Barnett Weekly

The financial demographic of America was displayed to me recently through the juxtaposition of two illuminated scrolling posters displayed on the side of a Plexiglas transit shelter on East 72nd Street in New York City.

One poster promoted Charles Schwab, the “Talk to Chuck” stock brokerage and investment company. Clearly aimed at people with plenty of money to invest, the poster pitched well-heeled citizens who want see the value of their portfolios grow. The other poster, which scrolled into view every few minutes in alternation with the Schwab poster, addressed an entirely different demographic and advertised the value, availability and benefit of government issued food stamps. Two minutes later, it was back to Chuck, then two minutes after that, Food Stamps, and so it goes, 24 hours a day.

The two target markets addressed on those rotating posters represent a basic economic demographic in today’s America, the “haves” and the “have-nots.” The haves enjoy the benefits of an economic system that rewards the wealthy with a variety of wealth-building methodologies. The have-nots, meanwhile, must avail themselves of food-stamps and the services of “pay-day” loan operations that charge usurious loan fees guaranteed to leave the have-nots wanting. A third demographic, what we used to call the American “middle class,” has apparently become irrelevant from a marketing perspective.

Our income tax system, originally conceived as a way to prevent a severe imbalance in income distribution, has lost much of its progressive basis of graduated tax rates, and increasing legislative attention is now paid to the idea of creating a consumption-based user sales tax. Using this approach, the poor and low-income citizens ultimately will pay a far greater percentage of their household income in taxes than will the wealthy.

Lurking not far below our bifurcated demographic are deeply embedded cultural and political forms plus popular opinions that have historically denigrated the poor while simultaneously elevating the rich. Until 1910, only documented property owners were able to vote in U.S. Senate elections. Poll taxes (a fee assessed when arriving to vote) were customarily employed to insure that only those with money could participate in elections, and this practice continued into the 1960’s until outlawed in a court decision. Vagrancy laws which made the lack of readily available money an actual crime subjected the poor to arrest and were once commonplace across America. Today, the poor and homeless are regularly denied a decent and secure place to sleep.

Our dominant social narratives continue to reinforce history. The poor are regularly referred to as “lazy, shiftless, dishonest, dirty and uneducated.” They are accused of “spreading disease, taking drugs, reducing property values, increasing crime, and raising the cost of government.” Reviled as “bums, leeches and free-loaders looking for a handout” they become easy targets for criminals and law-enforcement alike.

The haves, on the other hand are declared “clever, creative, resourceful, ambitious and deserving.” Called “leaders, visionaries, entrepreneurs, self-made, brilliant and successful” their wealth makes them the objects of adoration, attention, and celebrity. Are the wealthy actually a better type of human being; does wealth confer virtue or decency; is poverty immoral and are the have-nots bad people? Clearly not. Wealth itself does not determine matters of happiness or success any more than poverty insures depression or failure.

So by what measure should we judge others? Perhaps we should “Talk to Chuck.”

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I never expected to feel upset about banks. Growing up, I was taught that banks were places where you put your money into a “savings account” and over time it would accumulate. The bank paid something called “interest” which added more money to the savings account. Mostly, I liked the little green bank book that was date stamped and recorded deposits. It had my name on it and it was my very own little green savings account book.

Little green bank books are long gone, and my childhood innocence about banks is gone along with them. In some unpleasant ways that seem to defy the understanding of most ordinary people, banks have undergone a radical transformation. No longer the safe and reliable institutions of my youth, today’s banks are full-fledged casino players, using depositor money to bet on the stock market and gamble on all sorts of exotic “security instruments.” Moreover, as their activities have expanded, so have their wealth; today’s mega-banks are now deemed too big to fail; meaning they can’t be allowed to go under or the whole economy sinks with them.

Keep in mind that after the stock market crash of 1929 and the creation of the FDIC in 1933, individual bank deposits have been insured by the U.S. Government. This meant that even if a bank was mismanaged, depositor savings were safe and the banks were relieved of that ultimate responsibility should they fail.

There’s talk about the rise of “socialism” these days, but U.S. Government guarantees are exactly that: the use of government money to protect individuals. Personally, it makes all the sense in the world to me. Few single individuals have the requisite financial analysis skills required to evaluate whether or not a bank is well run. The FDIC guarantee is a simple method of insuring people’s confidence that their money is safe and will not be lost if a bank is mismanaged. However, when banks use depositor funds for complicated risky investments, FDIC guarantees encourage them to be imprudent in their investing.

