very good article.

It seems to me that the USA is in the declining phase of its civilization, as explained in the classic book, "The Rise And Fall Of The Roman Empire", when the ruling classes, or capitalist elites, become parasitic, the civilization is on the slippery slope of decline and eventual destruction....

Of course, it took a few hundred years for the Romans to collapse but things move much more rapid now, so it will probably happen alot faster this time.

2008 Dec 25 09:02 PM

[John Polomny:]

I do not know why people get so upset because the US has entered its terminal decline as an economic and political power. This seems to me to be historical as all great powers fill with hubris which causes them to overreach. We had the benefit of not having our country touched by either World War and this gave us an excellent opporutunity to become the dominant economic, military, and political entity in the world. However the lessons learned and advantages earned by earlier generations have been squandered and now the epicenter of power will move to Asia. To a people, who like us several generatons ago, are wiling to do whatever is necessary to be successful. Saving money, investing in productive capacity, sacraficing for the future. The US has enough accumulated capital such that its decline will take longer then most think but decline it will unless this time it really is different. Nothing really to worry about as the world is so much smaller because of cheap travel and communication that even most readers on this site have the opporutunity to profit from Asia's emergence.

"The only question is whether rational change will come when the existing system collapses under the weight of its lies, or we take back the country through grassroots efforts and spreading the truth through the internet."

This strikes me as rather ambitous. There are 300 million people in the US most of which have no education or interest in history, politics, economics so they do not even know or care about what you are talking about. Don't believe me stand outside a Wal-Mart and ask somebody about fractional reserve banking or have them quote to you the bill of rights. Pointless, your time which is limited and at a premium, should be spent diversifying assets overseas, setting up banking options overseas, and if you are that worried about collapse of the US getting yourself a crib in another country. Although you are correct in most of your analysis remember one thing, a prophet is unloved in his own country.

2008 Dec 26 01:44 AM

[raising4dau...:]

It's real easy. We need to amend the constitution such that no more descendants of Prescott Bush can hold a position in government anywhere in the country. Bush I and Bush II administrations are responsible for, what, about $8T in debt. Even the Kennedys haven't done that much damage.

2008 Dec 26 01:56 AM

[pja_truckin...:]

I've so enjoyed reading articles on SA for the last few months! I'm an independent blue collar maggot, who's had fun reading the insights of many learned and scholarly men and women who contribute so much to the financial world that we all rely apon in this country. I really do feel sorry for you. . . those who really wouldn't know how to work more than a few hours a day. Guess my calloused hands would scare ya'll to death! To bad. . . so sad. . . I look forward to the next few months. This "de-leveraging" is long over due. I'll be glad to pick you up and get you where you need to go as a kindness. Kind of a rememberance for all the good times! Learn to work, and I mean really work! Or you will be just another name forgotten in the sands of time! Buffet is so correct. . .along with Trump. Provide value. . . or fail! P

2008 Dec 26 03:34 AM

[sether:]

Prudent Man doesn't know who to be angry at anymore. He feels REALLY confused and frustrated because the unfolding events have revealed his former idols to be false.
Carter was the last good president we had. He told us the truth and we hated him for it. We needed to get off oil 30 years ago. We will all be putting on a goddamn sweater pretty soon. Ever since Carter it's been lies and debt. Reaganites / Bushies / 'Cons / 'Free'marketers continue to rape the corpse of America as they make their final exit in an avalanche of fraud, bailouts, bankruptcies, crime, and pardons. They did win the war, and no prisoners were taken. The only remaining task is to transfer as much blame as possible to the next president.
I do agree though that military service should be made compulsory. We would never have invaded Iraq if that was the case. We also wouldn't need to give billions to mercenaries to provide 'security', barracks and food to our troops.



On Dec 25 09:19 AM PrudentMan, CFA wrote:

> The Baby Boomers, that is what is wrong with America today. They
> are self-centered, wasteful, irresponsible, disrespectful, vulgar
> and self-indulgent.
>
> The Baby Boomers squandered the legacy of the "Greatest Generation".
> Bring back compulsory military service for everyone over eighteen,
> no exemptions as everyone can do something for the good of the country,
> and we may get some discipline back into the country.
>
> The Obama/Hillary Administration will be the worst since Carter.

2008 Dec 26 09:55 AM

[JohnAl:]

Mr. Quinn,

Another finely written analysis. Thank you.

The fact that there are so many of us who feel as you do gives me hope for the future - and it should you too - that our children and grandchildren may still be able to experience the American dream.

