We have become a society of haves and have-nots. The top 20% of households make 12.5 times the lowest 20% of households. This ratio was 7-to-1 in 1982. The top 1% of households make 20% of all the income in the US, the highest rate since 1928. Does this statistic portend a decade-long depression? The difference between now and 1928 is the huge household debt burden of Americans. This usage of debt by the poor has partially masked the gap between haves and have-nots for the last 20 years.

When I see “poor” people appearing to live a more luxurious life than myself, I don’t feel jealous. The thought that goes through my head is: Which banks or finance companies were foolish enough, or rapacious enough, to loan these people the money to live this lifestyle? These foolish financial institutions will never get their loans repaid. But the foolish banks got bailed out, the bank CEOs took home $30 million, and I lived within my means and footed the bill for the reckless actions of others. It appears that the fools are the Americans who lived their lives according to the rules.

The anger is building. I don’t think the politicians running this country realize what true anger looks like. They’re used to Americans being herded along like passive sheep.

I’ve heard many Republican ideologues blame the current crisis on the people who took subprime loans for home purchases. I’ve also heard many Democratic ideologues blame the crisis on the regulators. Both sets of ideologues are wrong, as usual. If a poor person has no home, no vehicle and no prospects, and a bank tells them they can buy a $300,000 home, drive a $55,000 Mercedes, and live like the people on TV, why wouldn’t they say yes? What’s their downside? If you have nothing and you’re offered the American dream, you’d actually be foolish to say no.

Now that they’ve lost the home, and the repo man has taken the Mercedes, they’re exactly where they were a few years ago: No home, no vehicle, no prospects - but plenty of debt.
The regulators were certainly asleep at the wheel. They didn’t enforce existing rules, foolishly waived leverage rules for the biggest investment banks, and believed the banks would regulate themselves. They were wrong.

The commercial banks, investment banks, auto finance companies, and credit card companies, however, were the ones who actually made loans to people who could never hope to pay them back in order to collect short-term profits.

Greedy Wall Street executives created an artificial market for the loans in order to generate billions in fees, so they could enrich themselves through stock options and obscene bonuses. They spent their false riches on $2 million NYC penthouses, $100,000 Porsche 911s, and $5 million beachfront estates in the Hamptons.

Based on the estimated $2 trillion of losses that our banks have generated, the CEOs certainly deserved annual pay 500 times as high as the average worker. There’s no way an “average” worker could possibly be talented enough to lose $2 trillion. You would need to be truly extraordinary to lose that much.


Source: Executive Excess 2006, 13th annual CEO Compensation Survey

The banks made a bad business decision in making those loans. But the taxpayer wasn’t involved in these business transactions. This is where Hank Paulson, Ben Bernanke and George W. Bush, formerly free-market capitalists, decided to commit our grandchildren’s money to bailing out the horribly run financial institutions. Our government has chosen to allow these banks off the hook for their bad business decisions at taxpayers’ expense.

Rewarding bad decisions and bad behavior will lead to more bad decisions and more bad behavior. Now the Federal Reserve has lowered interest rates to 1% again. And this is where this nightmare started: The massive printing of currency throughout the world will ultimately lead to a hyperinflationary bust. The law of unintended consequences can be devastating.



Early in the first Reagan administration Americans saved 12% of their income; household debt as a percentage of GDP was 63%. In 1980, the oldest Baby Boomers turned 34. They entered their prime earnings and spending years. This is when something went haywire with our great country. Deficit spending became fashionable for government, corporations and individuals. As we now know, Dick Cheney’s advice about deficits (i.e. that they don’t matter) was about as good as his belief that you can fire a shotgun in any direction without implications. The Boomer generation has freely made choices over the last quarter-century that has brought us to the brink of a second Great Depression.

During the current Bush administration, Americans’ savings rate actually went below zero, while household debt as a percentage of GDP soared above 130%. These figures prove the apparent prosperity of the last 25 years was an illusion.