by Gilles d'Aymery
"Nothing is more admirable than the fortitude with which millionaires tolerate the disavantages of their wealth."
—Rex Stout (1886-1975)
"Tell me what you eat, and I will tell you what you are."
—Anthelme Brillat-Savarin (1755-1826)
(Swans - January 28, 2008) THE GOOD TIMES: Remember John Paulson, the head of a hedge fund that I reviewed in my Blips #61? The smart man bet against the housing bubble and short-sold billions of dollars worth of subprime loans. He took home between $1.2 and $1.3 billion - repeat billion -- and made it to the much coveted Fortune 400 list of the richest among the rich. I thought that was a fluke, an accident of history. Wrong thinking. That was 2006. Came and went 2007. Last year, Mr. Paulson of Paulson & Company made between three and four billion dollars according to The Wall Street Journal as the firm made even more aggressive bets against subprime loans.
LET'S GRAB THE CALCULATOR and figure out the daily, hourly, and minutely earnings of Mr. Paulson. Say he worked 5 days a week for 52 weeks (he may have worked more than 5 days a week, but he must have taken a few weeks of vacation -- these people are known for taking lavish time off. So, it's a fair average). Say, also, that he worked a full twelve hours each and every day he worked. How would that compute? (Again, take 10 or 20% more or less, it makes little difference in the order of grandeur.) In 2006, Mr. Paulson made $4,807,692 a day; $400,641 an hour; and $6,677 a minute. In 2007, his take-home pay shot up to $13,461,538 a day; $1,121,795 an hour; and $18,697 a minute. In other words, John Paulson made more money in one 2006 minute than about seventy percent of the American population made in one month. In 2007, he made more in one minute than about 95 percent of the population made in one month. Notice that as far as the IRS is concerned Mr. Paulson's paychecks are not deemed regular income but investment gains, hence deserving of a lower taxation rate (what is it, 15%?).
TO THE LIBERTARIANS OUT THERE, I know you don't want to stifle innovation. You want people to be all they can be -- no regulations, no limits. But, err, can you explain the innovation here? Looks to me that fleecing the masses to suck the wealth up the ladder is an age-old, non-innovative story. Ask the millions of families thrown into the streets through home foreclosures. Because, that's the real story: A multitude is getting impoverished so that a tiny few get very rich. Is this what libertarianism is all about? Do you guys care a wit about your neighbors, or is social Darwinism your MO? And have you noticed that former Federal Reserve Chair Alan Greenspan, who, willingly or not, masterminded the housing bubble and the subprime fiasco, an Ayn Rand admirer and follower, is a well-paid advisor to Paulson & Company? Can't you good people put two and two together? Oh, and you surely are aware that Andrea Mitchell of NBC, MSNBC, CNBC journalist fame is the wife of who else but Alan Greenspan? If you cannot put two and two together, can you compute three and three (Wall Street, government, corporate media)?
INCOME INEQUALITY IN THE U.S. is increasingly being noticed in the main media. Here's an excerpt of Bob Herbert's "Good Jobs Are Where the Money Is" (The New York Times, January 19, 2008):
My colleague at The Times, David Cay Johnston, took a look at income patterns in the U.S. over the past few decades in his new book, "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill)."
From 1980 to 2005 the national economy, adjusted for inflation, more than doubled. (Because of population growth, the actual increase per capita was about 66 percent.) But the average income for the vast majority of Americans actually declined during that period. The standard of living for the average family has improved not because incomes have grown, but because women have gone into the workplace in droves.
The peak income year for the bottom 90 percent of Americans was way back in 1973 -- when the average income per taxpayer (adjusted for inflation) was $33,001. That is nearly $4,000 higher than the average in 2005.
It's incredible but true: 90 percent of the population missed out on the income gains during that long period.
Mr. Johnston does not mince words: "The pattern here is clear. The rich are getting fabulously richer, the vast majority are somewhat worse off, and the bottom half -- for all practical purposes, the poor -- are being savaged by our current economic policies."
IRRATIONAL EXUBERANCE, it is not. These fleecing policies have been incrementally put in place over almost four decades through deregulation (the virtue of the free market!) to very rationally take back all the gains that the working people, the little people, the middle people, had valiantly earned over a century of struggles. The well-being of a nation depends on sharing the pie as widely as possible among the commons. When the widest segments of the comity go up, the entire social structure benefits. It also means that the top of the societal flock gets its wings cut down to a more reasonable size. Then all the boats get lifted, not just a tiny few.