The recent bailouts and the continuation of bailout nation that we're likely to see during the next administration may end up being just the wake up call that Americans needed. More and more people are waking up daily to the stark truth that what we witnessed was first and foremost the result of a failure of a centrally planned monetary system. We will of course continue to experience such crises as long as the federal reserve and fractional reserve banking is allowed to exist, and as long as people continue to believe that a cadre of economists (or computers, as one of the commenters above suggests) can determine what is just the right amount of money to inject or remove from the economy in order to further whichever set of goals are in vogue with the power elites at the time.

Just one note to those who honestly believe that this was a failure of capitalism... time to remove the blinders, guys. You can start by educating yourselves at mises.org.

2008 Dec 26 11:05 AM

[AZ Quinn fo...:]

He gave a great one at the end.


On Dec 25 07:02 AM redbaron wrote:

> Great analysis, but very short on solutions.

2008 Dec 26 11:45 AM

[AZ Quinn fo...:]

His"bashing" as you call it is based on what Hussein the Messiah has said. I don't think we need to wait for him to put his cockamamy plan in to effect before we can opine on it!!!


On Dec 25 08:13 AM redbaron wrote:

> I should also add the political over-tones bother me with this article,
> as he promotes Ron Paul, and bashes Obama (before he is even in office),
> while completely overlooking the Bushies of the last 8 years. <br/>
>
> I find much to agree with in the analysis of the past, but that does
> not give a clear pathway for future economic decisions.
>
> I would prefer to give Obama a chance here in this situation, as
> he has Paul Volcker as an economic consultant here and now. As I
> see it, we Americans have very little choice now, but to put our
> efforts and our faith behind the new administration. To do less than
> what we have done in previous administration changes, is not right,
> fair, or in our national interest.

2008 Dec 26 11:47 AM

[AZ Quinn fo...:]

Brilliant!!! Thank you!!!


On Dec 25 03:09 PM tdillian wrote:

> To the author:
>
> a very well written article.
>
> I am an immigrant from a communist country in Asia. We, my parents
> and I, came to this country with very little money but they sacfriced,
> spent months in line at a US embassy in my birth country, to obtain
> our visa to come here.
>
> I have lived here for about 15 years now. I paid my way thru undergraduate,
> and graduate engineering school, bit by bit, this year, I finally
> paid off all my student loans this year. This meant sacrificing alot
> of material things that might have looked good. I am sure I could
> have gotten a loan for these material things, but perhaps it might
> be b/c of the way my parents raised me with the true asian culture
> even here in the US, none of this material stuff means much to me.
>
>
> I have friends who I went to school with in other fields, they make
> $60000 a year, yet they had no problems buying a $60000 decked out
> Mercedes. They had no issues taking 2 or 3 vacation to places I would
> be embarssed to go to , why? b/c it would mean taking out a loan
> to take these vacations.
>
> Will I ever own a Mercedes? chances are very low..
> Does this bother me? nope
> Will I ever own more than 1 house? chances are slim to none.. <br/>Does
> this bother me? nope
> Will I ever ever drink Crystal champagne? nope
> Does this bother me? nope
>
> All I want is to be judged on what I know and not who I know (like
> princess caroline's bid for her first fulltime job as a US senator)...
> what I want is a fair playing field.. I do not begrudge people who
> took a chance, were successful and are rich now.. this is what capitilism
> is, on a level playing field, someone had the guts to take a chance
> on an idea thru hard work were successful.. why would I be upset
> at someone like this? why would want their money? why would I want
> them to "spread their wealth" to me?
>
> What I have huge issues is, these companies that took chances and
> yet thru their won mismanagement, lying, gross neglience, ran massive
> debts, and them comning to taxpayers like me to bail them out.. and
> yes it is a BAILOUT! b/c the taxpayers will never see this money..
>
>
> Also, I completely agree with the author about the Obama, the man
> has run nothing in his life.. and yet even at the slightest complaint
> about him.. all these Obamabots come running to rescue..they seem
> to be blindly following the pied piper.
>
> They had a person like the Obama run in my birth country.. no one
> questioned him, no one critized him, no one scrutinized him.. and
> that will led this country's demise. And he basically ran the country
> into the ground. and now I am seeing the same thing with the Obama
> here..
>
> Bush was given sort of a free pass like this after 9/11, and it was
> not until the Katrina moment, people saw him for the imbecile that
> he was. But I will give credit to Bush where it is due, Bush kept
> this country safe for 7 years, and he tried to deflate the housing
> bubble in 2006 , but with the democrats in congress it was not possible.
> I suppose we will have to wait for the conman Obama's "katrina moment",
> I would guess with will come sooner than later.. when the hope ballon
> is filled so much, makes it a much easier ballon to pop.
>
> As for the question posed "what happened to the american dream?"
> It still exists, but the candle is being slowly exhinguished by the
> political class.
>
> I will never care if I never have any material wealth that the american
> society deems important, my self worth is not determined by that..
> but I will care if my children are not allowed a fair playing field
> where they determine what they want to make of their lives.
>
> This is one of my fauvarite quotes:
> " Decide to construct your character throughexcellent actions and
> determine to pay the pay the price of a worthygoal. The trials you
> encounter will introduce you to your strengths.Remain steadfast...and
> one day you will build something that endures,something worthy of
> your potential." "
>
> Will the american dream still exist? perhaps... but it may not exist
> in America, it might be exported to another country.

