No shoes & a 1-legged stool

[SoCalDem]

SoCalDem Donating Member (1000+ posts) Sat Jul-11-09 07:23 PM
Original message


The Last of the Shoes?

The dropping shoes metaphor is tossed around regularly, but just how many damned feet ARE there?

Well-educated economists toss these words around like they just thought of it........"Hey look at me.. aren't I brilliant?"

Greenspan spoke of "legs of a stool", and how there were 3 legs on the stool.

Let's look at some of those shoes & legs..

unions...gone

pensions...gone

jobs..outsourced

manufacturing..almost non-existent

wall street...kaput

401-k's...on life support or dead

health care...no job, no insurance, no care

home building...screeching halt (new homes are being bulldozed, because they cannot sell them)

mortgages....no

foreclosures....yes

credit cards.....squeezing the life from "customers"

Aren't we about out of shoes now?

Below are some threads from the past, that prove that we at DU knew this was coming, when our esteemed "economist & experts" seemed to not understand that the shoes were dropping like crazy.



............................................




SoCalDem Donating Member (1000+ posts) Fri Jun-20-08 12:29 PM


The 101-k IMPLOSION (not a typo) will the the next big shoe to drop..


Fret not!.. The plan will soon be fully implemented..

A whole generation... and maybe a whole country, will bear the brunt.

Boomers (not the "rich" ones) have spent their entire lives being an "experiment".


We were the perfect lab-rats. There were just so damned many of us. We were the first to get mass-inoculations with vaccines.

Madison Avenue boomed by marketing to us.....We were the first to test out new teaching theories..

We matured at just the perfect time in history for a real push to start destroying unions, and ushering in lowered-expectations in the workplace.

Lowered wages, meant that the opportunity existed for the "plastic-generation" to be born, as well. Less wages, combined with massive competition for jobs , while being exposed to the biggest dose of advertising for "the good life", made credit cards oh sooooo desirable...

Once hooked on credit, it was a logical step to encourage home-ownership, at any cost. Cities & towns had no interest in keeping a generation within their economic means.. America has always been about reaching for the stars..going for the gusto..taking more more more..

Home ownership had always been about paying OFF a home that you would live out your life in, but Boomers were a mobile bunch, and it did not take banks long to figure out that they could make more by creating a series of "transactions", and reaping profits on the transactions, not the long-term relationship between mortgagor-mortgagee..

It was very linear too.. Plastic cards piled on debt, and equity from homes periodically "paid down" those cards. Limits increased, and the spending resumed.

As more and more people saw their peers living the good life, they too wanted "in".

Long term planning for Boomers rarely included pensions, so a "new" product had to evolve.. The 401-k was a clever way to make MOST people "stockholders", and then keep them interested in things they had little knowledge of, but now had to start caring about..market-share..productivity.. market opens..market closes.. bond markets..money markets..

All that glorious wealth awaited them, and for only 4-8% out of their wages every paycheck.. A "raise" was met with an increased automatic deduction, and usually an increase in employee share of health insurance cost. So , for the lucky ones who got raises and had health insurance, they rarely ever saw any "real" extra money to spend. But that quarterly statement told them that they were getting "rich"..who needed a boring old pension that was 25 years away... and the equity in the house was always there to tap when the plastic spending got out of hand..

Companies did not "have" to raise our wages..we had equity & plastic available, to live the American Dream when wages could not deliver it.

We did what was expected of us.. We shopped until we dropped..and many, if not most of us have dropped.. We are approaching "retirement" age, with more obligations than we started with.

Our parents (and some younger boomers still have living grandparents) are relying on us for aid, our 30-something children have often been unable to get their "adult lives" started, due to crushing school debt and high living costs, and those pensions-buy-outs/switched to 401-ks are looking pretty anemic.

The job market that was inundated BY us when we matured, is now casting us off like used kleenex, so even if many WANTED to/NEEDED to work well past retirement ages, the jobs themselves are no longer around.. The jobs that may still exist for many, are the SAME jobs that the kids & grandkids are grabbing up as 2nd & 3rd jobs so THEY can buy food & gas up their cars.

For every person who praises the "go-getter" nature of a 60 or 70-something out there shagging grocery carts, there are many more who see this as a symptom of a nightmare scenario, unfolding before their very eyes.


For the Boomers who have managed to hold onto equity, and who have avoided the credit card trap, they will soon be trading in the house for medical care in their old age, since their own children may be unable to help them financially, so the circle is closing, folks..

People who spent a lifetime, paying off a house, so they could live out their years, and pass it on to their children, are now facing the harsh reality, that after "deductions" are taken from their Social Security, there is not enough left to live on, and that 101-K is not enough to make up the difference..and that $8 an hour job is not enough either..

