Sunday, April 25, 2010

The Real Heart of America

Here's Robert X. Cringely's nomination for "person of the year". I'm a little late on this, but it is still timely:
Time [magazine] made a mistake when it announced this week that Federal Reserve chairman Ben Bernanke should be its Person of the Year. But if Bernanke was a mistake, who should be Person of the Year? I nominate Grandma — your Grandma, my Grandma, every Grandma — because Grandmothers as a group are doing a better job than Ben is this year at propping-up the American way of life.

But wait, didn’t Ben save us all from a Great Depression? Didn’t his inspired and bold action opening taps and taking an axe to hogsheads of money down at the Fed preserve our very way of life? No. He preserved Wall Street’s way of life. He saved the banks, not their depositors. In fact, he used the depositor’s money (our money and that of our children and grandchildren) to not save the depositors, which I find particularly ironic.

We had a real estate crisis that precipitated a banking crisis, but Ben only fixed the banks, and not all that well, either.

And Grandma? She wrote a check, lots of checks, to her kids and grandkids helping them keep their homes. There is right now a charitable transfer of wealth happening from the oldest Americans to their middle-aged children that is, in many cases, the only thing keeping the latter in their homes.
Funny nobody talks about this.
Larry Summers was on the Sunday morning talk shows today. That guy along with Ben Bernanke and Timothy Geithner and Alan Greenspan are the ones who encouraged deregulation and big risk taking by the banks. They are the ones who almost single-handedly took down the world's economy. And they, like the Wall Street bankers, haven't had to pay any price. In fact, all except Alan Greenspan -- who retired -- got a promotion!


thomas said...

I saw the interview with Larry Summers on Face the Nation. He was asked some direct questions and managed redirect the attention back to the future instead of dwelling on who's to blame in the past. He did look a little concerned about having been involved in deregulation. I was glad that he was able to make a good case for finance regulation and everyone seemed to agree that the bill will help. Larry still looks like a snake in the grass, of course, after all he is a politician.

RYviewpoint said...

Thomas: You are half right about Larry Summers being a politician. Formally he is an economist, but he has dropped academic studies to do things like be Secretary of the Treasury under Clinton, president of Harvard (got tossed from that job), and now the Director of the National Economic Council. These are mostly politico-economic positions.

You are fully correct in saying he looks like a "snake in the grass". He has a shifty inability to directly answer questions. And he has an ego that turns him into a smoldering volcano. He has a bad habit of talking over other people. He is far too "self important" for my taste. But that is all personality stuff and ultimately not important.

What is important is that he helped create the current mess and he is only supporting half measures to fix up his mess. He has never admitted any failing in his judgements.

It is hard to fix a problem if the guy responsible for the problem isn't willing to admit that there is a problem.

I don't understand why Obama has him as a top advisor. The only thing that makes sense to me is that he is a "package deal" for taking money from Wall Street, i.e. Obama accepted the donations with the understanding that he would have to take Larry Summers as "an advisor".

He is a paid agent of Wall Street. Here is a bit from Wikipedia:

On April 3, 2009 Summers came under renewed criticism after it was disclosed that he was paid millions of dollars the previous year by companies which he now has influence over as a public servant. He earned $5 million from the hedge fund D. E. Shaw, and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money.

thomas said...

The other part of this post that I failed to address is the bailouts that are coming from the grandparents.

My dad receives less per month than I make in a week, but he has money saved and saves more and more every month. He hands me hundreds of dollars "for the trip back" when I go to visit him. My mom, who makes even less and her husband has been working at odd jobs for some time now, asked if I need help when I was up to see them. I was embarrassed a little. I was even more amazed when I considered their income. The latter generations don't know how to live on a limited income.. I am not as bad as some, but I am in this category; I am learning how to live within my means and without credit..

Still, it is amazing that the older generations are helping the grandkids and kids out of this mess. Something that the federal government can't do, but older Americans on a limited and fixed income can. We all can learn so much from these people.

RYviewpoint said...

Thomas: It is sad to see the older generation having to help out the young. The tradition when I was a kid was one of the children stay with the parent to look after them and the other siblings would recognize special rights to inherit the family farm for doing this duty. I remember whispered discussions about what to do with grandparents who had farmed all their life and therefore had no social security.

The prodigal ways of today are truly astounding. I lived the life of a "student" my whole life. I was an oddball. I saved and bought and didn't use credit.

Funny, I taught high school for a year and applied for a credit card but was turned down as "too risky". Shortly after that I read stories about people's pets getting credit cards and these days I get 3 or 4 credit card offers per month. But since I spent my first four decades with no credit card, I never developed a habit of using credit. My frugal ways were further re-inforced when I finally bought my first house and got a 12.75% mortgage. I did everything I could to lower the principal back before the days of flexible mortgages.

I also found it odd in my 50s to watch TV news stories and see "welfare stories" with people sitting around with big TVs, VCRs, and other gadgets that I didn't buy until I was in my 40s. I didn't get my first washing machine until I was 40. Instead I went to the laundromat.

So when I hear how Americans are "struggling" with debt I am more than a little incredulous. The average income is quite high. Even low wage jobs are plenty to cover food, clothing, and cheap accommodation. Who borrows? It was all those people who bought McMansions starting in the late 1980s. These were the ones suckered by TV shows like "Lifestyles of the Rich and Famous".

You really need very little to be comfortable. And I've always valued independence over status seeking. I've found that most gadgets break easily and don't deliver the entertainment value promised. I watched entertainment conglomerates force march people from singles to LPs to audio tape, to cassette tapes, to CDs, to Walkmans, to iPods and at every step people are forced to re-buy the same media they've already bought but in a new format. Crazy.

It's a treadmill. I guess I did soak up that hippie value. I've never been big on owning things. So I sympathize with people in a debt trap, but I go nuts thinking it is pretty easy to fix: tear up the credit cards, set a budget, write down every expense and keep a running total so you can see where your money is going. Those 3 things will break the debt trap and set you free.