The View from Abroad

Hard hitting commentary from an American living overseas

Kenn Jacobine

Kenn Jacobine
June 03
Kenn Jacobine is an international educator currently teaching History and Economics for the American School of Doha, Qatar. He has also taught at international schools in Ecuador, Mali, and Zambia. His political transformation took place over the course of many years. Starting out naively as a big state liberal, he became a Reagan Republican in 1982. Disillusionment set in with the realization that small government rhetoric rarely translated into limited government actions. On Christmas day 1992, he became a libertarian. In 1994, Kenn ran for the State Senate in Pennsylvania on the Libertarian Party ticket garnering 5 percent of the vote. He has been active in freedom causes ever since.

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JANUARY 24, 2013 12:47PM

Gap Between Rich and Poor Rooted in Government Policy

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Anyone who proclaims the American economy is recovering from the financial crisis of 2008 is either lying or not paying attention.  The good people at the Economic Collapse Blog have aggregated 37 statistics that strongly indicate the economy continues to worsen under the financial leadership of President Obama and Federal Reserve chairman Ben Bernanke.  In particular, the figures indicate that it is the lower economic classes which have been most severely devastated by four years of reckless federal spending, bailouts for the well-connected, and artificially low interest rates.

For instance, since 2008 15 million more Americans rely on food stamps.  According to the Census Bureau, 146 million of us, nearly half of the U.S. population, are poor or low-income.  The Civilian Employment/Population ratio, which is the broadest measure of employment in the country, is the lowest it has been since the early 1980s.  Median household income has retreated to its 1995 level.  Lastly, the economy is not producing jobs for U.S. college graduates as 53 percent of them under the age of 25 are either unemployed or underemployed.  Given that many graduated with huge college debt, what could the future hold for these folks?

But, don’t despair.  Some in our society are doing quite well because of the federal largess thrown their way.  Most of them just happen to be located around New York City and the District of Columbia.  You see, the U.S. stock and bond markets are at, or near all-time highs.  Real estate in Manhattan and Washington, D.C. has bounced back nicely and are both at all-time highs.  Even the Contemporary Art market in the Big Apple has seen sales skyrocket in spite of higher prices.

But, this is predictable given that New York and the nation’s capital is where the Wall Street/Washington Axis of Financial Evil is headquartered.  It is where that axis prints the new money and injects it into the economy through its well-connected surrogates – i.e the “too big to fails”.

And it is all done in the name of stabilizing prices so the rest of us don’t suffer so much.  How nice it is that the powers that be are looking out for us working folk! 

Don’t be fooled for a moment. 

The financial establishment in this country, which includes the Federal Reserve and its “too big to fail” cronies, knew exactly what it was doing.  Through monetizing federal debt, a series of quantitative easing schemes and holding interest rates below market prices the banking establishment has succeeded at stabilizing the cost of living above market levels.  Put another way, if left to its own devices with no monetary easing from the Fed, the market would have rid itself of all the mal-investment built up from the previous Fed induced false boom period (housing boom). 

Consequently, housing prices would be lower, commodity prices would be lower; in fact general price inflation would be lower.  The cost of hiring new workers would be lower causing an employment recovery.  Savers would have gotten a decent return on their money.  In short, working class Americans would have seen an enhancement in their standard of living.

On the flip side, many rich folks would have been devastated.  Their stock and bond portfolios would have been decimated.  Many would have lost their jobs through bankruptcy and restructuring.  The value of their homes wouldn’t have been restored on the backs of working men and women. 

This is what should have happened.  After all, they caused the crisis along with their accomplices in government.  Didn’t they deserve the consequences of their actions?  That is capitalism.  That is the American way.

Article first published as Gap Between Rich and Poor Rooted in Government Policy on Blogcritics.          

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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there is an aphorism which goes something like this:
"give a man a fish, and he eats today, give him the fishing pole, and he eats everyday."

the constitution took the fishing pole from the electorate, and the people depend on the government ever since. but the problem is even deeper: in games theory, and your own poker game will tell you as much, when other conditions are equal, the biggest bank wins. so the recurring hyperwealth and poverty of the usa is not so much government policy, as it is structural design. any society will tend towards hyperwealth/poverty end condition, unless there is a political mechanism for periodic re-leveling of wealth. one mechanism is democracy, the other is revolution.
the public does not care about the economy during a boom, and cares about little else during a recession. this is a rare, near 5yr recession that seems to be "structural" somehow. the old rules dont apply any more. yeah obama has been a massive disappointment as far as having a spine and standing up to the bullies. he seems averse to most political risk. whats the gutsiest thing hes done in his 4yrs? health care? yeah whatever.
But "O" wants to focus on global warming. It's 20 degrees here and I am bundling up to save money.
We sheep are supposed to eat what the media feeds us. I, for one, do not like the taste. Things keep getting worse financially. Just take a walk down Main St and see all the buildings vacated by failed businesses.
I am pretty sure that neither "O" or Bernanke could figure out the tip on a $200 lunch bill. Their brand of math doesn't add up.
Jeana, We come back to the U.S. in the summer and at Christmas. I tell you that it seemed to us like in just 3 1/2 months our town looked worse off. More business out of business, and building structures in disrepair.