Swindled in the most gigantic flimflam of all history...
The thought has been growing in a dark corner of the lumpâ,"s mind like a poison mushroom in the shade - the average American is victim of monumental hornswoggle!
And now, adding a bucket of Miracle-Gro, John Crudele writes in the New York Post:
â,"Here's a figure that I find stunning.
â,"When I was in college in 1972 (and paying about $3,000 a year total for an expensive private school), the average American had an average weekly paycheck of $334.60.
â,"Today, the figure is just $277.96 after it's adjusted for inflation. And that is down about 90 cents a week from August of 2005.
â,"Don't believe me? Look it up on the U.S. Department of Labor's Web site - www.bls.gov.
â,"The tables go back to 1964, when average earnings were consistently over $300 a week.
â,"If you look around, you'll see that Americans are obviously surviving and even thriving. But they are doing it by taking on additional jobs, or by having more than one adult in each household working.â,
The poor man had already farmed his wife out to work. And now, he has got himself a wallet bulging with credit cards. And taken to Neg. Ams and Optional Arms like a Baptist preacher to hooch.
So, he keeps his place in society, but only by working harder and longer than he ever did beforeâ,¦and by going deeper and more inextricably into debt than any human being since Adam.
Our old friend Doug Casey:
â,"Median household debt grew by almost 34 percent between 2001 and 2004, while net worth went up just 1.5 percent, according to the latest Survey of Consumer Finances (a report issued only every three years). We suspect that since 2004, the numbers have gotten much worse.
â,"The household debt-service ratio hit a record high, just shy of 14%, in the first quarter of 2006â,¦ meaning that of every 100 after-tax dollars earned, 14 now go to servicing debt.
â,"The average American household now is carrying over $90,000 in debt, much of it as adjustable-rate mortgages. In fact, interest rates on 22% of the $8.7 trillion in mortgages carried by Americans are scheduled to be reset this year. According to one observer of the housing market, the typical ARM will bump up from a manageable 3.6% to an uncomfortable 5.6%, which would mean an increase of $800 a month on a $500,000 mortgage.
â,"It gets worse. In 2005, 40% of all new mortgages were adjustable-rate, and they will start resetting in 2008 and 2009. And Fannie Mae reports that almost two thirds of all sub-prime loans will be reset in 2006 and 2007. Many, perhaps most, of the borrowers will get squeezed, and more properties will hit the market after lenders repossess them.â,
Oh ye heartless fatesâ,¦
Consider the poor working manâ,"s situation. He was a believerâ,¦he believed that prosperity really was just a matter of working hard and trusting in the American dream.
In his brief bouts of thinking, he must have felt lucky. He lived in a free, democratic and openly capitalist societyâ,¦in what must have been a period of the most rapid technological and economic progress in history. If he couldnâ,"t get rich, nobody could.
But the whiff of the dollar and the alluring scent of waiting wealth lured him into a trap. Now, he has his himself in such a vise, the juice is getting squeezed out of him. Three decades of drudgery have taken him nowhere. He has actually lost ground. And when he turns his head to the East, he sees three billion Asians ready and eager to push him back even further. Theyâ,"ll do his work for halfâ,¦no, a quarterâ,¦no, a tenth of what he works for.
In the meantime, with his naƒ¯ve faith in the American dream, he bought him himself a lifestyle bigger than his boots. With a wink and a nudge from his banker and his broker, he moved into a bigger house than he actually needed, further away in the suburbs than he could afford to be. Now, his new, upwardly adjusted mortgage is ballooning out of his grasp, the heating bills are piling up on top of the maintenance, and the big hunk of unpaid for steel in the driveway guzzles more gas than he can feed it.
And now, here come the bankers and the brokers again....to foreclose on his house.
â,"It is already starting,â, Doug continues. â,"The U.S. Foreclosure Market Report shows that in the first quarter of 2006 alone, over 320,000 properties went into foreclosure, a 72% jump over the same period the year before. In Colorado, where I hang my hat about a third of the year, nearly 4,200 properties went into foreclosure in May, accelerating to 10,500 properties by mid-July.
â,"In the second quarter, year-on-year new home sales fell, on the average, by more than 25%. In some markets the bubble is deflating even faster. In the Los Angeles/Long Beach area, for instance, new home sales in the second quarter were off 50%, and in Tucson they were off 46%.â,
â,"Home Prices Most Sluggish in 3 Decades,â, CNN reports.