After banks were barred from trading in securities or other brokerage activities under regulations of the Glass-Steagall Act of 1933, they enjoyed a nice solid niche in the American economic landscape. They were boring but predictable. When the regulations of the 1930s were dropped in 1999 during the Clinton administration, FDIC guarantees became a hedge fund against reckless bank investing. When these unsafe bets failed, it was us taxpayers, of course, who had to bail out the banks to the tune of 700 billion dollars.

The big banks have America by the throat and are not about to let go now. Our federal government is weak-willed and massive campaign contributions to legislators by the banking industry have compromised legislator ethics and have made congress next to useless when it comes to protecting ordinary citizens. Not shamed by the current financial fiasco, the big banks continue to pay billions in bonuses to executives, secure in the knowledge that our government will do little or nothing to stop it. The greed that fed the recent economic collapse continues unabated, and the seeds for the next collapse are already planted. We are being robbed by the very institutions created to protect our wealth.

My little green bankbook, a childhood fairy tale, is now a great American tragedy.

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I received a letter in the mail the other day, a nondescript white envelope from my credit card company. It was the sort of envelope I’d usually toss into the recycling figuring it just contained special offers on merchandise purchasable for all the points my wife and I have accumulated by using the card for 22 years. But uncharacteristically, I opened it.

The letter inside filled a full page, and in dry language explained that the interest rate charged on our card was being raised to 19.99% on January 1, 2010. It gave no explanation of the rate increase – poor payment history or if this was a change being made to all card holders, not just us. Further down the letter, it said we could “opt out” which means use the card at our current rate until it expires at which point it would not be reissued. It also offered, and here’s the blackmail part, a lower interest rate if we’d agree to spend a minimum of $1,500 per month and make payments on time. We have an “auto-pay” plan in place so paying on time is not an issue. But I was offended by the requirement that we spend $1,500 monthly.

The credit card world, which is the world of banking, is morally upside down. Charging rates that 50 years ago would have subjected them to prosecution for usury (like 29.99% interest due to delinquency!), the banks and their credit cards use late fees and insane interest rates to lock people into perpetual debt. Now that many transactions require credit cards, people are virtually forced to use them. Those that pay them off completely each month are called “freeloaders” by the bankers, and this latest effort to secure high monthly purchases is a blatant attempt to force more people into debt.

I called my credit card company to ask them why my rate was being changed. A representative coldly stated that “the change was to enable the continuation of credit.” When I asked him if this was a card-wide change, he brusquely answered that he was “not going to feed any rumor mills,” and refused to tell me more. This is what 22 years of payments made on time earns you in 2010. Disgusted, we “opted out.”

I went to the local bank to find out what they offer, and approached a young man named Socrates at one of the desks. One has hope when one asks a person named Socrates a question, but he said that “all the credit card companies are doing the same thing.” Ah, well. Now that the big banks have been bailed out by us tax-payers our reward is 19.99% interest unless we pay ransom. Paying many millions to lobbyists to get congress to legalize usury is not expensive for banks when they can so easily pick our pockets.

The average American’s neck has been placed in a financial noose. During difficult times credit cards can buy a month or two of security while a new job is found, but the banks are playing on such hardship by tightening the noose. Just as the bank/mortgage industry had no compunctions about foreclosing houses instead of working with homeowners, the bank/credit card companies have no hesitation about yanking on the rope from which many now hang.

Reprinted from The Sonoma Valley Sun Newspaper

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Nobody can argue that this economic recession has not been painful; jobs have been lost, homes foreclosed, pensions and retirements diminished or eliminated. People are suffering and this despite the fact that most have worked hard and lived honest, decent lives. Over ten percent of Americans now regularly take antidepressants, over 27 million people.

Conventional financial commentators and experts all seem to be focused on consumer spending, and its role in stimulating the economy. Their view is that the recession won’t end until consumers begin doing just that, namely consuming. Accordingly, auto, manufacturing orders, and consumer product sales dominate their statistical analysis, and these reports are then made part of the Wall Street public relations program, stimulating stock price increases and inducing investors to reenter the Stock Exchange gambling casino and plunk down their bets.

All this would be fine, were it not a grand delusion. Tying prosperity to notions of profit and loss is a foolish simplification, but our conventional economic system continues to promulgate the view that this is the only way to measure success. That financial “experts” and politicians ceaselessly hawk this position does not make it true, or particularly useful. If the success of human culture was simply the by-product of profit, we would have become extinct long ago.