They will downsize to make ends meet, but in the end, they may be penniless, and scrambling to find their next meal, and doing without medicine.

Magazines, tv shows & newspapers will always brag about the people who DID "get rich" from their astute management of their 401-ks, but those folks are NOT the norm.

A look at this ARTICLE kind of spells out the problem. That "deferred" income, even WITH some participation from an employer will NOT ensure a comfy retirement..unless you only plan on living a few years after you stop working..and never get sick.

The money-whizzes tell us that the market is so HUGE and so MAGNIFICENT, and with globalization, when boomers start TAKING instead of contributing, the markets will be just fine..BUT..when have they been right lately?

It seems to me, that they have been dead wrong about just about everything they predicted..for at least 20 years or so.


It's always made me sad to think of how many people think they will be okay ,"just because"..

We have a 401-k, and savings and we know it will not be enough..but we've done all we could, so we accept our fate..whatever it is.. The only hope many of us have, is that the only money that disappears from them is the employer's share.. I figure that as long as we have what WE paid in (even sans interest), we will at least get something back..But that is no even-swap for the pensions that people before us could count on..

Even if a pension was only $500 a month, at least it was a sure thing..not some pie-in-the-sky scheme that MAY work out for some, but probably won't for most..

We HAD hoped to sell our equity-rich house, and buy a cheaper one outright, but that hope is fading too.. :(

Our sons are annoyed at us for saying we might leave the state, but when my husband retires in 5 years, I don't see any other option..California is a cruel place for a non-wealthy oldster to live in..


It's all a delicate balance..

Totally calculated and instituted to make rich folks richer, and to keep the rest of us "in our place"..

Now that houses are finally getting cheap (at the expense of those of us who lived frugally, and built equity), the only people who can now GET loans, are rich people..who will snatch up the cheap houses, rent them out until the market goes back up, and then make big profits when they start selling them..

and money in our CDs is getting an anemic 2.7% interest..down from 4.8 the previous term

The "Greatest" ended up being the GREEDIEST/Luckiest

THEY got the cheap houses, free education, VA benefits, beefed up Social Security, Medicare when it was new & shiny.. They HAD pensions, and jobs with full benefits.

For MOST of the GG's lives they had it pretty good..all for doing what ANY generation would have done in war-time..

A person who was 19 or 20 when war broke out, would have been a child during the worst of the depresion, and since most people were pretty rural back then, most of them had plenty to eat and lots of "work" in family businesses and on farms..

City people even had enclaves of family/like-minded people who looked out for each other back then..

Those GGs have been WELL-rewarded for their 4 1/2 yr wartime service.. Their progeny has had little but their crumbs to pick at..


...............................

a few comments from the original thread:

mrreowwr_kittty (1000+ posts) Fri Jun-20-08 12:44 PM
Response to Original message

4. I used to do financial planning and you are spot on.

I worked for one of those big companies that pushes retirement accounts and mutual funds like they're the holy grail. I lasted a few months because I just couldn't stomach feeding clients bullshit platitudes like "People don't plan to fail, they fail to plan!", while knowing (because I read sites like DU) that the average retirement account has less than $50K in it. I also got tired of being around repukes spouting supply side gibberish all damn day.

There's nothing wrong with IRAs and 401ks per se. They would be fine to augment a comprehensive social safety net, that includes SS, health coverage, and a pension. But they are NOT, for most people, a vehicle to retire on. I can't tell you how many times I ran through a retirement analysis with a person in their 40s or 50s and having to explain to them that putting away a few hundred a month in an account that may or may not perform depending on the market was not going to provide them with anywhere near the $2 million they'd been told they need to retire by the time they were 65. And these weren't people who flagrantly spent their money. It was the usual things: health crisis, divorce, college, layoffs, etc.

All I can say is we better hold on to Social Security like our lives depend on it. Because, frankly, they do.

...........

truedelphi Donating Member (1000+ posts) Journal Fri Jun-20-08 02:15 PM
Response to Reply #4

18. Good for you for only lasting a few months.

It's sad tht so many people will tell me, Well the market is down, but it doesn't affect ME!

I have to remind them, "Weren't you just commenting a few weeks ago about all the money your company has put into your 401 K's or whatever??"

When the 514 Trillion dollars in derivatives go belly up, after the USA government has transferred all our wealth into the hands of the top banking families (Can't let their banks fail, can we?) then and only then will people wake up.

But what good it will do when all of us are just hungry bodies in a soup line, I can't tell ya.

......
TalkingDog (1000+ posts) Fri Jun-20-08 12:56 PM
Response to Original message

5. We pulled 90% out of ours.

We installed a PV system and are planting fruit trees and gardens on the acreage we had to clear to do it.