2008 Dec 26 12:01 PM

[scotty1560:]

This episode in our history will probably take a "generation" to forget.

De-regulation caused many headaches: Real estate investors had 100-120% financing and liar loans, equities had the hedge funds, lenders had the reserve requirements or better put "lack of reserves". If you give gamblers money, they tend to gamble. Tax law changes created some more incentives and encouraged fraud.

You might see some trader rally's in equities, but one would think we are
facing years of slow sideways recovery here. My guess is 6-9 years from
a new cycle will be begin, driven by either a war, technology, or alternative
energy- some catalyst will be required. Government action will not solve
the big picture.

Chances are we get the "nasty" inflation via cost of living expenses
(food, utilities, direct or indirect taxes, energy).

Hopefully, some future restrictions will be put in place before the next "boom". My vote is to bring back Andrew Mellon and kill the FED.

2008 Dec 26 08:07 PM

[beenburnedt...:]

I love reading James Quinn and find his articles very informative.

He concludes, "I’m convinced that the majority of Americans are decent human beings. They want a richer and fuller life, with a legitimate opportunity for advancement. The last 25 years of materialistic psychosis was a temporary deviation on the road towards the American Dream."

As a business owner and father who has seen a lot of good, but also a lot of bad, sinister, and corrupt behavior, the 25 year psychosis is not temporary but it has invaded a majority of the current populace. Greed, general cynicism, and authority mistrust, has displaced hard work and genuine trust.

There needs to be societal change. Is that best done through a painful depression? Through a charismatic leader? Through an physical threat to the country's security? (that hasn't seemed to work yet)

An external factor that no one can predict yet must change the course of peoples minds in this country. We are all going to sacrifice at least in part in order to get there. There can not be gain without sacrifice.

2008 Dec 26 09:39 PM

[unclej0:]

The financial crisis really WAS a failure of capitalism. The idea of letting the big financial institutions fail is attractive to the "serves them right" emotion but the freeze-up of commerce and industry that might result would be a large scale economic tragedy.

What we had here is the failure to adequately regulate the economy.

The underlying problem is that we are still unable to regulate the economy because the pols are bought and paid for by special interests who are expert at gaming the system - any system that has yet been implemented.

We are pretty good at solving scientific problems in nature but we have not gotten very far in the successful management of human affairs. If we don't get on that problem soon, it may be our final frontier.

Do not depend upon ideology (any ideology) to replace science. Ideologies are little boxes that constrain thought and best serve demagogues.

2008 Dec 26 11:16 PM

[NoSurprise:]

Hmm, interesting, gloomy and partly accurate article. However, a vast majority of Americans are and have always been living the dream. We have not been affected, relatively speaking, by the two World Wars, we have not had genocide or widespread corruption in US. We have not been perfect either, given the plight of immigrants, minorities and women in the past. Perhaps, an exotic vacation is worth a loan. Seeing how other people live, survive and prosper or barely scrape by is a very eye-opening experience. Asia, Africa and the middle East serve as great learning lessons for the vast majority of the populace who know little outside what is spoon-fed by TV.

American dream is an idea which depends on the interpretation. The idea of working hard with your hands, or going to church or not taking on too much debt as a requirement to being a good person or a good citizen is small-minded. America, as any other collection of 300million people, has and will always have the hard-working blue collar workers, the white-collar professionals (who, it sounds from the comments, work less hard or maybe being Phds, MDs, JDs provide less vital services to the masses), the brilliant entrepreneurs who come up with an idea and get rich fast, old money who can live off and use the capital their family accumulated, the crooks, the poor, the unlucky, etc. All the criminals that we have seen come to light in the past 18 mo, 18 years, etc have always been a part of any society. Crooks, scam artists, thieves, Ponzi schemes are older than dirt.

