Sunday :: Aug 3, 2008

Paying for the Party

by Mary

Ian Welsh's piece this weekend is a real kicker and he predicts a deadly downward spiral as the trends in the economy continue. It's a sobering read. He ends with some specific advice that taxpayers need to take to heart:

First of all, remember the iron law: TANSTAAFL. There ain't no such thing as a free lunch. Every time the Treasury, or Congress, or the Fed bails out some bank or Wall Street or a GSE or someone else remember that it's your money they're using. Every cent they spend making sure that no financial executive who made millions isn't left behind, is a cent they won't be spending on anything else you care about, and since it's a cent paid for with deficit money, it's a cent (or, oh, a trillion or two trillion dollars) that you're going to have to pay for. And fundamentally, it's being used to bail out executives who awarded themselves multi-million dollar bonuses for years while running their companies into bankruptcy.

Second, on a personal level—get debt free. Make sure you are on good terms with your spouse, your family and your neighbors. Make sure your friendship circle is healthy. Consider trying to make your home as energy independent as possible or even putting in some energy production (brownouts are going to be more common going forward). Reduce expenses. If you're in a position to make money right now, do so, because pretty soon you may not be able to. Create a garden if you can (even apartments can have small gardens.) I prefer not to give financial advice, but I will say this: if you live in the US, work in the US, get paid in US dollars, you have more than enough financial exposure to the US. That said, in a real general global downturn there are no obvious safe places to put your money, which is why I recommend the non-financial steps above (especially making sure your marriage is happy. Really. Nothing is worse for your finances than breaking up.)

Third—on a political and social level. Get involved. Get your voice heard at the local level. Be active. There are going to be a lot of people who want to balance the budget squarely on the shoulders of the poor and middle class, who are going to, like Mish, decide that if you need a heart transplant and you can't afford one, you should die. Outside of die-hard libertarians everyone knows that tax rates are going to go up significantly to pay for the drunken spending and shooting spree of the last eight years, and to bail out all the executives who made themselves rich by driving the economy and their companies into the gutter. The rule here is the same as in poker—if you don't know who the sucker is, it's you. And since you, yes you, have been the sucker for the last thirty years, in which time ordinary wage earners haven't had a single pay increase in real terms, while the rich have increased their income and wealth to gilded age levels, odds are you are the sucker. The rich took the money, but they don't intend to get stuck with the bill.

Nouriel Roubini lays out why the real cost of all the bad debt is going to be closer to 2 Trillion dollars and he says we suffering the worst financial crisis since the Great Depression.

Talking about the super-rich, it looks like they are definitely planning to hold on to their share.

Super-Rich Tax Cheats -- they hide an estimated $100 billion a year from the IRS, but now the U.S. Senate is turning up the heat on offshore tax havens. The man who ratted out some of these tax dodgers now lives in hiding and has a $10 million bounty on his head. This is a story straight out of our new Gilded Age -- one of billionaires, foreign bankers, corruption, secrecy and, of course, greed.

Better hold on to your wallets, folks.

Mary :: 5:22 PM :: Comments (8) :: Digg It!