Endangered Species – The Middle Class

This morning’s opinions in the New York Times spoke of bailout for those in foreclosure and a process whereby a person that lost a home in the process could rent it from the bank for fair-market value.  These are both good ideas and present some interesting possibilities.  Anyone that knows my super-cynical nature will appreciate my views on this.

After over 2 years in the housing crash we have not even seen the bottom.  Housing prices will continue to fall and consumer product prices will increase until there is nothing left of the middle class.  We will be extinct.  We should all be on the endangered species list.

I understand that this is not about fair or right it is about abolishing the middle class and everything it stands for.  Banks and Big Business are members of a very exclusive club; The Old Money Club.  The club is about BIG money not new money, but old money.  Money made around the turn of the twentieth century.  These people have so much money that they don’t even show up on the who’s who or worlds’ richest lists.  They know who they are and don’t need to advertise.  It is truly gauche to draw attention to one’s wealth; tacky, in poor taste you know.  They don’t want any more club members and have designed barriers that prevent entry.

Here’s my theory:  Somewhere in the lavish parlors of these aristocrats a marvelous money making plan was developed.  They decided that lending more than a home was worth would lure people into their scheme.  They could streamline the loan process, not require any income or even employment verifications and just pump out millions of loans to people that clearly could never afford the payments.  They developed mortgage companies with no financial backing to process these loans, guarantee them through Freddie and Fanny, package them, sell them to investors, reaping the profits.  We all know the results.  After several years of home inflation, and almost everyone jumping on the “Get Rich in Real-Estate with no Money” bandwagon; the bubble burst.

There was also the promise of easy money from creating additional debt during the housing boom.  The option of borrowing up to 125% of you home value – no appraisal necessary – was too much for most people to resist.  They could make a phone call, sign a few extremely complex documents and have the cash in 48 hours.  They bought new luxury cars, boats, vacation homes in the mountains and at the beach; they invested in the stock market for the first time ‘ever’ and took lavish luxurious cruises.  This new found wealth – actually debt – was perfume to the carpetbagger waiting to separate these yokels from this new found money.  Stock portfolios were created that invested in stocks like Consolidated Lint and National Dust; shill companies set up to front the scam.  Others, poorer people saw this as a path to the middle class.  They could purchase more house than they could ever afford because the good time will go on forever; I’ll get a better job, I’ll get promoted, I’ll get a raise, We can hold on for 5 to 7 years then sell the place for twice what we paid because housing prices will continue to rise.  We’ll sell before the ARM escalates to the big payment.  That was the lure.

The reality as we all know is that the housing prices did not continue to escalate; they dropped nearly 50% in two years.  This was the tip of the iceberg.  The next little fluke was a subsequent downturn in the economy.  Unemployment hit 9.8% according to the Government, and up to 20% according to the economists in the know; leaving a huge number of people unable to make their newly inflated mortgage payments.  The Federal Reserve (The Fed) tried to stem the tide by lowering the prime interest rates to unheard of lows; but the damage was done and even those that foresaw the crash were now caught up.

So the US economy is in the crapper and we are about as low as we can go, right?  General Motors, the Blue Chip of Stocks goes bust.  They are about to close the doors:  No more Cadillac, no more Escalades, no more Corvettes, and no more Buick Rolling Living rooms.  Others in the big three were making the same noises.  Imagine the devastation in Detroit and all the jobs lost if we let these businesses fail.  Look, up in the sky, it’s a bird, it’s a plane; no it’s Super Prez.  He’ll save the day.  He’ll have Congress loan them our money to bail them out.  They can’t possibly fail… He can save them.  YEA!!!!  SUPER PREZ!!!!

Where did this money come from you ask?  He borrowed it from The Fed.

I tell you this to make my point.  You cannot continue to borrow money to pay bills.  Eventually the account will be empty, there will be no one to loan the money; and at that point they have you.

Here’s the plot.  Get everyone excited about the possibility to enter the elite upper class through real-estate and investment.  Where will they get the money to invest?  Have them borrow it, just like the government does.  When they can’t repay, we’ll take their assets and leave them broke.  We’ll have the houses, their wealth, the cars, boats, vacation homes, big screen TV and home theaters, and everything else of value.  As for the government, we don’t want ownership, we want clandestine control.  We want to be the man behind the curtain.  The government will enact laws that favor our interests and life styles, we can maintain exclusive control of “Club Membership” and if the rabble wants a place to live and work, they will have to come to us.  We will own and control everything because we own the debt.

So we borrowed and spent and spent and borrowed just like our government.  We have no earthly means to repay these huge debts, just like our government.  US Debt is estimated to exceed $14.1 trillion dollars: $44,900 per person in the US, or $91,500 per working person in the US.  Let’s look at this in another way: You would have to make $45.75 per hour in addition to your normal salary to cover this debt.  I don’t know too many people that make that much, let alone that much extra.

Those of us that didn’t take the bait will eventually succumb to the inevitable inflation.  It’s happening right now: fuel prices up over 7.7% since Thanksgiving, food prices are up 1.5%.  Now this doesn’t sound like much, but consider that fuel is up over $1.00 per gallon.  If you have no job, are out looking for work that amounts to a significant amount over a month.  Things are projected to get worse. Why?  Because we can’t pay the debt and the cost of that debt continued to rise.  My property value is down over 55% from 5 years ago.  Granted, I would need to sell the house to realize the gain or loss, so these are arbitrary numbers.  My point is that everyone is hurt by this situation.  The Aristocracy will win in the end.  There is little we can do to stem the tide.

The view from here is bleak and pretty hopeless when you consider that we run our country by borrowing more money to pay our debts.  We can’t operate our families, our households or our businesses like this, why do we allow our government to deficit spend.  If you look at your credit card bills you’ll see the futility in this practice.  As you make your normal minimum payment it will take you 30 plus years to pay of the debt; and this supposes that you are not creating additional debt.  You can see how we fall into the trap of spending more than we have to satisfy our need for things and stuff.  Unfortunately our government is funding programs that are supposed to help us.  I won’t go down that rabbit hole.

All my reading tells me that the only hope to avoid this catastrophe is to pay off you debt as quickly as possible.  Don’t create any more unless it is ABSOLUTELY necessary.  Start saving as much money as you can, and invest in precious metals.

The American Aristocrats don’t want us to understand the fallacy in this type of financial lunacy.  They want us to continue to spend and borrow to support that spending so that eventually they will own us, lock, stock, and barrel.  When they own everything, we will have to pay their price for whatever we need.  We will have come full circle to the times just before we left England and every other decent country in Europe to infest these shores.  We will become serfs to the nobles.  Our cities will resemble the townships of Olde England, Germany, and France: a castle in the middle and the hovels surrounding.  Where is our government; why don’t they stop this lunacy; aren’t they supposed to protect us?  They are part of the problem, not the solution.

Welcome to the US Feudal System!

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