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CREDIT CARD MELTDOWN--TWICE THE SUB-PRIME RISK

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From Sunday's Washington Post, Barbara Ehrenreich writes a column that might better have been a WaPo series over the last 30 years or so that they championed and cheer-led the economic miracle.
The Boom Was a Bust For Ordinary People

By Barbara Ehrenreich
Sunday, February 3, 2008

I t begins to sound a bit naughty -- all this talk about the need to "stimulate" the economy, as if we were discussing how to make a porn film. I don't mean to trivialize our economic difficulties or the need for effective government intervention, but we have to face a disconcerting fact: For years now, that strange stimulus-crazed beast, the economy, has been going its own way, increasingly disconnected from the toils and troubles of ordinary Americans.

. . . I first began to sense this in the boom years of the late 1990s, when I was working in entry-level jobs for my book "Nickel and Dimed." While the stock market soared and fortunes were being made in the time it takes to say "IPO," my $6-to-$8-an-hour co-workers lunched on hot dog buns because that was all they could afford and, in some cases, fretted about whether they could find a safe place to sleep.

. . . Not that we hadn't been warned. A century ago, Henry Ford realized that his company would only prosper if his own workers earned enough to buy Fords. But, like Wal-Mart, too many of our employers today haven't figured out that their cruelly low wages would eventually curtail their own growth and profits.

Creditcards A brutally frank and honest assessment of our past 30 years would make the argument there is little hope for the credit-addicted working poor but a '29 style crash. An entire nation has been sold down the river of hopeless wages and easy credit.

Take the $1.2 trillion Americans took out in home-equity loans over the past five years, double it and you see our current $2.5 trillion credit-card borrowing that is at risk.

The War on Drugs fights a supposed enemy that is not a 10th as damaging as the enemy at the gate--the deliberate hooking of America on that other drug of choice (now necessity) easy credit. We're mainlining what began so innocently--"here, no need to reach in your pocket for cash, the card is the way to be modern and hip and in the know."

It's not even easy credit--for thirty years it's been increasingly desperate credit as real wages and decent jobs shifted out from under workers like sand underfoot. Every single economic decision during those 30 years, that chose between the welfare of people and the welfare of greed, was settled in favor of greed.
  • A Congress that will not vote in a decent minimum wage, allows 18% interest on credit purchases that jump to 30% if a single payment is late.
  • A Congress that will not vote in a decent minimum wage, tightens bankruptcy laws in favor of the lender.
  • A Congress that will not vote in a decent minimum wage, votes for $3 trillion in tax benefits to the already rich and strips its people of health care, threatens their social security and makes of us a 'temp agency' society.
  • A Congressman who will not and has not voted in a decent minimum wage, answers a constituent's query about why this is possible with a computer-generated response that he 'shares my concern and will take my position into account as economic issues develop.'
Edwardsjohn He shares not a damned thing but the choice of greed over people and he shares that not with me, but with corporate America. Corporate America elected him while voting America was busy elsewhere. There was a presidential candidate who said just that and his name is John Edwards.

Corporate media marginalized him and his voice no longer carries that message.

Meanwhile, our increasing downward spiral into subsistence wages encourages an actual wall between America and Mexico. America moves seamlessly from becoming a pre-emptive war nation to a pre-emptive wall-building nation and never questions why. We find ourselves, this land of the free and home of the brave, cowering behind a wall, Iron-Curtaining ourselves from our neighbors.


Reaganberlinwall The Berlin Wall separated desperate political prisoners from their fellow Germans and families. This despicable wall between America and Mexico is actually favored by our politicians so that desperately poor Mexicans don't interfere with the jobs of increasingly desperately poor Americans.

Mr Bush, Ms. Clinton, Mr. Obama, Mr. McCain or Mr. Romney--"Tear down that wall" America has apparently forgotten those Ronald Reagan fist-shaking imperatives that are less than twenty years old. In a mere twenty years corporate evolution has hastened our decline from wall-decriers to wall-builders.

And we call that progress.

Immigration is a hot-button issue, not to slow the relentless American slide into poverty, but to protect and extend it.

Walmartworker While Henry Ford paid his workers wages from which they could buy his car, Wal-Mart pays a stumbling minimum that ties its workers to dependency. Along the way we've gone from a single wage-earner with a boat in the driveway, to a 'shoot yourself up' credit-card fed borrowing habit promoted by your friendly, usurious local bank.

The new paradigm offers a subsistence life on seven maxed-out credit-cards, grabs 18% off the top for itself and smilingly advises its addicts to not leave home without it.
We like to attribute our high productivity to technological advances and better education. But a revealing 2001 study by the consulting firm McKinsey & Co. also credited America's productivity growth to "managerial . . . innovations" and cited Wal-Mart as a model performer, meaning that our productivity also relies on fiendish schemes to extract more work for less pay.

Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads and cutting back on breaks. That may look good from the top, but at the middle and the bottom, it can feel a lot like pain.

The poor were once left alone to be poor. Now they (and an increasing portion of the former middle class) are everyone's financial victim. The cancer of desperation is spreading from the have-nots to the once-had-somes.
For years now, we've had a solution, or at least a substitute, for low wages and unreliable jobs: easy credit. Payday loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May cover story on "The Poverty Business," BusinessWeek documented the stampede to lend money to the people who could least afford to pay the interest on it:

Buy your dream home! Refinance your house! Financiamos a todos! It wasn't just the bottom-feeders that joined the unseemly frenzy to lend to the poor; big companies, such as Wells Fargo and Countrywide Financial, plunged right in.

But somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were borrowing.

Carwreck No one bothered because no one expected them to repay. It was fee-based fraud, sliced and diced to support $100 million annual salaries on Wall Street for CEOs who brought us yet another meltdown and seem to think we should pick up their wreckage.

In truly innovative fashion, the bloodied are pulled from the car and asked to sweep the glass off the street.

Tell me how a cave-in Congress or pseudo-populist president is equipped (or motivated) to change that. They think (and are paid to think) that a 'stimulus package' can make America well again after 30 years of wage and job destruction. We are privileged to participate in the new and improved Viagra Nation.

Credit-cards are the cash source of last resort for a hundred million Americans. Late payment on one of them can default the whole bunch to 30% interest rates. $2.5 trillion in un-collateralized debt--ten to twenty times the mortgage meltdown defaults, balanced on the head of a pin.

How many angels can dance on the head of a pin? We may be about to find out.
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http://www.jim-freeman.com

Jim Freeman's op-ed pieces and commentaries have appeared in The New York Times, Chicago Tribune, International Herald-Tribune, CNN, The New York Review, The Jon Stewart Daily Show and a number of magazines. His thirteen published books are (more...)
 

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