Benson's Economic
& Market Trends
Hotel "Debt"
California
Richard Benson
Archives
February 28, 2005
The song "Hotel California" by the Eagles is a haunting
reminder of what could be in store for the Baby Boom generation.
The song's lyrics set the tone:
Mirrors on the ceiling
Pink champagne on ice
And she said
We are all just prisoners here
Of our own device
And in the master's chambers
They gathered for the feast
They stab it with their steely knives
But they just can't kill the beast
Last thing I remember
I was running for the door
I had to find the passage back to the place I was before
Relax said the night man
We are programmed to receive
You can check out any time you like
But you can never leave ...
With a slight change in lyrics,
the perfect theme song for Baby Boomers - who have illusions
about being able to retire - could be called "Hotel Debt
California," with the lyrics... "you can buy, but
you can never own." In the new "Ownership Society"
that our government is marketing, black is called white and freedom
is clearly defined as freedom from real choice. Indeed, given
the way ownership operates in practice, George Orwell would feel
right at home in today's world.
Why have Americans chosen to
accumulate so much debt? Why have lenders and the Federal Reserve
made it so easy to go into debt? Are car manufacturers, who give
you cash back to buy a car and drive it away, to be held accountable?
Or, perhaps, we can blame the mortgage lenders who allow you
to borrow more money and offer interest-only, low teaser rates
and negative amortization loans. Are they being irresponsible?
Consumers are paying so much
for real estate these days that the thought of actually paying
off their mortgage, and owning the home outright, is almost jokingly
surreal. When there is a correction in the housing market, many
people will find they have negative equity; in other words, they
own nothing, but they owe quite a bit!
Americans are headed into Debt
Slavery, one credit card and one house at a time. To make sure
they get there, Congress is rushing though a major reform of
the Federal Bankruptcy Law. Since banks have been posting record
profits, one must wonder why there is such a rush to prevent
the little guy from getting a "clean slate" in Chapter
7. Indeed, when sophisticated lenders, with millions of clients
and infinite amounts of cash, continue to offer credit cards
and increased credit lines, why is it that they are shocked when
someone can't afford to pay the interest or late charges on their
credit card bill due to illness or loss of a job. Even with bankruptcy
filings - over 1.5 million a year - the banks claim to be totally
caught off-guard. The banks claim they need protection from sophisticated
deadbeats and can afford to pay for protection by contributing
to Political Action Committees. Moreover, even though the banks
know how to price risk, and charge double-digit interest rates,
they're livid when people who fall on hard times can get away
with not paying them back with interest.
Congress seems determined to
make sure that individuals enter the world of Debt Slavery and
want the courts to be the collection agency. Bankruptcy reform
means many a poor soul will be hounded for years through a Chapter
13 filing, instead of being given a fresh start in a Chapter
7 filing. If you file Chapter 13, any cash you make will be "sucked
out" of your paycheck and go towards your debts for many
years to come. You can forget about paying off a mortgage or
saving for retirement. (Surprisingly, these new bankruptcy
laws will still allow corporations to stiff their creditors.
Indeed, how could "The Donald" afford to buy and/or
maintain his mansions without stuffing his junk bond holders
with his casinos in Atlantic City?) Debt Slavery is a cornerstone
of the Ownership Society. Why? Because now the bank owns you!
Congress has also passed new legislation that moves class-action
lawsuits to the Federal courts, effectively making it more difficult
to sue a large powerful corporation, such as Wal-Mart. The press
recently reported that when employees at a particular Wal-Mart
store had unionized because they were being treated like dirt,
Wal-Mart simply closed the store. In the past, the press has
reported other unfair labor practices by Wal-Mart, such as how
they avoid paying their employees their full earned wages, and
how some employees are forced to work off the clock and were
even "locked in" at night by a night manager. In seems
that in today's world, it's important for corporations to "own"
their employees without having to pay for their pensions, healthcare
or insurance. This first round of legislation to protect big
business from legal liability is certainly not the last we've
seen.
So, who really owns us and
our property? In an Ownership Society, the employer owns the
workers, and the bank owns the house and the car. If you have
a credit card, not only do you work for the bank, but you can't
quit work! If you don't like the system, your job will either
be shipped overseas, or an illegal immigrant will grab it. The
irony of all this, of course, is that our government still allows
illegal immigrants - who are willing to risk their lives for
a chance to be a Debt Slave in America - to flood our borders
and become "workers" in America. Meanwhile, large corporations,
our legal system, and government are working hard to make George
Orwell's "Big Brother" a reality.
If there is a silver lining
to this world that Kafka described so well, it was so succinctly
stated by our President in his State of The Union Address, whereby
he said, and I quote, "in the future, if people retire at
the age of 65, there just won't be enough working people to take
care of them." What better way to solve this tragic problem
then to turn baby boomers into Debt Slaves today, with a debt
burden so high they will never be able to make ends meet unless
they work until they are truly disabled.
Don't get me wrong. I hate
socialism and love freedom. In a socialist country, the government
owns everything and everyone is a slave. In our society, you
don't have to borrow but we do because it's so easy and seductive.
Under capitalism, Debt Slavery is purely voluntary.
Our fear is that the average American doesn't truly understand
the extent to which he is in hock, or how much the federal government
may need to rely on us in the future for today's deficits because
our country owes so much to foreign creditors.
If the middle class ever wakes up in America - it might if the
Hockey, Football and Baseball seasons are all canceled in the
same year - there would be a great demand for the "repudiation
of old debt." When that occurs, you may not wish to be an
Asian investor holding a FNMA security, let alone a Russian or
Korean Central Bank with too many dollars.
With a Debt Slavery society
wishing to break free, the easy and perhaps only way out may
be inflation and the continued debasement of the currency. We
are saddened about the path our leaders have taken us down. Where
is the freedom that our parents had (and their parents before
them) because without freedom from debt, we're really not free
at all! Welcome to Debt California.
February 28, 2005
Richard Benson
Archives
President
Specialty
Finance Group, LLC
Member NASD/SIPC
2505 S. Ocean Boulevard
- Suite 212
Palm Beach, Florida 33480
1 800-860-2907
eMail: rbenson@sfgroup.org
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