WANT A REAL STIMULUS PACKAGE? Instead of having the fed lower the interest rate, which is nothing more than a Wall Street bailout, and sending rebates of $300 to $1,200 to over 100 million families at a cost of $150 billion that will have to be borrowed, thus adding to our government's staggering $9.15 trillion debt, try this:
1) Immediately repeal the tax cuts to the wealthiest Americans and increase their marginal rate of taxation to 80 or 90 percent. Since, as David Cay Johnston shows, the fiscal policies implemented for the past 30 years -- trickle down economics -- have been an abject failure (except for 1 percent of the population), why not going back to a sounder approach? It would help replenish the US Treasury, alleviate the debt burden, or at the very least contribute to assisting lower-income families in need of temporary relief. By the same token, lower taxes on the bottom 50 percent of the American people and create a Federal Savings Fund that would allow wage earners up to $75 or $100,000 a year to save up to 5 percent of their earnings remunerated at 2 percent over the monthly CPI. Savings would soar and help pay for the necessary long-term investments the country must make to keep the next generations out of Third World status (seriously).
2) Extend unemployment benefits to 12 months. That money would instantaneously be recycled into the economy.
3) Put a moratorium on home foreclosures. Better yet, let families who have been ejected from their homes go back to them. Except for speculators who played housing flip to the hilt, renegotiate a lower monthly payment with those families, whatever they can afford, even if their initial purchase was not financially sound. The benefits of that approach would be multi-tiered. It would stabilize the real estate market quickly, thus plugging the drain on local taxes and stopping the deep reductions in the social services provided by cities and counties, which, in turn, have a domino effect on local economies. It would allow millions of families to avoid either homelessness or bare-bones living in rental quarters. It would substantially lower the losses of lending institutions that are faced with writing down the full value of the less-than-financially-sound loans they made. A few investors and speculators will be hurt. So be it. Put it this way, leaving the blame game aside: Foreclosing in a time of a weak housing market leads to further downward pressures on the entire market. It throws people out of their homes. It has a direct effect on the balance sheet of lenders. It has a negative outcome on local public spending on social services. It snowballs downhill to the entire economy. In other words, if a homeowner can only pay $800 instead of $1,000, or even $1,600 a month, the entire economy is better off both structurally and humanly to take the $800 and forget about the agio that was simple profit in the first place. Profit is lost; structure is maintained. Who gains? Society. Who loses? Investors and speculators, the former being mostly wealthy and able to lick their wounds, the latter taking a well-deserved hit (you don't speculate on people's lives -- well, at least in a humanistic social construct).
WILL THIS DIFFERENT STIMULUS become the order of the day? Want to be kidding, no? This is America, the country where the rich get richer, the poor get poorer (and get blamed for their poverty). No, the fed lowers the interest rate so that the big -- but dwindling -- middle will pay for the losses of the happy few, and the government borrows more money to throw at an already debt-overburden polity so that it can dig a deeper hole. No worries, the "deciders" are all multi-millionaires, from Mrs. Pelosi to Mr. Bush. They intend to stay the course. Makes sense, so long as you are walking in their shoes. Problem is that the overwhelming majority of America does not own golden shoes, yet votes for the golden boys and gals (go Hillary, go; and Obama, and Edwards, and Romney, and, and, and). Go Figure. I can't -- without becoming drastically sarcastic. Life's good. We sink. They prosper. Old story. Let's appreciate the happy times and the good food.
CIAO BELLA: As the floor is falling and the houses disappearing, optimism is in the air for the happy few. In Manhattan, the crème de la crème gather in eating dives like Harry Cipriani on Fifth and 60th where they can start their tribulations with a $19.95 bellini -- a white peach juice with prosecco (sparkling Italian wine) according to Alex Kuczynski of The New York Times, in "Drink, Be Merry and Eat if You Must," January 20, 2008 -- and a baked-cod appetizer for $38.95. Then, patrons can move on to a bland hamburger ($31.95), a veal Milanese ($55.95), a chicken-club sandwich ($27.95), a chicken salad ($28.95), or an aged sirloin for $66.95, among other items on the menu. The cost of wine and spirits the article does not say. What counts, says Alexandra Wentworth, the author of The WASP Cookbook, is that, "When you're in a fancy place that is overpriced and the food is bland, you feel like you've gone back to your elitist roots. . . . Spending a lot of money on bad food is our version of comfort food. It means you're with your tribe. If the tomato aspic costs $50, we feel right at home."
DON'T YOU LOVE the sheer vulgarity and self-contentment of our elites?
. . . . .
Ç'est la vie...
And so it goes...
La vie, friends, is a cheap commodity, but worth maintaining when one can.
Supporting the life line won't hurt you much, but it'll make a heck of a
difference for Swans.