Commentary
It�s the (predatory) economy, stupid!
By Ben Tanosborn
Online Journal Contributing Writer


Apr 2, 2008, 00:49

Four presidential elections ago, Democratic political-carnivore James Carville coined the phrase, �It�s the economy, stupid,� to denote Papa Bush�s failure to properly address the 1992 recession. The senior Bush was the idiot then . . . but all of us, Americans, may be jointly the idiot now. And maybe we shouldn�t be talking about a recession, but a true depression. You know, like back in the 1930s, with our McMansions but without apples.

It�s a natural human instinct: to narrow things down, to simplify things. And even people with extensive education and high professional stature succumb to any facile answers to the most difficult and intricate questions. Right now in these United States we seem to have major trouble accepting the �R� word when it is really the �D� word that should be worrying us. No, the economy is not just simply slowing down; it is tanking!

In the past year I�ve attended more than a half-dozen banks'-sponsored presentations for their business customers (my clients) about the state of the economy -- international, national and regional/local. A long time ago, I reached the conclusion that most bank economists are but meaningless window dressing with no other value; after my latter experiences, I am now totally convinced.

At these state-of-the-economy breakfasts, during the closing �questions and answers� periods, I have been posing for all of three years the same questions dealing with the out-of-control real estate �fake market� and the parallel �bubblicious� stock market based on a totally unsustainable consumption-through-credit rate of growth. Questions to which I have been receiving the same idiotic stock answers; answers that you get to hear monotonously and often from the blokes and broads at CNBC: �Heck, our real estate prices aren�t really that high, only four or five times the annual household income; and that�s really comparable or even lower than the ratios in most European nations, where they can get as high as seven times.� Also, they dismiss an overvaluation in world stock markets, perhaps of 5 to 10 trillion dollars, by saying that it isn�t much when measured against a combined world markets� valuation of around 60 trillion dollars.

Aren�t we able to see that grotesque rationalization by our cadre of not very bright economists, Wall Street bulls-on-steroids, and don�t-give-a-damn politicians? Our socio-political system, unlike that of Canada, Europe or Japan, does not cater to the well-being of people -- or at least not as much, as we see other nations with free higher education, universal health care, great public transportation systems and many other perks we don�t have -- so a housing ratio comparison is totally out of place, absurd. If the Europeans are putting 40 percent of their income into housing, we probably should be aiming at nothing higher than 25 to 30 percent.

And it isn�t the crookedness of the subprime fiasco that got us here, but a runaway upsurge in values that had less to do with the workings of a free economy -- the forces of supply and demand -- and much more to do with greed . . . in great part selfishly promoted by the real estate industry itself. So here we are 2 or 3 trillion dollars in overvalued housing, some of it already spent in past consumption (equity loans), the rest in the pockets of crooks, house-flippers and agents who benefited from unnecessary, unwarranted commissions. A properly structured capital gains tax on short-erm real estate profits would have prevented this second onerous tulip festival.

As for that present valuation of 60 trillion dollars for the world stock markets . . . what would that value be if earnings decline by 25, 50 or 75 percent (something which a depression would bring about in short order); 45, 30, 15 trillion dollars (using same price/earnings ratio) . . . what then? Haven�t we in the US come to the end of the road as we consume more than we produce? Our grandkids can no longer collateralize our borrowing, and China is not likely to go along banking our diminishing-value dollars.

Americans have taken Norman Vincent Peal�s power of positive thinking several degrees beyond rationality. The made in America �something for nothing� syndrome, which has given us multi-level marketing and other get-rich-quick schemes have seen their day . . . even with the spiritual backing of those Christian mega churches that promote the Gospel of Greed instead of espousing a Love Thy Neighbor doctrine.

Uncontrolled predatory corporate practices, untaxed individual greed, and unrestrained consumer gluttony, together, are bringing this economy to its knees. Now, after the fact, the partner-in-crime government wants to bring about the establishment of some market controls . . . overhaul the system, they say; that after lower- and middle-class America have been fleeced -- although the final realization of �poverty� is a few months away.

Well, we could all ask Dick Cheney to summarize the state of this predatory economy. Of course, we should expect another of his customary in-your-face responses: �So�?

� 2008 Ben Tanosborn