True prosperity is found in more enduring and less materialistic values. It begins with the earth itself, which belongs to no one despite nationalistic claims to the contrary. All prosperity springs from our relationship with earth; its air, water, plants, minerals, animals, bacteria and so forth are the literal ground of our existence.

Prosperity is also revealed in the good fortune of being human. At best, each of us has the ability to decide our actions, make choices about what and how we eat, what kind of work to do, ways to manage our body, hygiene and health, and other matters of personal preference.

Society itself embodies prosperity; the ability to cooperate and develop collective aspirations, to create a compassionate community reflecting our understanding that none of us are truly alone and that what affects others effects ourselves, and to be able to join together to overcome adversity and disaster – all this is richness.

The wealth of our natural prosperity belongs to everyone, cannot be created by another. Such wealth is something we have inherited, not earned ourselves. Nonetheless, we can squander it, and do so easily. We waste time on idle pursuits and worthless objects. We pollute the earth and lack appreciation of its natural richness. We harden our hearts to others out of fear and greed.

When we lose sight of true prosperity, we become easily frightened and attach ourselves to fantasies that others are to be blamed or looked upon as saviors. We exhibit poverty mentality and become psychological victims. We withdraw or become aggressive. In such an atmosphere the hucksters take hold of our emotions and we are tossed around like fallen leaves in a November breeze.

Solving our economic problem will not be accomplished by returning to unrestrained, thoughtless consumption of things we can do without. Despite the opinions of financial experts, who cynically view the public as simple-minded children, the experience of the past year has awakened many to the folly of their past behaviors and set them on a new course; having learned a lesson the hard way, they will never turn back.

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During a recent trip to visit our granddaughter I needed to buy a swim suit so that we could go for a dip in the pool at our motel. I was stunned to discover that my swim suit cost me only $5.98 at K-Mart.

I’ve never shopped at K-Mart before; call me naïve or perhaps just loyal. I buy my clothes right here in town and figure that supporting local business is more important than saving a buck or two. But really, the prices at K-Mart were so low that I’m still in shock.

Of course, low prices come with their own price. The average salary at K-Mart is only $403 a week, or about $21,000 a year. Only certain workers qualify for benefits, and even employee discounts have been eliminated. In short, super cheap prices at the likes of K-Mart may be good for folks with lower incomes, but the success of such big-box stores means lower incomes for more workers.

With the erosion of the union movement, labor’s ability to place pressure on management to keep wages high enough for families to stay ahead has been eliminated. Big box stores’ consumer products are manufactured overseas at rock-bottom cost, people are employed and paid domestically as close to the minimum wage as possible, and prices for goods are set so low that smaller independent retailers cannot compete. The sum effect of these trends is the creation of a desperate underclass; people who in the past could support a family are now filing for bankruptcy in record numbers. At the same time, America’s largest corporations enjoy the lowest income tax rates since Dwight Eisenhower was President in1959, and America’s billionaire club (371 in 2008) grows richer and bigger each year.

On July 24, 2009 the national minimum wage was raised to a whopping $7.25 per hour ($253 for a 35-hour week). On almost the same day, Bank of America, Goldman Sachs and other Wall Street financial companies announced that despite taxpayer bailouts, they awarded bonuses to their employees of over eighteen-and-one-half billion dollars!

As incomes at the upper end balloon, the ranks of the unemployed grow and the number of lower-income wage earners increases. In what has been described as an “hour-glass” economy, what used to be a growing middle class is now a shrunken, shriveled shell of its former self. The net effect of our trickle-down economic policies is that income inequality is at an all time high.

All this notwithstanding, it’s politics as usual in Washington D.C., where a congress largely made up of wealthy white men (how dare Supreme Court nominee Sonya Sotomayor question the judgment of white men!) and a Senate almost entirely comprised of millionaire lawyers, bickers and pontificates about what’s good for America. Relying on ill-founded fantasies of reigniting the consumer credit frenzy of the last two decades, our economic planning ignores reality: the engine of the U.S. economy, the middle class, has been torn asunder.

During the past six months, Wall Street’s upward momentum has been built upon slowing job losses, not job growth. The media’s enthusiasm for this up-tick in the market masks the underlying illness in our economy and ignores the average wage earner’s despair of making any sustainable economic progress.

A Chinese-made swim suit for $5.98! Who would have imagined its true cost?

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