The Trickle Up Theory of Economics

The Trickle Up Theory of Economics

 

For about thirty-five years we had a fairly stable economy from the 1950’s through the 1980’s.  We had a large, healthy and robust middle class.  Senator Elizebeth Warren(D-Massachusetts) http://en.wikipedia.org/wiki/Elizabeth_Warren says that certain laws were put into place to insure that our economy stayed stable and balanced.  Then during the Reagan years some teeth and regulations were pulled out of these laws and we immediately had the S&L Scandal.  Then some more were pulled out by President Clinton in 1999 (the Banking Modernization Act of 1999 and the end of the Glass-Steagal Act) http://www.investopedia.com/terms/g/glba.asp  and we immediately had the Dot.com bust in 2000 and set us up for the housing bubble and its eventual demise of the economy in 2008.

This is by design.  It was created by some very far thinking and clever people on Wall Street.  Here is how it works.  First you feed the population this lie.  “Investing is the stock market is a great way for a middle class person to invest and grow their money.  Investing is a smart way to save for your retirement.”  Then the Wall Streeter’s create a system of booms and busts on roughly a ten year cycle. 

Imagine that a million people invest $1000 in the market.  Their money grows a little bit at a time for 10 years and all looks good.  Suddenly, the market crashes in a matter of weeks and their investments are only worth $500 now.  What happened to their money?  Did it just disappear into thin air?  Well to the investor it disappeared.  But to the people on Wall Street and to the investment firms the money trickled up the ladder to the people at the top.  A million people just lost $500 that is half a billion dollars that went into somebody’s pocket, one of the 1%’ers.

Some people will be able to weather this set back, but many people will not and they will get out of the market and their money is lost forever.  So now let’s say there are only ¾ of a million people are able to invest.  But the lie is told again and more people invest.  Those people stay in the market and will regrow their investments until the next market crash.  Then more people will get out of the market and their money is lost and has trickled up the ladder to the top once again. 

As more people can no longer afford to invest the few people that have profited will invest more and more until they get bumped out of the market in the next crash until the only ones left are the very, very wealthy while the rest of the nation lives paycheck to paycheck. 

With this plan of trickle up economics the rich steal from the middle class over a 50 or so year period of time till they have all the money and all the control.  We are twenty-five years in and so far I think their plan is working out pretty well.  What do you think?

If I were elected President I would make Elizebeth Warren Secretary of Economics and bring back all the banking laws, safeguards, and regulations that existed before 1980.

Let us start with the downfall of our economy in 2008

Let us start with the downfall of our economy in 2008.  Everyone pretty much agrees that the buying and selling of mortgages and the derivatives, side bets, and insurance on those Wall Street bets brought our economy to its’ knees.  And yet neither the new Obama Administration, Congress, or Paul Guetner never once put onto the table that maybe the buying nor selling of mortgages should be made illegal. 

Honestly, the selling of mortgages (debt) should not be packages into “securities” and sold on the open market.  This is not just an economic issue it is a consumer protection issue.  I want the same mortgage my parents had!  Whoever gave me the mortgage loan is the person and company that I am beholden to for the next 30 years.  My folks became best friends with their real estate agent.  Why?  Because it was an honest transaction and she was a genuinely good person.  In the early 2000’s mortgage companies started a policy called “point and sell”.  What this meant was that your mortgage was sold to another company before the ink on your signature dried.  They didn’t care who you were or your income or your ability to repay the loan because they got their commission and immediately sold it.  The mortgage company took no risk whatsoever.  Where was the consumer protection agency?  Do they even still exist?

Our real estate system is corrupt.  It is not good for the consumer, it is not good for investors who think they are buying a secure investment, mutual fund or IRA when they are really buying other peoples depts.  These “investments” rely on the hope that millions of strangers  will pay off their depts.  The cure is simple.  The buying and selling of mortgages should be illegal.  This would create a stable real estate market and consumer protection for those who want to buy homes and can actually afford them.

It would also prevent the wholesale selling of our real estate problems to foreign countries obsolete.  The reason why my mutual funds and college savings accounts tanked in 2008 was because some of those investments were involved in buying these “debt securities” (an oxymoron) when I thought I was making an investment in companies that actually produced things.  When the economy fell I was taken by surprised because I thought I was not invested in real estate when in fact I was.  So was most of Europe.  That is why the world economy is so bad because we exported our problem by selling securities that were really dept.  The thing that sickens me most is that WE ARE STILL DOING IT!  Wall Street hit a record high in trading today (3/6/13).  The news touts it as a good thing, but most of the trading is actually trading of “debt securities”. 

The answer to a stable economy is the buying and selling of mortgages and all debt for that matter (credit cards, auto loans, etc.) should be illegal.  Whoever gives you the loan should be responsible for your loan.  They take the risk and they alone should reap the rewards.

If I were President of the United States I would make the buying and selling of loans and all “debt securities” illegal.