MONEY 140 - AMERICA 8

THIS IS MY 140^TH BLOG ON UNDERSTANDING MONEY TOOLS

August, 2018

understandingmoneytools.blogspot.com

In this blog we will continue with “America” with emphasis on the years 2008 up until present day.  These were critical times in this country, and even more important today.

Let’s again start by running a quick re-cap of important issues from our last blog:

-       The Great Recession.  A recession is 2 or more consecutive quarters with negative GDP.  A “depression” is extended “recessions”.  The government states the Great Recession lasted about 18 months, perhaps 20 months.  It started December 2007 and I believe lasted well into 2010, The affects can still be felt by many today.

-       The Great Recession, and how it was handled by our government, was the greatest transfer of wealth in the USA’s history.  The wealth transfer of real estate and other assets went from good, hardworking middle Americans to the top 10%, or even 1%, of America’s wealthy.  The top 1% alone in the USA holds at least 40% of all wealth, the top 1% in the world owns over 50% of the world’s assets.  Inequality the likes we have never seen.

-       Briefly, how did this happen?  The government permitted idiotic lending practices from 2000-2008.  Our US banks were failing, and the government required “capital” standards.  The government came up with the brilliant idea to print a ton of money ($4 trillion), give most of it to selected banks (“Selective Breeding”).  These banks in turn lent the money out at almost zero interest, but only to the big corporations and the wealthy.  There was no “trickle down theory”.  The big corporations and the wealthy took advantage of the weaknesses in the middle class and took over assets.

-       Leading up to the Great Recession Wall Street packaged billions of dollars in real estate loans, mortgage derivatives and bond packages that should have been rated sub-prime or “C” and rated them “A”.  Most of this occurred with our 2 rating companies, Moody’s and Standard and Poor’s.  NO ONE WENT TO JAIL OR PRISON, when they knew exactly what they were doing.  This went financially overboard as certain countries like Germany could leverage an “A” rated investment 30 to 1.  You remember Chancellor Merkel would not shake George W. Bush’s hand after this occurred?

-       Banks also went from asset based lending to income based lending.  What happens if you lose your job or have a business set-back?

-       We found out loans for home equity, business and manufacturing operations were no better than the “moment”.  Banks can “call” these loans due and payable if your income changes, assets change or for any other reason the banks deem reasonable.  With the many bank mergers and acquisitions all loans were called due immediately.  One bank’s loans didn’t mean they were acceptable by another bank, and a new promissory note needed to be created.  If you have a bank loan,  better have the cash or liquid assets on hand to cover that loan.

Now, let’s move on.  Barack Obama became our president on January 20, 2009.  A president of mystery; questionable birth certificate, no one can remember him at Columbia College or Harvard and he was only a US Senator from 2005-2008.

I commended Mr. Obama for his attempt to change our disastrous health care system.  We passed the Affordable Health Care Act, sometimes referred to as Obama Care, on November 7, 2009.  The Act opened up insurance availability, however it fell short in that it didn’t address most necessary needs and for many was not inexpensive.  The biggest thing it did was take away the un-insurability people faced because of pre-existing health issues.  Insurance companies only want the healthy and accident free!

Bill Clinton tried to pull a national health care together when he was president and that failed.

As a country we need a good, affordable and fair health care system.  Where we fail in this endeavor is we do not bring the necessary parties to the table and they all need to make major concessions.  These components of health care are: the drug industry (and their outrageous pricing and profits), hospitals, doctors and insurance companies that specialize in health care/hospitalization.  Even though drug companies have large Research and Development costs it is crazy that we can buy the same drug in other countries for 5-10% of the cost here.  The Veterans Administration can buy competitive drugs, but the common person or insurance company cannot.

As we view the years 2009 until Donald Trump took office on January 20, 2017 very little changed.  Wars continued and we opened up new disastrous fronts in Libya and Syria. I feel Mr. Obama tried to placate to the world, while he should have been more aggressive in making amends with China (and trade), North Korea and Russia.  Again, we have a president who doubled the debt while in office leaving a debt of approximately $20 trillion for Mr. Trump.

During the Obama years America became even more divided as a country.  Unification is necessary to accomplish anything!