The same bankers that are so evil this year, created a lot the wealth of the financial world. (through money multiplication, through derivatives, through options, through exotic financial vehicles). Thats what allows all of us to get that loan for the car, for grad school, for the house, and yes for that couch and the large plasma tv, not to mention the SUV or two in the driveway. Google founders are uber-rich but they came up with an idea that changed our lives significantly. Same thing with MSFT, Amazon, Ebay. Pfizer, Merck, Dollar Stores. We all know there is no free lunch out there, so some people who are rich did steal or do something illegal. Others have earned it. Who is to say that building a desk is somehow more holy than selling a house or marketing a product or creating a song?

Trying to be a patriot, or blaming this President or that President, or class distinction, or who works how, or religion, or who has what morals is comforting to the author of these pronouncements and divides things into US and THEM, but ultimately fails to define, grasp or comprehend the problem. These tactics are great at population control and thus will always be employed.

USA is a great country for the reason that it was one of the first and still is a land of opportunity. It is the land where you can work and make something of yourself, it is a land where you can practice your religion, speak your language, try to preserve your heritage. It is a land where you can make a lot of money and get rich, it is a land where you can walk into the ER and get advanced medical help. It is not perfect nor the best in every little category in the world. It is built on the backs of immigrants who did not have these basic and not-so-basic freedoms in their old countries. Thats why we had the Puritans, the English, the Irish, the Jews, the Koreans, the Chinese, the Nigerians, the Italians and everybody else come here in mass. That is the dream. It is just freedom (religious, economic, social) and opportunity. Nothing about 45 inch TVs or having 401K matching or 3 cars or whatever. Having a downgrade in the standard of living is tough, no doubt about it.

This is sort of like an economic 9-11. We haven't been attacked by terrorists on the same scale since that time, so we did something right strategically then on the international/politica... arena. This also provides us with a historic opportunity to do what is right. Our politicians and our government are elected by us. We as a country get what we deserve. If all the politicians that we elect end up corrupted and self-serving, then that must be a shortcoming of representative democracy and we will need to correct it.

America has always been a great country because of these freedoms and opportunities, which the majority of the world to this day has never experienced. (Iran, Sub-saharan Africa, Venezuela, Russia, most Arab states, India, China,the list goes on). As long as we have the people who want to work hard, want to get rich, want to come here to live their lives in freedom, we will have the potential to prosper. As far as the corporations and the special interests and the corruption, we as a nation are responsible for correcting and properly regulating.

Not to bicker, not to point fingers, not to hate or be jealous of your neighbor, not to have a holier-than-though attitude, not to run around screaming that the end is coming, goes against the grain of human nature.

We will see how it plays out.

Cheers,
Mike

2008 Dec 27 01:07 AM

[James Quinn:]

Sounds like you're a Boomer. The classic Boomer mantra - "Don't blame anyone, because that is politically incorrect. We are great. We are better than other countries. Everthing will work out because it always has."

Saying we are better than other countries is like saying we are the best looking horse in the glue factory.

You are one of the Great Deniers. They include Ben Stein, Larry Kudlow, etc.

Let see how it plays out. La Di Da. La Di Da.


On Dec 27 01:07 AM NoSurprise wrote:

