Simply Politics & News

[mlsoft]

chris...

As for the wealthy having assets and the middle class not having any -- that's what the stock market and real estate bubble did.

And where did that speculative money go that the middle class lost ?

To the banks and business executives.

I would submit to you that while the above statement is commonly accepted, it is actually incorrect. You are assuming that the markets are a zero sum game -- they are not. The middle class participated hugely in the bubble years, both through gains in their stocks (both individual and through 401k's, etc.) and through massive asset appreciation in their homes.

The problem is that all too frequently the beneficiaries of the bubbles "cashed in" their gains and spent them on financing a lifestyle they could not have otherwise afforded. For years, our economy rode a wave of consumer spending fueled by cash that was raised through the sale of appreciated assets. Eventually the bubbles burst, leading to a swift decline in the value of the remaining assets. So the majority of the middle class benefited greatly from the bubbles, but many of them squandered their new found wealth, assuming that the bubbles were the norm, not the exception. Of course it was not the norm and when the markets finally corrected a good many participants found themselves in far worse shape than when they began.

This is a classic example of why Social Security assets should never be allowed to be invested in the markets. We always hear the old saw that "over time, the markets always go higher". As we have seen, that is not a true statement. Sometimes, they go lower, and occasionally they go much lower.

When the bubbles burst, for the most part the bankers and Wall Street got killed in the subsequent precipitous decline in asset values -- many banks and brokerages, not to mention regular businesses and executives, went insolvent during the bust. The unjust part of it all was the "bail out" of some of the players by the government, who chose arbitrarily who was to survive and prosper, and who was to go under, mostly for political reasons. Many banks failed, but some were arbitrarily bailed out. GM and Chrysler, which had been mismanaged for years, were taken through bankruptcy using a patently illegal process which basically gave ownership and control of those companies to the very unions which had played such a large part in bringing those companies down, while illegally taking down the debt legally owed to the bondholders who had first call on the remaining assets of the corporations.

When the true history of the era is written, if it ever is, it will be seen that the winners were the political allies of the administration, while the losers were the US taxpayers and their children for many generations.

mlsoft