Nearly two years ago I wrote in this paper that popular fantasies about an increase in consumer spending turning around the economy were a joke. At that time the worst of the housing and credit crisis was becoming manifest, and foreclosures were beginning to soar. The bailout funds had made their way to the very institutions that caused the crisis through their greedy and illegal actions, and the middle class consumer was drowning, upside down in debt.
Nonetheless, economists, columnists and the financial community continued to ballyhoo the power of the U.S. economy and predicted that an upturn in consumer spending was just around the next corner. Then it was the next corner, and the next and the next, and believe it or not the hucksters are still talking about an uptick in consumer spending.
In the stock market playground of the institutional investors (meaning many of the same corporate entities that caused the housing and credit collapse), stocks and prices are churned as traders buy and sell back and forth to each other. The individual investor, always the chump in this game, jumps in too late and gets out too early to see stable returns, while brokerage houses make nice commissions in both directions as the stocks get bought and sold. The stock market is a fool’s game, but there is always the bigger fool ready to plunk cash down on the table.
These past few weeks the financial pages of the New York Times have featured articles exploring the idea that maybe the average American is not going to spend us out of the recession. Maybe, the articles say, people just don’t have enough money to buy a lot of things right now. It makes me wonder what planet these writers live on. The massive transfer of the wealth of many into the hands of the few is nearly unprecedented in American history; the last time so much was owned by so few was just before the great depression of 1929. When the common citizen is deprived of money, jobs and security the spending stops. One does not have to be a highly-paid financial columnist for the New York Times to know it.
The recent action by congress to impose austerity in government spending, an ill-advised effort of Republicans and Democrats alike, will only worsen matters. Just as the 2008 TARP bailout failed to produce jobs, the corporate recipients choosing to sit on the money instead of spending it, so the increased wealth of our county’s richest people will not produce jobs either, except perhaps for a few minimum wage gardeners needed to trim boxwood hedges on one of a number of grand country estates. Contrary to the opinion of congress, trickle-down economics does not work except in feudal societies wherein a poverty stricken population benefits from the occasional largess of the privileged class.
At some point in time, America will undergo a phase shift, a radical and fundamental alteration of the structure of society such as when water turns to ice. Perhaps everyone will simply stop paying their mortgage. Perhaps millions will gather in the streets for months at time and demand a fair share of the nation’s wealth. Perhaps things will get so terrible that society will become as immobilized as congress and we’ll experience our very own “American Spring.”