> Hmm, interesting, gloomy and partly accurate article. However, a
> vast majority of Americans are and have always been living the dream.
> We have not been affected, relatively speaking, by the two World
> Wars, we have not had genocide or widespread corruption in US. We
> have not been perfect either, given the plight of immigrants, minorities
> and women in the past. Perhaps, an exotic vacation is worth a loan.
> Seeing how other people live, survive and prosper or barely scrape
> by is a very eye-opening experience. Asia, Africa and the middle
> East serve as great learning lessons for the vast majority of the
> populace who know little outside what is spoon-fed by TV.
>
> American dream is an idea which depends on the interpretation. The
> idea of working hard with your hands, or going to church or not taking
> on too much debt as a requirement to being a good person or a good
> citizen is small-minded. America, as any other collection of 300million
> people, has and will always have the hard-working blue collar workers,
> the white-collar professionals (who, it sounds from the comments,
> work less hard or maybe being Phds, MDs, JDs provide less vital services
> to the masses), the brilliant entrepreneurs who come up with an idea
> and get rich fast, old money who can live off and use the capital
> their family accumulated, the crooks, the poor, the unlucky, etc.
> All the criminals that we have seen come to light in the past 18
> mo, 18 years, etc have always been a part of any society. Crooks,
> scam artists, thieves, Ponzi schemes are older than dirt.
>
> The same bankers that are so evil this year, created a lot the wealth
> of the financial world. (through money multiplication, through derivatives,
> through options, through exotic financial vehicles). Thats what allows
> all of us to get that loan for the car, for grad school, for the
> house, and yes for that couch and the large plasma tv, not to mention
> the SUV or two in the driveway. Google founders are uber-rich but
> they came up with an idea that changed our lives significantly. Same
> thing with MSFT, Amazon, Ebay. Pfizer, Merck, Dollar Stores. We all
> know there is no free lunch out there, so some people who are rich
> did steal or do something illegal. Others have earned it. Who is
> to say that building a desk is somehow more holy than selling a house
> or marketing a product or creating a song?
>
> Trying to be a patriot, or blaming this President or that President,
> or class distinction, or who works how, or religion, or who has what
> morals is comforting to the author of these pronouncements and divides
> things into US and THEM, but ultimately fails to define, grasp or
> comprehend the problem. These tactics are great at population control
> and thus will always be employed.
>
> USA is a great country for the reason that it was one of the first
> and still is a land of opportunity. It is the land where you can
> work and make something of yourself, it is a land where you can practice
> your religion, speak your language, try to preserve your heritage.
> It is a land where you can make a lot of money and get rich, it is
> a land where you can walk into the ER and get advanced medical help.
> It is not perfect nor the best in every little category in the world.
> It is built on the backs of immigrants who did not have these basic
> and not-so-basic freedoms in their old countries. Thats why we had
> the Puritans, the English, the Irish, the Jews, the Koreans, the
> Chinese, the Nigerians, the Italians and everybody else come here
> in mass. That is the dream. It is just freedom (religious, economic,
> social) and opportunity. Nothing about 45 inch TVs or having 401K
> matching or 3 cars or whatever. Having a downgrade in the standard
> of living is tough, no doubt about it.
>
> This is sort of like an economic 9-11. We haven't been attacked by
> terrorists on the same scale since that time, so we did something
> right strategically then on the international/politica... arena.
> This also provides us with a historic opportunity to do what is right.
> Our politicians and our government are elected by us. We as a country
> get what we deserve. If all the politicians that we elect end up
> corrupted and self-serving, then that must be a shortcoming of representative
> democracy and we will need to correct it.
>
> America has always been a great country because of these freedoms
> and opportunities, which the majority of the world to this day has
> never experienced. (Iran, Sub-saharan Africa, Venezuela, Russia,
> most Arab states, India, China,the list goes on). As long as we have
> the people who want to work hard, want to get rich, want to come
> here to live their lives in freedom, we will have the potential to
> prosper. As far as the corporations and the special interests and
> the corruption, we as a nation are responsible for correcting and
> properly regulating.
>
> Not to bicker, not to point fingers, not to hate or be jealous of
> your neighbor, not to have a holier-than-though attitude, not to
> run around screaming that the end is coming, goes against the grain
> of human nature.
>
> We will see how it plays out.
>
> Cheers,
> Mike

2008 Dec 27 07:23 AM

[Krissie:]

Thank you for the article, Mr. Quinn. I also thank you for recognizing that nurses et al contribute more to our society than lawyers, greedy CEO's, Wallstreet financials, and corrupt bankers. As a nurse for many years who hasn't had a "real" job (hah! and you actually BELIEVE the want ads in the newspapers??), I've been living off of Bone Soup for quite some time. Nurses are hired by "greedy corporations" too and they certainly don't like a person like me pointing out their greed and errors.

Someone mentioned that there is a shortage of solutions. If you read between the lines, a very real solution is to punish/jail/fine/suffe... a loss of reputation, those who steal/cheat from others. This has NOTHING to do with your rank, your status and how old you are nor how much money you have. You would get no BAIL OUT from me, but go directly to jail, and no, you can't pass go either. Accountability is the name of the game.
Let those who run the greedy/corrupt corporation fall by the wayside, do not bail them out. Let honest folks with integrity and morality to begin to run our country. Let us have REAL leaders to lead who are not false prophets, because we will follow you. Most people are sheep-like anyway. Leaders that are interested in shiny baubles should not be elected. We need something/someone of real substance.

Obama? The only thing I hope for Obama is that he can improve on the mess we have here/ and not add to it. We shall see, we shall see.
I also hope that the corrupt politics that have come out of Illinois are due to something that Obama has done to make it happen! One can only hope. Without hope, there is nothing.

Caroline Kennedy can stay directly where she is, in her bubble. Just because you are bored doesn't mean we will vote for you.

2008 Dec 27 02:09 PM

[wildsalmon:]

Three points:

1) Referring to the "too big to fail" reasoning for lending/giving money to large institutions:
You should mention that the Glass-Spiegle Act was put in place to prevent banks from entering businesses that would create that situation. A 'Great Depression" prevention measure. That was rescinded by Bill Clinton under pressure from the lobbyists of the largest banking institutions.

