Finance 101: Blame the Poor

Original Link: http://www.informationclearinghouse.info/article25430.htm

By Gordon Arnaut

Did you know that the poor (and mostly black) people in the US caused the global financial crisis that threw the world economy into its worst slump since the Great Depression of the 1930’s?

I didn’t know that either, until I heard this news from the US media and popular broadcasters like Glenn Beck, Sean Hannity and Rush Limbaugh.

This is how it all happened: Special interest groups representing poor people, minorities, and “socialist” elements in the US government “pressured banks to make loans to people who could not afford them, and then the whole thing melted down…” explains Beck, who has a radio and TV audience of several million viewers and listeners.

Thomas Sowell, a right-wing economist for the Hoover Institution and a writer for the Wall Street Journal and Forbes magazine, says that anti-poverty activists “blocked drive-up lanes and made business impossible for banks until they surrendered to demands that they make billions in loans that they wouldn’t otherwise have made.”

God Bless America. The land where truth and freedom prevails.

The only thing I don’t understand is how these poor, black and Hispanic Americans, whose combined share of the national wealth is less than the personal fortune of a few wealthy individuals at the top of the Forbes list, could possibly have exerted such a disproportionate influence on the nation’s economy.

Statistics from the United Nations tell us that the bottom 40 percent of the population of the United States own less than 1 percent of the nation’s wealth. That is about 120 million people. If each and every one of these individuals “forced” the banks to give them mortgages and loans, and then failed to pay them back, the worst that could happen would be a total national loss of 1 percent of wealth.

Is this what happened? That 120 million poor Americans all simultaneously defaulted on their mortgage and loan payments and the economy collapsed because of a 1 percent decline?

Or perhaps the collapse had more to do with the top 1 percent of Americans who own 38 percent of the national wealth? If we do a bit of simple math we see that a member of that top 1 percent—about 3 million wealthy Americans—owns, on average, about 1,500 times as much as a member of the bottom 120 million Americans. Put another way, about 1,500 poor people share a single piece of pie that one wealthy American has all to himself.

Also curious are numbers on who actually lost the most in this Great Recession. According to a study by a professor at the University of California, the average American household lost an astounding 36 percent of their total wealth. But the top 1 percent households lost only 11 percent. So the net result is that the wealth distribution is even more unequal than it was it was before the financial crisis. Maybe the top 1 percent should be thanking the poor black folks for “causing” the financial meltdown.

What we do know for sure is that the US government has given more than a trillion taxpayer dollars to big banks like Goldman Sachs and Citigroup, to prevent them from going under. This has led to huge deficits, which has brought demands from the wealthy that the government cut back on social security and Medicare. So while the bank executives continue to reward themselves with multimillion dollar bonuses at the taxpayer’s expense, poor pensioners—who you will see at the grocery store buying marked-down, half-rotten fruit and vegetables—are asked do get by without their medicines and live on bread and water.

Of course the plight of the poor, the sick and the old is of no concern to the slick business media, with their glossy spreads of the “good life” and fawning write-ups of the business elite whose lifestyles would make Marie Antoinette blush—an army of servants, chauffeurs, pilots, prostitutes, maids, cooks, valets, butlers, masseuses, caddies, surgeons…at their beck and call.

And what about the “ordinary” people of America? The great middle class of suburbia? Mom and dad working three or four part-time jobs between them, kids working too, always trying to get ahead, but never quite getting out from under a lifelong load of debt—interest continually piling up. Banks repossessed nearly a million homes last year. Another three million went into foreclosure and the total number of homes repossessed will likely reach over 7 million when all is said and done, say experts.

Do these people need to lose their homes? What would happen if the trillion dollars that Bush and Obama gifted to the banks were given to help ordinary homeowners instead? The median monthly mortgage payment in the US is about $1,300. A trillion dollars could pay the mortgage on those 7 million distressed homes for 10 years. If the average mortgage is about $150,000 then that trillion dollars could pay off completely all seven million of those mortgages.

Not that anyone is asking for total debt forgiveness. Even a tiny fraction of the bank bailout, say 100 billion, would be enough to get those homeowners back on their feet and keep a roof over their heads.

So the banks get more than a trillion dollars, but homeowners get practically nothing. (Well not nothing; they get the tax bill that is paying for the bank bailout.) One has to ask the logical question. Is this democracy? Is this a system where the people exercise political power?

Welcome to America, a country of 3 million people (and 300 million debt peons).