Organized Suppression of Wages Causes Financial Crisis

And like that pilot flying circles in the sky none of our leaders has a clue what's going on in the cockpit of our economy. In an all-out desperate attempt to save their own ineffective behinds they're heaving mountains of money at a monster of their own creation, the great beast gobbling up every last scrap of sacrificial paper as our leaders pray the hideous creature gorges itself enough to satisfy its craving then retreats to the cave from whence it came, blood drooling from its mouth, only to emerge again in another few years for the next feeding frenzy.

If nothing else this financial crisis will spawn endless new volumes of books, papers, and essays to be mulled over, debated, and torn-to-shreds by pseudo-intellectuals passing themselves off as college professors and economists, all of whom had nothing to do with the crisis and certainly offered no solutions to get us out of it. But claim that they knew all along what was happening they will, you can count on that. So what are the facts? How is it that we find ourselves on the proverbial precipice of economic disaster once again? As the fictitious Wall Street character Gordon Gekko famously uttered, "Greed." I sometimes wonder if Gekko isn't wandering the floor of the New York Stock Exchange this very moment.

More than any single culprit in this depressing crisis exists an undeniable truth that few economists or Wall Street pundits dare to admit. The truth is that our banking system feeds on inflation-dependent debt perpetuated by a suppression of real wages. Since the post-World War II economic boom fizzled out in the late seventies real wages in the US have remained flat, not even keeping pace with inflation while our nation's corporate wizards have been rewarded by Wall Street for suppressing these labor costs and calling the resulting windfall increased profits. What they should have called it was the destruction of the US labor force. Wall Street, more than any other culprit, motivated an entire manufacturing sector to shutter its US operations then ship those jobs to China, hence the gargantuan trade imbalance between our two countries that exists today.

So what did Wall Street do when all those high paying manufacturing jobs vanished from US soil? Why they decided to ratchet up the fractional reserve lending and securitization machines so we could all sell homes to each other and call it an economy. Gullibly we bought into it. Everybody was swimming in equity. Wall Street took their insane profits and bonuses and laughed all the way to the Bank of the Caribbean. What they failed to tell everybody was that as real estate prices were rocketing higher than Lindsay Lohan on her way to rehab, everyone's wages remained on the basement floor.

Remember those guys from China who now make all the widgets we buy? They made our housing craze possible by buying all the debt those Wall Street creeps were peddling around the globe. For a while everybody was raking in the dough. Then a strange thing happened. Wall Street discovered many of the high-flying loans they lumped into those supposedly AAA rated mortgage pools weren't so AAA after all. Oops. It seems it wasn't such a good idea to convince an entire nation the value of their homes would always go up. All that equity inflation Wall Street was counting on to roll their own debt over vanished after people figured out it was all a scam and quit making their mortgage payments. Now we can't even sell homes to each other for a living. What do we do now Gekko? You sold us out to China and now our homes aren't worth the money you loaned us to buy the darned things.

From a banks perspective low wages mean higher borrowing. Low wages also mean lower tax revenues and higher federal deficits. Quite a good scam if you ask me. Maintain a shortage of real money in the economy by rewarding companies to drive labor costs down then loan the workers money to buy things that through this scheme are kept out of their financial reach. Same thing with the government. By rewarding corporations to suppress wages tax revenues are guaranteed to remain low increasing the probability of government borrowing from the banks. Throw in an unfair tax system that favors the rich and presto, revolution is in the air.

In 1980, the last pre-Reagan year, families in the bottom 90% income bracket averaged a paltry $30,446 in income (inflation adjusted). In 2006 that same 90% tier averaged $30,374 (inflation adjusted) - a $72 annual income decrease. Conversely, in 1980 the top 1% income tier took home an average $5.4 million versus the 2006 stratospheric average of $29.6 million - a five fold increase. How can that be? Did the collective elite cure cancer and no one told me?

The Nation - Plutocracy Reborn

The fact is that a chasm between the rich and the rest of us grows wider every minute and no one in Washington or on Wall Street wants to admit it. Until the ruling banking class is stripped of the power to dictate economic law this nation will spiral further down the drain of inequality and perpetual debt only to be spat out into the sewer like all other failed fiat currency systems.

Finally, we can argue until the cows come home about whether we're headed into a deep depression exacerbated by hyperinflation, a Japanese-style economic flat-spin for the next couple decades, or into another economic bubble that will take us to yet an even higher place from which to fall. The fact is that no one knows. And if they claim otherwise, they're lying to you just like the politicians, bureaucrats, and Wall Street CEO's that pushed us to the edge of our own destruction in the first place.

Brett Buchanan
http://itsnotrealmoney.com
brettbuchanan@yahoo.com