2) Please note that Pres - elect Obama said the same economic statements prior to the election that Pres Carter said to get elected. Change, get rid of corruption, .... Unfortunately we don't seem to have learned from the Carter administration results. Over 10% unemployment, over 5% inflation, 18% interest rates, .....

3) Not much said about Barney Frank, Chris Dodd, and Bill Clinton's roles in 'requiring' the lending institutions to make the loans to those unqualified borrowers. How much did Mr. Frank's significant other gain financially from the Fannie Mae Freddie Mac situation? Others benefited even more. What motivation did Frank and Dodd have to change the regulatory environment to prevent the debacle from happening. Now Frank is the person looking over the bench questioning those who are in trouble. Why do we continue electing professional politicians?

Happy New Year.

2008 Dec 28 11:26 AM

[littleBonap...:]

i find the article really good. Like some of people which already
sent a comment, I was also born in a totalitary country.

you american's need really to watch what's going on in your country-
once america will reach a certain point, which you are
really extremely close to - you will slide into a system
which you will never get out from.

many american's have not the faintest clue what it means how the
mechanisms in a totalitary regime works. that's the reason why
many are still asleep and erroneously still believe their democracy
is guaranteed. that would be a hystorical mistake.

the system reached the banana-republic status already. from there
lead many ways to hell. the fastest way to hell goes through the
state when power and money is in the hands of few which represent
everything. their personal interests are disguised as sort
of ideology. that's how it always worked.

this absolute monopoly and a nomenclatura of priviliged which
basically lives on the cost of the rest are very typical characteristics.
such a nomenclatura is full of incompentence, but as long as their
are loyal to the system, they can survive easily -as they maintain
the system's "stability"...

watch out guys.

2008 Dec 28 12:04 PM

[pigdog67:]

Actually we have regulations. However there is no enforcement, as Cheneys (not Bushes) free market cronies were put in those positions as Cheney knew they would look the other way. Its the same with the EPA. These agencies are woefully underfunded. So there is no way they can do they enforcement even if the morally felt that they should.

2008 Dec 28 07:10 PM

[sr9web:]

A bunch of whiner crybaby loser talk.

2008 Dec 29 12:12 AM

[momomiester:]

And not as bad as Dumbya? Yeah draft our kids so they can fight the corporate wars.
I hate to tell you buddy but each generation is the same due to human nature is the only true contant. The only diffence today is the outbreak of the media and communications like the internet. If you put these technologies back during the "greatest generation" they would of done the same thing with it.


On Dec 25 09:19 AM PrudentMan, CFA wrote:

> The Baby Boomers, that is what is wrong with America today. They
> are self-centered, wasteful, irresponsible, disrespectful, vulgar
> and self-indulgent.
>
> The Baby Boomers squandered the legacy of the "Greatest Generation".
> Bring back compulsory military service for everyone over eighteen,
> no exemptions as everyone can do something for the good of the country,
> and we may get some discipline back into the country.
>
> The Obama/Hillary Administration will be the worst since Carter.

2008 Dec 29 10:45 AM

[Pirate Jo:]

The 'American Dream' is still very alive and well for me. Here's why:

1) I have never harbored the delusion that I was going to get to spend the last 30 years of my life in the inactive state commonly known as "retirement." I know the great Ponzi scheme of Social Security has given people some crazy ideas about this. My grandparents, for example (I am 38 years old, smack in the middle of Generation X) got back everything they had ever paid into Social Security within one year, then continued to collect benefits for 25 more. So I suppose everyone else looked at their lifestyle and assumed they would enjoy a nice long retirement, too, but it was precisely that enormous wealth redistribution from young, working, relatively poor people to old, non-working, generally wealthy people that has made "retirement" a pipe dream for the rest of us. But then again, I don't care. I earn a living sitting at a desk, fixing computer programs - there's no reason I can't keep earning a living for a long time to come. This makes it relatively unimportant to me that I amass a fortune in wealth.

I have always known SSI wouldn't be there for me. Anyone under the age of 45 who thinks they're getting SSI is a mouth-breathing dullard. It will either be bankrupt by then, or the withdrawal age will be increased to 75. (Expect another stock market sell-down at about that time.) In order for me to be able to spend the last 30 years of my life not working, I'd have to save millions of dollars. That's almost impossible, given the fact that I have to spend my life paying into SSI for current retirees, and the fact that the stock market has not and will not consistently produce the kind of returns that would be required for me to accumulate that much on my own. I earn more than the average person, and it would still be impossible.