We have even less unification since Mr. Trump became president, however at least he speaks his mind.  Very essential to the future of the world is peace.  We cannot have nuclear war, and I believe Mr. Trump is on that path for attempting to get peace.  Every president has said we are going to get out of Afghanistan, and that still has not happened.

Yes, Mr. Trump inherited a mess, in more ways than one, however so did Mr. Obama.

Mr. Trump is a great promoter.  He made a lot of his money through inheritance and promotions.  You hear, “The Trump Bump” from Wall Street.  Ridiculous!  Any of the new tax implications won’t be felt for years, and the decisions may end up being deleterious.  To cut taxes, mainly for the wealthy, when the country is broke takes a lot of guts.  The wealthy are going to find the benefits no matter what, but the affect to the middle class worker may be totally different.  As a for instance, just the rise in oil prices this past year is so inflationary across the board of products from gasoline to plastics that it has already eroded the tax benefits that the middle class received.

We need to come to our senses starting with politicians and the power Americans could have, rather than being brain washed.  America is broke!  Mr. Trump has already gone through about $1.5 trillion since taking office and now is asking for $1.3 trillion to keep the government running.  Companies like Apple and Ford Motor Co. see the handwriting on the wall.  Apple is targeting Asia including China for its future. Americans can’t afford the Apple iPhone X at $1,000, Ford Motor Co. is now moving the Ford Focus (one of 2 cars they had manufactured in the US) over to China.

Mr. Trump lowered the US corporate tax rate, however we still compete globally and have lost good companies like Medtronic and Johnson Controls recently to Ireland where the corporate rate is only 12.5%.  Big companies like Microsoft and Apple have billions of dollars offshore and I doubt if there is enough incentive to have them bring all the money back here.

New employment numbers:  Up one month like June, not meeting expectations in July.  These are meaningless numbers.  First, one needs to look at how many jobs were lost because of retirement, deaths or company closures. Then, and most importantly, one needs to look at what kind of jobs make up these numbers.  From my stats, the majority of these are service and low paying jobs.  Part time jobs are included in these numbers, and it would be nice to hear the number of new employees receiving corporate benefits….very few.  How many of these new jobs include older people 65-75 years of age who can’t afford to retire?

Along with people needing to work beyond their 60’s into their 70’s and 80’s to make financial ends meet, it has been very sad to see the number of older people seeking bankruptcy protection because of lost pensions, market conditions (savings and bond rates at near zero return) and medical/drug costs rising in the 15% range year after year.

We have not increased our average middle class family income over the past 40 years, especially when including inflation.  Big companies in America should learn from Henry Ford when he paid his workers 3 times what competition was paying.  Asked why he was doing this; his answer: “so my employees can purchase our cars they make”!  Common sense. 
By low pay, we have driven our consumers from product unless we give them free money to do so.  Then, they are on the life “hook” to forever pay back debt and become slaves.

This is such a side point, but I think it needs addressing.  We have great disparities in this country between people of the white race and black race.; inequalities financially, educationally and environmentally. I lay blame on the white people and president Andrew Johnson who followed Lincoln into office. When we freed slaves after the Civil War, we (the white people) never realized long term issues if we didn’t educate the black people.  Yes, we freed them, but never gave them the needed essentials to make it in the world.  The old expression:  “Give a man a fish, and you feed him for a day.  Teach a man to fish, and you feed him for a lifetime!”

I think Mr. Trump has accomplished quite a bit in his first one and a half years.  No president has stood up to our ridiculous financial contributions to the United Nations or NATO to date.  We have agreements, they should be adhered to.  People should understand Mr. Trump’s negotiations.  He pushes, upsets people, then pulls back.  Then, he re-enters the issues, gives a little and yet pushes once again.

Mr. Trump should follow the G-8 on wanting to cut pollution, and mandate large corporations to do so.  I also believe Mr. Trump should stay away from controversial issues like permitting the hunting of large endangered species of animals. It’s a “no win” situation.  Stick to politics and the economy.

Most people follow current events so I will keep this short.  As I have mentioned in pervious blogs, I do not favor the elitists and wealthy taking control of America and the world.  Inequalities have always failed and we are following in the footsteps of the Greek Empire, Roman Empire and every empire since.

In our next blog on America we will get into finances and the markets.