3-14-2008

Bush speaks to World Economic Conference at the Economic Club of New York

Essentially, as it has been for the last seven years for Iraq and the Economy his words are the repetitious, "Stay the course. We are winning!" He just adapts the old saw to our equally failing economy.

By Ed Young

As a starter for describing the ‘faux economy’, I will address the now infamous housing market. So, why is everyone surprised that the housing sector is going bust? After the Bush big tax break for the rich, what did the recipients of his largesse do? They went out and bought million dollar homes on the east and west coasts. If they did not get enough from the tax break, they mortgaged their homes to invest in million dollar homes and during the initial frenzy the big builders over build. What had been a buyer’s market at the beginning had now turned into a seller’s market. The windfall also caused these shortsighted nouveau riches to buy expensive foreign cars. The rush made the ARMs to rise. These buyers were quickly stuck with the value of their real estate investment dropping. Loan defaults and home foreclosures soared. The seller’s market turned back into a glut of homes on a buyer’s market with no buyers and home prices kept sinking.

At the same time, these economically cornered families were also caught in the huge transition in professional labor market. Not only were corporations outsourcing skilled labor to foreign countries but also were in-sourcing cheaper professionals. The squeeze on the Middle and Upper Middle classes meant that Mid-economic-level business owners, e.g. department stores like Bloomberg’s, Lord and Taylor’s, or even Dillard’s, had no one left to buy their products. Of course, Tiffany’s is doing well, and there is a booming business in $25,000 and up diamonds, yachts, and multi-million dollar second homes! This also left US professionals competing for lower salaries. As the dollar fell on international monetary exchanges, their money could not buy as much as it used to. At the inception of this fiasco, the media was flooded with ads about how easy it is to get home equity loans. The pied piper was successfully leaving these poor mice and ultimately their children over the cliffs of bankruptcy. The Bush tax boon devastated those who were just rich enough to be saddled with rising debt and not rich enough to weather the effects of their reversal of fortune.

Other factors compounded the desperate situation of the ‘not-quite-rich’. These folk also initially had bought stocks and pushed the market up but the ones selling at these high prices were the large corporations. A cycle that was vicious for these ‘not-quite-rich’ had begun. As big corporations stopped selling for a high profit, the market would drop. When the market dropped, highly liquid corporations bought back their own stock. A rapidly cycling volatile market ensued. The market trended upward because the big, wealthier than ever, corporations were manipulating it to the detriment of the small investor.

At this point, corporations were positioning themselves to go private. When they succeeded in this financial coup, the big investors and big corporations switched to investing their stuffed coffers overseas in booming countries like China, India, and Malaysia. This meant that the small, individual investors had not only lost money when the market had dropped and their income sources were dwindling, but their options for investing and recouping their losses were diminishing. Those unfortunate enough to have bought preferred stock and were depending on dividends in the end of the year mail, only to open empty mailboxes. Those caught in this downdraft were also the ones greatly, adversely affected by the rise in energy and gasoline prices. High debt, high interest rates, market losses, homes they can’t sell, downward mobility, increased expenses meant that the Bush boon had ghastly backfired on them. These were the people hit hardest in this ‘selective’ depression.

The media collaborated by presenting a smoke and mirrors act touting a glowing economy. There was now what we should call a ‘faux economy’ in full bloom. The Bush trick worked because of the rising stock market due to profits from padding contracts to defense industries; shifting their stocks in foreign markets that were on the rise; and massive corporate buy-backs at low prices that kept their liquidity safe and helped their portfolios look plush. Also helping corporations was the fact that Prime rates were down because of lack of demand for the US dollar. At the other end of the seesaw, the ‘not-quite-rich’ were hurting because in the sub-prime market, mortgage rates were up due to delinquencies and foreclosures.

