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Saturday, November 26, 2011

The World Changes


I finally got to finish three parts (5 1/2 I hour) PBS documentary by Ken Burns titled “Prohibition." The documentary was an eye-opener. It made me realize as to how we have not changed a bit, all we do is change the characters. For example, remember all the hoopla about Muslims erecting a mosque at Ground Zero and Republican legislators changing the name of French fries to freedom fries. According to the documentary during WWI, the name for German sourdough bread was changed to freedom bread, and people were killing German dachshund dogs, and one man was hanged because he was overheard speaking German to his neighbor. That was our initial world war, and we overreacted and 9/11 was the first time our mainland had been attacked and we did the same .The 2008 Financial Crash was the first financial crisis since the 1929 Great Depression, yet we still don't have regulations in place to prevent "Too Big to Fail."

Ron Paul would've felt at home in the 20th century because the 18th amendment banning the use of alcohol (Prohibition) for public recreational purposes was considered the most liberty destroying legislation of our lifetime. Police chiefs across the nation reluctantly stated that over 40% of their forces were involved in the illegal sale of alcohol. It was legal to brew a small amount of alcohol for personal consumption, or for a doctor to prescribe rum and whiskey for medicinal purposes but those exemptions led the honest shopkeeper and the small-time doctor yielding to the temptation of making a lot of bootlegger money. The documentary was more about life lessons, than it was about the illegal consumption or the selling of alcoholic beverages. The people of that time over consumed alcohol which led to domestic abuse, poverty, medical problems, but it was a classic case for the reason we cannot legislate morality.

I would like to think that we're much more intelligent these days but we may not be. Democratic presidential nominee, Al Smith, lost his election to Herbert Hoover because he was a Catholic running on an anti-prohibition ticket. The KKK printed thousands of hate pamphlets that predicted the Pope would occupy the White House, openly burned crosses and marched in anti-Smith rallies. The Klan publication, Fellowship Forum, showed a Cabinet meeting with the Pope and a dozen fat priests sitting happily around the table, with Smith, in bellboy livery, serving them liquor. No Klan tale, however, surpassed the story that the Holland Tunnel secretly connected to the Vatican! The Republican Party never admonished the tactics. I can see the similarities without the openness, in the Mitt Romney campaign. It's funny because Al Smith's opponents would have liquor at all their strategy meetings.

Today, one of our biggest problems is income inequality, but we cannot get a handle on it until we know its cause. I'm convinced that this started in the Reagan era when they started implementing tax policies to favor the rich. During the past 30 years, the gap between the wealthy and the middle class is as large as it has ever been. Income inequality was one of the causes for the 1929 Great Depression where wealth accumulated at the top and never trickles down, so when the stock market crashed there was no one left to revive the economy. The scapegoats of that time were the poor farmers, and today we have a 9.0 unemployment rate, yet people are chastising the poor for not working.

I've seen where some posters are just parroting what they hear from the single source articles they read every day, or they try to incorporate their pet peeves into every argument. Let's take this “taxing the rich" argument. That's just a diversion that emphasizes the point by saying that if we confiscated all their assets, and we still wouldn't have enough money to balance the budget. That's not the point at all. For argument's sake, let's skip the reasons, of how we got in this predicament for right now but let's concentrate on how we will get out.

We need a plan to start reducing the debt and deficit just when we start showing signs of recovery because you can't do both at the same time. We can immediately cut out the wasteful spending but eliminating programs creates layoffs (consumers) who just might go on the public dole. We still have to invest in education, research and development, infrastructure and innovation. Revenues will have to be part of the mix even though some right-wing partisans are starting to say that a balanced approach is just a liberal socialist talking point. You don't have to be a mathematician to know that if you don't cut defense spending or tax the top 2%, the cuts will all come on the backs of the poor, the elderly, and education. We will never reduce the debt to zero in our lifetime, and the best we can do is to start seeing a downward trend in the foreseeable future. All the talk about reducing capital gains rates and reducing the corporate rates to zero are just smoke and mirrors because, once the economy starts to revive, the unemployment rate will go down, as well as deficit reduction as the tax revenues increase. We can restructure our income tax code later when cooler heads prevail. We're treating this economy like we reacted to 9/11 because it's not a situation that we are accustomed to. We don't need a reactionary economic policy.