Screw them. If I'm going to work my ass off, I'm going to do it for my own gain. And at least I'll have food on the table as soon as pick it out of the yard and bring it inside.

And when I told my "customer representative" at the bank why I was taking the money out (devaluing dollar, inflation, train wreck of economy) he didn't disagree. In fact, he said I was the first customer that he didn't have to explain the larger picture to

..................

ruedelphi Donating Member Fri Jun-20-08 02:20 PM
Response to Reply #5
19. Wow. You are spot on, and I am not surprised to


Find out that you are the first person the bank rep didn't have to explain the big picture to.

Why people found it acceptable to hand 4 to 9% of their paychecks over to the stock broker crowd, I have never understood.

(Slightly off subject) I work taking care of the elderly. Even fifteen years ago, the "Nursing home insurance account" people were telling my clients, "We am sorry but we are only gonna cover four months of your disability, long term care needs -- we are filing for bankruptcy and will be out of business soon.

Yet all around me, people I know have signed up with these types of accounts.

It is a great idea in theory - but I can't see how any insurer is gonna offer payouts to every Baby Boomer in the country who has one of these. After all, we saw with Katrina how the insurers close up shop the minute there are a flurry of claims.

....



The Final "shoe"

SoCalDem Donating Member (1000+ posts) Tue Sep-23-08 10:53 AM
Original message

"...Of particular concern is what happens with the more than $2 trillion in consumer debt..."

THIS IS THE NEXT SHOE TO DROP....

FOLLOWED BY THE COLLAPSE OF THE 401-k scheme..

and finally..Social Security..

http://www.chicagotribune.com/business/chi-thu-credit-p ... (link is too old to open & cached link does not work anymore)

Consumer debt defaults looming large
As more Americans lose jobs, credit cards, loans won't be paid

By Rachel Beck | Associated Press
September 11, 2008

snip...

The latest data on the job market paint an ugly picture: The unemployment rate shot to a five-year high in August, and payrolls are being cut at an alarming rate. With more people out of work, that likely means many are having a tougher time paying their bills. If that leads to a surge in defaults on debt assets beyond just mortgages, such as credit cards, auto loans and more, we can forget about the credit crisis being over any time soon. That's something to remember amid all the news regarding the Treasury Department's takeover of Fannie and Freddie. The mortgage giants, which own or guarantee about $5 trillion in home loans, or about half of the nation's total, have been ailing for months as mortgage default rates have soared and their capital base has been constrained.

snip...

The government is trying to prevent further deterioration in the mortgage market, but it hasn't done much to ease other credit troubles.

"There is no silver bullet here. This is certainly a positive step but is not the absolute answer," said Mark Zandi, chief economist at Moody's Economy.com. "They've made progress in residential mortgage assets but have yet to deal with other problematic loans." What's worrisome is whether growing stress in other areas of credit leads to more big losses and write-downs at banks and other financial institutions in the months ahead. Of particular concern is what happens with the more than $2 trillion in consumer debt. That may be a fraction of the more than $12 trillion in residential mortgage loans, said Zandi, but it still is large, comparable with all the goods and services produced by France in 2007. Americans this year have been increasingly using their credit cards to make purchases. Banks have tightened lending standards on such things has home equity loans, which consumers used heavily in recent years to finance spending. New data from the Federal Reserve show that consumer borrowing on credit cards grew at an annual rate of 4.8 percent in July, up from a growth rate of 3.5 percent in June. But as credit card use has surged, payments on those cards have fallen, even though $106.7 billion flowed into Americans' wallets in recent months from the U.S. economic stimulus package. Card payment rates fell 6.2 percent on a year-over-year basis in July, the ninth consecutive monthly decline. That's the second-biggest pullback in the records kept by the banking analysts at Oppenheimer & Co., behind March's year-over-year decline of 7.4 percent.

snip...

According to the Labor Department, the jobless rate rose to 6.1 percent in August from 5.7 percent in July, and employers cut their payrolls by 84,000 in August, the eighth consecutive month of declines. That pullback was fueled by employers' worries about the economy and their own business prospects. So far this year, 605,000 jobs have vanished. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable. "Rising joblessness of the magnitude we saw in the August employment report means that more households, including good-quality prime borrowers with solid credit histories, will likely be encountering more difficulties meeting their debt obligations," said David Rosenberg, chief North American economist at Merrill Lynch. Research by Merrill's economics team found that there is a tight historical link between the unemployment rate and consumer credit card delinquencies.

snip

The losses might not begin to intensify until 2009, because there is a lag between when someone is out of work and when loan defaults begin. So while the U.S. government focuses its attention on the mortgage mess, another storm is brewing. And don't count on a quick fix.

...........................

and so it goes....

[Mnemosyne]

1. Hear, hear, SoCalDem! K&R n/t