But the lump is no longer sluggish. Suddenly, the fog in his head is beginning to clear. Suddenly he is asking sharp questions: â,"How come Iâ,"m earning not a penny more than I my father did 30 years ago?â, â,"What is wrong with the American economy that it canâ,"t provide the average American with a decent living?â, â,"How can you talk about economic growth or technological progress when Iâ,"m not making any progress at all?â,
At last, the brain is working. Capitalismâ,¦democracyâ,¦empireâ,¦ Wal-Martâ,¦ATMsâ,¦deficitsâ,¦ARMsâ,¦suburbsâ,¦credit cardsâ,¦401(k)s. He swallowed the whole thing.
*** Last night, we strode home from the office in such a contemplative funk that we were practically run down by a double-decker on its way to Islington.
We were doing a little independent research - on vice. So, we took a detour through Soho to have a look.
â,"Come on inâ,¦youâ,"ll like what you see,â, a woman in a shocking outfit beckoned to us. Her dƒ©colletage was so dƒ©colletƒ© she might as well not have bothered with colletage at all.
â,"Give us a try,â, called out another, dressed in what looked like an office costume, a gray business suit, probably targeting out-of-town businessmen looking for a little fantasy in the big city.
We saw bookstores flaunting â,"Super Sex Videosâ,¦18 or older,â, and bars opening their doors to us. Casinos and gaming parlors flashing their lights. And out on the street, people stood around with beer in their cups, time on their hands and idle money in their pockets.
Our interest in vice is, needless to say, purely professional - like smoking marijuana for medicinal purposesâ,¦or gambling to keep - it gives us a chance to enjoy a look at the low life without getting ourselves muddy. Besides, we were so deep in thought, we barely noticed the provocations.
When economies go soft, financial experts counsel investors to switch to â,"defensiveâ, positions....and â,"vice stocksâ, are a favorite. When times get tough, people turn to drinking, smoking, gambling, and sex, say the experts.
We doubt that is true. Good men are loyal to their football clubs and their vices. They donâ,"t give up on them when times get tough, but neither do they favor them when they are in the chips. A man needs a well-developed vice. One he can stick with through thick or thin. Otherwise, he is prey to every fad that comes along. He canâ,"t, for example, be a womanizer and a drunk at the same time. As soon as he starts picking up the bottle too much, the woman dumps him. Sheâ,"s not about to share. Nor is heavy gambling compatible with heavy drinking. A drunk is wiped out too fast; he never gets a chance to develop a serious gambling addiction. No, a man has to find a vice that suits him and stick with it.
So, when the economy goes sour, he doesnâ,"t give up smoking, drinkingâ,¦or loose women. Instead, he gives up fair-weather spending, to which he has no attachment, and sunny-day stocks, that he owes no fidelity. By comparison, the â,"vice stocksâ, do pretty well. Business doesnâ,"t slack off. And stock prices hold up.
Is this the time to buy vice stocks? Well, not necessarily. It is a comment on our era that prices of tobacco, liquor, sex and gambling companies are already high. Usually, they can be counted on to be fairly low. Why? Because in normal times, the vice investor is a little timidâ,¦a little reticent to mention it. He gets no extra status by admitting that he makes money from vice company.
You see, thereâ,"s more to money than money, and when people buy stocks, itâ,"s for reasons often having little to do with getting rich. Some want to feel hip with the latest technology companies. Others want to support products and causes they like.
And what almost all of them really want is status. They only want money because money buys them status, which means they want to be sure that the stocks they buy donâ,"t undermine their search for status.
Who wants to tell his neighbors that he makes his money by exploiting slum tenants in â,"Section 8â, housing? Who feels his chest expand and his chin rise ever so slightly when he admits that his money is invested in on-line gambling or companies that sell booze, 24 hours, on-off?
But these are not normal times. As the publicâ,"s money has thinned and stretched, so has its sense of propriety. Today, a man says he has bought an on-line pornography company with the same pride as he announces his daughterâ,"s first birthday. Shame has almost disappearedâ,¦as anyone who watches television reality shows can verify. And so has hypocrisy; people no longer even pay lip service to virtue.
Which means that the prices for â,"viceâ, stocks are not as low as you might think. Wait for a down draft in the stock marketâ,¦or an up draft in hypocrisy.
Then, it will be time to buy.
Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.
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