Ponzi Schemes and How Conservatives Are Duped Into Believing They Work

Were conservative values satisfied by Reagan’s Piss on Those Lower Than Yourself, or Spread Manure not Money policy (he called it “Trickle Down”)? I think not. In order for that theory to work, benevolent employers would spread wealth throughout their companies. Instead of that happening, greed dominated corporate America. Ponzi scheme after Ponzi scheme played out as a company shifted manufacturing out of the US in order to boost profits by cutting costs. For a while, jobs were still plentiful so no one noticed the real costs.

The Reagan tax breaks made it easier for some people, eager to cash in, to form new companies that paid lower wages to startup. These companies absorbed employees that had been let go and started to prosper. As they prospered, many were bought by investors that saw an opportunity to make more money. Investors are not the same as owners, in that an owner usually takes time to make sure the employees are taken care of, investors look towards the bottom line and not much else. In a global economy it is always easy to find cheaper workers. As more work is sent out to the lowest cost workers, more workers here get laid off.

Our economy is based upon people spending money. The wealthier people did not get that way by spending money. Thus, no matter how much money a wealthy person has, all they are interested in doing is making more money via investing it. It made no difference if goods were being produced locally or abroad, as long as they got a return on their investment they didn’t care. Well paid workers, spend money. It is the goods and services they buy that drives the economy forward. But the trend in America has been to get rid of the production workers. This set us up for a series of recessions.

TV’s were among the first things that became so cheap to produce from outside our borders, that now none are made here. But the workers that made TVs were able to find other work for a while, so people still bought them. The auto industry has become another victim. Even though it is cheaper to assemble the cars here than to ship in finished products, most of the parts are now made elsewhere. The workers that used to make the parts sometimes find other work, but often end up going into other fields that pay a lot less. They end up not buying as much. The same trend occurs with other industries and goods, textiles, appliances, and so forth. The US now has a “service based” economy, we no longer make goods for others to buy, we sell information and cater to tourists. Most of the things we buy are produced elsewhere, but as long as some people are able to find work at menial wages, the greedy investor class is happy.

The only industry that could never leave, housing, was delivered into the hands of the Ponzi artists via deregulation of the mortgage banks. This meant that a shell game could be played and the last person holding the mortgage may not have a good one. Banks protected their interests by creating layer upon layer of paper “derivatives” they could sell to the lowest levels of investors (those that bought into the market last). As the shell game raised the cost of housing, people were forced to stop buying houses. Temporarily, to protect the banks, interest rates were dropped. In order to keep the only sector still able to generate a profit for the banks, due to the deregulation, the banks issued riskier loans.

It is impossible to have houses assembled elsewhere and ship them to a location. In order for builders to cut costs, cheaper labor has to be brought in from elsewhere. In order to actually employ the cheaper labor, trade unions would have to be destroyed. Thus we get “right to work” laws. Why hire a union worker when a non union one will cost you less than 1/3rd the amount in dollars and you can get away without paying for medical insurance as well. Once again, investors are happy to look the other way if labor costs are reduced so the loss of good paying jobs in this field didn’t bother them. The bubble was now primed and set to burst.

Problems arose, when the oil companies allowed their market to be overtaken by speculators. Instead of having the direct cost of production and delivery setting the price for oil, deregulation allowed in gamblers that made bets and side bets which eventually came to be the dominating factor in the cost of a barrel of oil. The oil barons made so much more money making these bets that they pretty much have stopped much of their search for new sources of oil. They currently sit on 65,000,000 acres of land that they could explore and drill if necessary, but would rather steal more land from us than spend the money on exploration of their current assets. The obscene profits announced by Exxon Mobil every quarter are not poured back into production or exploration, they are placed into the betting pool.

When the cost of getting to work started seriously eroding people’s ability to continue spending money on other goods, the schemes that hid the true cost of Reagan’s legacy started to unwind. People started curtailing their spending, layoffs increased, prices rose, as people lost jobs, mortgage defaults increased. As banks started tightening credit, people cut back further. The cut backs caused more layoffs in order to protect the investors bottom line. The recession started.

The only way out of a recession is for people to spend money without using credit. That cannot happen without having jobs here in America. Investors will not part with their money, if they don’t see a benefit to them. Since manufacturing is not done here on a scale that creates the extravagant profits they seek, they are not willing to invest here in America. The only way to prime the economy is to take money from the upper 2% that control most it and get it into the hands of people that will spend it. But in order to get them to spend, you first have to stabilize their housing, food, medical, and transportation costs.

It doesn’t matter if you call it socialism, it needs to be done. It always takes liberal policies to get the country out of the recessions caused by conservative greed. History repeatedly shows this to be true. Obama may not be liberal enough to get us out of the mess we are in, but he is a far better hope than McCain (one of the principal architects of deregulation) would ever be.

Journal Comments

  • H Maria Perry
  • JenLand
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