It is a ‘faux economy’ all right because everyone but large corporations has been suffering. However, large corporations were stuck with one consequence of the bust for the upper middle, middle, and lower economic classes. (*see note below.) For the employees of large corporations who were facing the possibility of losing jobs or bankruptcy, the stress began to hit them hard. When crises hit, the agonizing distress made the now exploited, moderately privileged classes physically and emotionally ill. Workers compensation for both the laid off and for the current injured or ill employees went up. Medical insurance premiums went up. Contrary to traditional trends for booming economies, violent crime went up, especially with respect to murder of spouses. Oddly, the family-values-conservatives made no mention in the media of the fact that Bush’s booming faux economy was directly resulting in a rising crime rate in the categories of white-collar crime and murder within families.

Legislators were scrambling to save their wealthy constituents back home by sneaking pork into any bill they could. At the same time, campaign funds for conservatives were drying up, mainly due to the Iraq war and its cost to the mid-level businesses, and non-defense corporations like the auto industry and the health insurance companies. Lawmakers became easy prey to lobbyists for large corporations, especially health insurance and pharmaceuticals. In addition, mid-size and even large corporate farmers were hit hard by the influx of cheap produce from foreign competitors. Many like the Iowa farmers looked to ethanol to save them and they successfully lobbied for Bush to help on that front.

Ironically, the ones benefiting the most from Bush tax relief and subsidies were the big oil companies. They were seeing the rapidly rising demand around the world, which was good for them in the short run, but was causing them to look closely at the dwindling prospects for new drilling. They saw the ‘handwriting on the wall’ and it said ‘alternative energy sources’ like solar, wind, and especially hydrogen. They knew they had better hustle to get Bush to protect them. They began vigorously lobbying for protection and staving off the energy revolution. One target was to prevent US automakers from switching, as had Toyota and other foreigners, from going hybrid or hydrogen. Being one of them, Bush readily aligned himself with ‘Oil’ but touted his token pittance grants to the ‘alternatives’ as a smokescreen. Global instability in the oil market had made Bush’s Iraq war a great benefactor to the oil industries. Oil, according to Bush, was to be the salvation for the now impoverished Iraqis; however, starving Iraqis pirated and bootlegged the country’s oil. Iraq oil supply drying up on the world market served to help the big oil companies and Middle Eastern countries like the Saudis even more while demanding was increasing everywhere. When US instigated turmoil in South American and African oil states resulted in cutting their part of the supply, those allied with Bush oil interests were helped even further.

His Iraq war coupled with Islamic conflicts and brush warfare bursting out all over in developing industrial countries resulted in a huge benefit for the arms and defense industries. Ironically, opposition in countries like Venezuela, Nigeria, and elsewhere with foreign production, was not just decreasing supply and upping the profits from demand, but also threatened huge losses to their big oil companies in both the long and short term. This problem could be laid at the foot of none other than their ‘friend’, Bush.

The word quagmire, oft used for Iraq, could be reasonably applied wherever one saw the Bush footprint, whether abroad or at home.

Early in 2000, as Bush was pushing huge tax breaks for the rich, eight Nobel Laureate economists had predicted that it would be a disaster for the US economy. Of course, they were ‘academics and scientists’ and only a fool would listen to them, the Bushites would say. And, of course, they foresaw the dire consequences correctly. However, today the predictions of these wise Nobel Laureates are never mentioned and the White House, with Paulson as principle economic spokesperson, and with graceful mastery of doublespeak, convince the people that we are in a glowing, growing economy. Bush, Fox, and the rest of the media, have succeeded in selling a ‘faux economy’ to America. Ironically, now the screw has turned back even against the biggest Wall Street tycoons.

I am reminded of an irony in literature. At the end of Ayn Rand’s "Atlas Shrugged", we are presented with pictures of the Nietzsche-Superman, elitist, capitalist, free enterprise built edifices being burned all over the country at the hands of the sniveling, envious, low-life herds of communist, working class poor, rebels. How suggestive is our 2008’s economic catastrophe of Ayn Rand’s economic holocaust? Where is the irony? It is the greedy, amoral, pseudo-religious, feigning self-righteousness, Bush free enterprise capitalists that are now destroying, not only the US, but the Middle East, Africa, and in some sense, the whole world.

*(Working or lower class is not discussed here because everyone knows their wages have been stagnant for over a decade and with migrant workers there will be no push to increase them for the foreseeable future.)

Please pass this on. Thanks, ed