There's not a day that goes by where we don't read about some elaborate plan to fix our economy in our local newspaper and public forum. It's as if it's a sure-fire fix without giving thought to history or established economic theories. Some posts their proposals multiple times, as if the more you see them, the likelihood they will take hold. The posters want a flat tax because they don't know or care about the income inequality we're suffering from. Some favor "austerity only" not recognizing that it will do more harm than good and one would have to look no further than to our European trading partners as proof. They talk about a "strong dollar" but fail to grasp that even though that is desirable in the future, it would leave our goods on the shelf right now. Think about it, Dillard’s, Macy’s, Tiffany, and Neiman Marcus don't have Black Friday sales but Walmart, Target and Best Buy do.

 In the meantime you can't place all the blame on the Federal government and allow the multinational corporations to go untouched.  We have a DEMAND problem right now, of which the government can't do anything about. On of our biggest trader (Europe) is having a financial crisis of their own. Once consumers start spending, some of our jobs will come back but we still don't have a lot of manufacturing jobs that usually gets an economy up and going like Germany did. We have a service based economy. I hope some of these little tidbits will help you understand some of the problems we are having,you might disagree,so feel free to share where I might be wrong. It's the only way we all learn together,so we don't have to keep repeating the myths of the past.


Mike said...

The Internal Revenue reminds me of some posters; we can tell 'em that they're wrong but they just won't listen...:-). I remember back in 2009 when I called the IRS and even wrote them a letter(which they ignored) telling them that they had sent me a $250 refund in error. The agent insisted that I had miscalculated my tax return. We cashed the check but today we got a letter informing me that I owed them $250..... It was over that schedule M, "Making Work Pay Credit" in 2009.

Legion said...

Good points Mike.
America has a completely different economy and way of life than it did in 1929. A large portion of America workers in 1929 worked on their own farms, provided almost all their own food and didn't have electric,phone or cable bills to pay, just a note at their local bank for their land or seeds to plant and a charge account at the local dry goods store.

Bad farming practices and a drought , the dust bowl, changed their way of life.

About the IRS, for the last 3 years I was informed my return was wrong. 2 of those years I had to pay a additional amount, under $20 both times and the other they sent me a check for overpayment... $3.59. lol

Mike said...

I can relate to that;I remember the day as if it was yesterday.I told the lady how I calculated the return but she said the check is being processed as if the big machine has spoken....It took a little while to explain to my wife how this was a wash because all we are doing is returning the $250 we were overpaid in 2009 and all I lost was the 44 cents for the stamp.

Times are different and we will neverr ssort out the blame game.We can go to public and read two or three versions of the 1929 Depression as to: the cause,the prolong effect, and what could have been done. Our recession will follow that same path...I just want to get on with the recovery,so we can have time to pay the blame game .

Legion said...

In a way 1929 was the same. A majority of capital was held by a small percentage of the population, a lot of it just on paper. A majority of the consumers were in agriculture then, service and manufacturing jobs now.

One difference was the almost monopoly of shipping products held by the railroads then, A farmer had to pay what they charged if they wanted to sell their produce of livestock any distance away.

Then the drought occurred. The ranchers and farmers yield was cut or eliminated but they still owed the bank and dry good store money plus the farmers weren't shipping as many goods by rail or buying any new plows or other equipment manufactured in industrial areas.

So the local dry good merchants holding un collectable charge accounts tried to withdraw their money from the banks that where holding un collectable mortgages, except the money was loaned out or invested by the bank and wasn't available, thus the "bank runs". Ex: "Today, First Victoria has in excess of $1.7 billion in total assets.", does anyone actually think they have that much cash on hand?

Anyway, banks had to close, manufacturers had to lay off workers or close, the railroads and coal company s had to do the same and the stock market crashed taking all that "on paper" wealth with it.

Like you have said Mike, the demand for goods and services dried up and that trickled up, how about that for a slogan,all the way to Wall street.

Mike said...


One of the many reasons I enjoy receiving comments from posters of your caliber, are the important points that you bring out.

I had forgotten about the monopolies that certainly lead to the doom but I will add that we were in a world financial crisis back then, as we are today. We're in no position to start leveling tariffs because we need all the customers we can get. I like to negotiate from a position of power not desperation. The European leaders will meet with President Obama this week and many will say that we cannot afford to help them, in their time of crisis( a lot of it; Wall Street caused) but unless we do something, we're stuck with the Asian markets.

At least we can forget about bank runs or serious stock market crashes because we have the FDIC, who will close the banks to prevent wholesale withdrawals and the mechanism shut down the stock market from doing the same. We just can't seem to prevent the banks from gambling with aunt Martha's savings account.