So I can sit around and gripe about it, or simply accept what an unrealistic fantasy the myth of "retirement" has been all along, and plan accordingly. Most retired people, unless they are so incredibly wealthy that they can spend their retirement years on a cruise ship, don't have a life I envy anyway. They seem bored, and waste a lot of money sitting around watching TV and gambling at bingo or casinos. No thanks - I enjoy my job and would rather work. At least I won't have to work full-time by then.

2) I don't have kids. Frankly, it's because I never wanted any and have never understood the desire to have them. But boy am I thankful for that. As various other commenters have mentioned, if I had kids and/or grandkids, they would get screwed even worse than I have. Their standard of living would be less than mine, not greater. All the more reason not to have them in the first place. People living in abject poverty in Mexico or India can still immigrate here and think they're getting a great deal. So let them. When I die I'll leave them a little bit more room, too, instead of producing more people.

3) No debt. No credit card debt, no car payments - in fact, no debt of any kind. Well, except my mortgage ...

4) My mortgage is my last remaining debt, and will be paid off in four years. I live in a small city in the Midwest, where the housing bubble never really had much effect. Even though the market value of my modest little condo has probably dropped a bit recently, I'm still way above water on it. People should quit looking at their houses as an "investment" anyway, and look at them for what they really are - A PLACE TO LIVE. Soon I'll have a place to live that I won't even have to make payments on. Why should I care what someone would pay for it? I have no intention of selling it anyway.

So in short, lower your lifestyle expectations, live debt-free, pay off your house and stay in it, plan on working until maybe your last five years of life (it helps to keep yourself healthy), and don't have kids.

2008 Dec 29 12:10 PM

[digitaldorobo:]

Yeah, "return to our roots"-- God is the answer, lol.

In fact, let's go back to the days of the overbearing Catholic and Protestant churches. Let's go back to slavery.

Anyone who needs someone else to tell them how to live surely has no answers.

Anyone looking back for answers clearly is going to trip over as the world moves on.

Welcome to present.


On Dec 25 12:59 PM faithmore wrote:

> You hit the nail on the head. What you said is all true and could
> not be stated better. Unfortunatly our leaders could care less. You
> are a nobody like me just trying to squeak in a few insights of truth
> before the next shoe falls.
>
> The only thing you forgot is the truth that Washington, Franklin,
> Lincoln, Jefferson, Madison and other of our great leaders relied
> on when the chips were down. They relied on a God which they believed
> was real, not some fairy tail or flawed religious church. And they
> prayed. All were prayer warriers.
>
> Need I say more. Only when God intervenes directly will America be
> restored to its roots. "In God We Trust" is our motto, but our mantra
> is "Me First". The squeeky wheel gets the grease. The rest of us
> get screwed. How stupid to trust those that betray and hate God.

2008 Dec 29 02:24 PM

[Pirate Jo:]

"Only when God intervenes directly will America be restored to its roots ... How stupid to trust those that betray and hate God."

Is it possible to hate God for not existing? Sorry to break the bad news to you my friend, but deities (even yours) are imaginary creatures. If you are waiting for an invisible man who lives in the sky to intervene in the U.S. economy, you are going to be disappointed. The United States won't be the first empire, or the first economy, to fall apart. Ancient Greek civilization existed long before the Dark Ages and was more enlightened and advanced than anything that came after for a long time. Why do these religious fundie types always imagine God is going to intervene on our behalf, when he has never done so on behalf of anyone else? We're not that special.

2008 Dec 29 04:01 PM

[carbonpenguin:]

Mises is powerful stuff for a bright, half-formed marxist, which is what I was before the start of the Ron Paul campaign. I then developed a split for a while, digging on both the Marx and the Rothbard/Rockwell, and feeling guilty for doing it. It was a long process, but I've gotten to the point where the two ideologies are integrated into my belief system, and the closest thing I've found o far has been Mutualism. E.G. www.mutualist.org. Read www.mutualist.org/id10... and www.mutualist.org/id4.... first. It's the attempt to integrate those two mindsets is what I lived for 18 months, and it what this discourse is an attempt to accomplish.

We're here. We exist in far greater numbers than most people understand (including our people). We need to get together in some sort of federation and start acting out in our day to day lives against this pathologically destructive system.


On Dec 26 11:05 AM JohnAl wrote:

> Mr. Quinn,
>
> Another finely written analysis. Thank you.
>
> The fact that there are so many of us who feel as you do gives me
> hope for the future - and it should you too - that our children and
> grandchildren may still be able to experience the American dream.
>
>
> The recent bailouts and the continuation of bailout nation that we're
> likely to see during the next administration may end up being just
> the wake up call that Americans needed. More and more people are
> waking up daily to the stark truth that what we witnessed was first
> and foremost the result of a failure of a centrally planned monetary
> system. We will of course continue to experience such crises as
> long as the federal reserve and fractional reserve banking is allowed
> to exist, and as long as people continue to believe that a cadre
> of economists (or computers, as one of the commenters above suggests)
> can determine what is just the right amount of money to inject or
> remove from the economy in order to further whichever set of goals
> are in vogue with the power elites at the time.
>
> Just one note to those who honestly believe that this was a failure
> of capitalism... time to remove the blinders, guys. You can start
> by educating yourselves at mises.org.

2008 Dec 29 06:03 PM

[john1:]

Just more unpatriotic negativity from liberals who hate America, and the troops.

2008 Dec 29 06:20 PM

[digitaldorobo:]

Healthy discourse is never unpatriotic.

Knee-jerk reactions such as yours come from those who seek to sustain the status quo rather than help heal.

Open your eyes and your heart.


On Dec 29 06:20 PM john1 wrote:

> Just more unpatriotic negativity from liberals who hate America,
> and the troops.

2008 Dec 29 06:29 PM

[carbonpenguin:]

Alright, so you dismissed the lower-level ideologues what can't distinguish a rational argument from an ideological construct by invoking some of culturally conditioned loyalty cues. Now, do you actually have the will or courage to confront the *root* of these problems, or are you just a parrot?

2008 Dec 29 06:33 PM

[carbonpenguin:]

*response to john1*

2008 Dec 29 06:34 PM

[unclej0:]

Before criticizing the VAT, you should analyze the alternatives. In the USA, we have no Vat and people spend like there is no tomorrow, running up frequently unsustainable debts. We also don't have enough revenue to run the government soundly, so we have payroll taxes and health care/ pension plans that burden the cost of American labor. This makes American labor much less competitive and we have lost a large part of our manufacturing base to Asia. We also run up large deficits and neglect the infrastructure, mortgaging our country's future.

In addition to all this, we have a large trade deficit and usually inflation, which is a considerable tax on both wealth and wages.

I don't have a good computer model of the economy but I suspect that living without a VAT is not sustainable in the long term, at least, not until American labor will work as cheaply as Chinese labor.


On Dec 25 05:50 PM Sonia wrote:

> If the Federal Reserve did not control the money supply, Congress
> would control it. Politicos and lobbyists would have their fingers
> on the the switch of the printing press - and oh, wouldn't they just
> love to make use of it!
>
> People resist VAT by buying downscale, buying less, resulting in
> reduced employment and a lower standard of living for all. England
> has a 17% VAT, not only at the point of sale but on every step in
> production. Since VAT does not provide the government with enough
> money to satisfy their insatiable appetite for spending, England
> also has an income tax. The result? My $1000 refrigerator sells
> for the sterling equivalent of $3000 in a London chain store, due
> to VAT on mined ore, steel production, plastic production, etc.
> My mother, who lived in London, had only a 10 cu ' refrig - and on
> her small retirement income, she paid income tax. VAT is just another
> way for politicians to take the working people for a ride.
>
>
> Cindy's ripoff - my sympathies - exemplifies why nobody should ever
> put all their eggs in one basket. I've been bitten this year by
> Fannie Mae preferreds sold by USB in May (Government agency bonds
> are safe, right?), and a gas bond issued through Lehman that went
> belly up - but because of diversification we'll go on eating - and
> by living low on the hog, we paid off our house long ago. Anybody
> can do well in this country if they are willing to thrift shop and
> yard sale, buy three year old cars, and send the kids to state college
> instead of going into debt for Ivy League - but "make do and mend"
> is not in this generations' vocabulary, unfortunately.

2008 Dec 30 10:08 PM

[Pirate Jo:]

"The crux of the problem is that Americans, with a strong sense of morality and caring about what is right and wrong, are no longer steering the American ship."

Americans are steering the ship, it's just that they no longer have a strong sense of morallity and caring about what is right and wrong. It is easy to get angry at a handful of bureaucrats in Washington and imagine there is some kind of conspiracy among the people at the top, but the truth is we have exactly the kind of government most Americans want. I know *you* believe in limited government, and so do I, but there are only about a dozen of us who feel that way. We are surrounded, on the other hand, by hordes upon hordes of people who want the government to guarantee them everything, including their retirement income, their medical care, their kids' educations and daycare, their job security, and their mortgages. Very few people really have a desire for freedom and the responsibility it entails. The problem isn't that the government doesn't represent the will of the people - the problem is that it does.

Jan 26 10:26 AM