Governments used to talk of providing ‘safety nets’ for citizens in trouble. That meant offering assistance to people on the margins of society. A man who lost his job would get unemployment compensation. One who was injured would get workman’s comp. Poor people were offered food stamps...and surplus food from government farm support programs.
Now, the feds offer a safety net for people with money – a kind of rich man’s Marxism – in the form of protection against financial losses.
On August 17th, U.S. stocks were selling at just 8.25% below their all-time high. Yet, the rich were already bellowing for a bailout. And along came the Fed with a cut in the discount rate. According to Fortune Magazine, the Fed also bent its rules to help two major banks – Citigroup (NYSE: C ) and Bank of America (NYSE: BAC ).
So great was investors’ confidence in these rescue efforts that it was soon back business as usual on Wall Street. Stocks seemed to be on the road to recovery last week – with another solid increase on Friday. The yield on the 30-year Treasury bond is back at 4.89%. Gold has returned to $677. The dollar is falling again.
We can now announce with confidence that ‘all is well.’
The logic of the safety net – whether used to catch a poor man or a rich one – is that whatever mess you’ve gotten yourself into, someone else pays for it. You forget to save money...you lose your job; bingo...someone else provides emergency assistance. During the ’70s and ’80s, Americans began to realize that providing unlimited assistance to the poor had its drawbacks; many people actually seemed to prefer a life of easy poverty to a life of hard work. Many were ‘hooked’ on public assistance, with several generations of welfare recipients in a single family. We recall, in the early ’80s, asking a young woman in the ghetto of Baltimore what she did for a living.
“I get a check,” was her reply.
Poor thing. She never knew the pleasure and pride of a job well done. She never enjoyed the boost to her confidence and self-esteem that minimum wage employment can give.
Later, the Reagan administration reformed the welfare system. We don’t know if it did any good or not; but people stopped getting so many checks...and stopped talking about it. Now what they are talking about is the safety nets for the rich – and everyone is in favor of them. So far, we’ve seen the central bank act with remarkable speed to help bankers, speculators and hedge fund managers. Stockholders have been given a boost too. And if the housing slump worsens, government will probably rush out some safety nets for homeowners.
Now, capitalists, proles, and the bourgeoisie all get checks. Is that progress...or what?
“The whole secret to the rental business is getting good tenants,” said a man sitting opposite us on Saturday night. The affair was a celebration of a neighbor’s 40th wedding anniversary. He invited about 100 people to dinner to mark the occasion.
“I was a car salesman,” continued our dinner companion. “Actually, I worked my way up so that I was in charge of marketing Renault cars in Toulouse. It was a good job. I loved it. And I was very good at it. So I won about a dozen trips. You know, incentive bonuses. On one of them I got a trip to Florida. What a great time! We went to Cape Canaveral...and toured around the whole state.
“But when I was 55, Renault decided to cut back its sales staff; so they offered me such a nice early retirement, I couldn’t refuse. And then, I began to buy up houses in the Toulouse area. It’s a great city...the center of research and the aeronautical industry in France. And the second biggest student population after Paris.
“I realized that you had to get good tenants. Otherwise, they damage your place...or they miss payments. All it takes is one missed payment per year and your revenue goes from plus to minus. Each month’s rent is 8% of annual revenue. So if you’re running at 8% positive yield and a renter misses a payment, your profit for the year is erased.
“Obviously, you try to build a few missed payments – and vacancies – into your figures. But if you can eliminate them...with no vacancies...and no problems from tenants...then you can operate more efficiently and more profitably...and you can acquire more property.
“So, all I did was to ask more questions. I want to see bank statements. I want guarantees. I want cancelled checks. I want tax returns. I check references. I always meet the people. And if I don’t like them, I don’t rent to them.
“It’s work...but I’m retired. I enjoy it. And it pays off...
“Well...it paid off so well that the French tax authorities came after me. They’re awful. I think they monitor my bank accounts, because they seem to know a lot more than they should. And they tax me so heavily that I wonder why I bother. Now, at my age, all I’m trying to do is to build up some wealth so I can pass it on to my children. But it’s very hard to do. They take so much away...
“I let my daughter live in one of my apartments, for example. They claimed that I would have to pay tax on the amount of money that the apartment should rent for. I told them to ‘drop dead.’ But of course, they always have the last word.
“I think France is headed for ruin. People with ambition...rich people...and young people...are all leaving the country. And I’d leave too if I were younger.”
Now, the feds offer a safety net for people with money – a kind of rich man’s Marxism – in the form of protection against financial losses.
On August 17th, U.S. stocks were selling at just 8.25% below their all-time high. Yet, the rich were already bellowing for a bailout. And along came the Fed with a cut in the discount rate. According to Fortune Magazine, the Fed also bent its rules to help two major banks – Citigroup (NYSE: C ) and Bank of America (NYSE: BAC ).
So great was investors’ confidence in these rescue efforts that it was soon back business as usual on Wall Street. Stocks seemed to be on the road to recovery last week – with another solid increase on Friday. The yield on the 30-year Treasury bond is back at 4.89%. Gold has returned to $677. The dollar is falling again.
We can now announce with confidence that ‘all is well.’
The logic of the safety net – whether used to catch a poor man or a rich one – is that whatever mess you’ve gotten yourself into, someone else pays for it. You forget to save money...you lose your job; bingo...someone else provides emergency assistance. During the ’70s and ’80s, Americans began to realize that providing unlimited assistance to the poor had its drawbacks; many people actually seemed to prefer a life of easy poverty to a life of hard work. Many were ‘hooked’ on public assistance, with several generations of welfare recipients in a single family. We recall, in the early ’80s, asking a young woman in the ghetto of Baltimore what she did for a living.
“I get a check,” was her reply.
Poor thing. She never knew the pleasure and pride of a job well done. She never enjoyed the boost to her confidence and self-esteem that minimum wage employment can give.
Later, the Reagan administration reformed the welfare system. We don’t know if it did any good or not; but people stopped getting so many checks...and stopped talking about it. Now what they are talking about is the safety nets for the rich – and everyone is in favor of them. So far, we’ve seen the central bank act with remarkable speed to help bankers, speculators and hedge fund managers. Stockholders have been given a boost too. And if the housing slump worsens, government will probably rush out some safety nets for homeowners.
Now, capitalists, proles, and the bourgeoisie all get checks. Is that progress...or what?
“The whole secret to the rental business is getting good tenants,” said a man sitting opposite us on Saturday night. The affair was a celebration of a neighbor’s 40th wedding anniversary. He invited about 100 people to dinner to mark the occasion.
“I was a car salesman,” continued our dinner companion. “Actually, I worked my way up so that I was in charge of marketing Renault cars in Toulouse. It was a good job. I loved it. And I was very good at it. So I won about a dozen trips. You know, incentive bonuses. On one of them I got a trip to Florida. What a great time! We went to Cape Canaveral...and toured around the whole state.
“But when I was 55, Renault decided to cut back its sales staff; so they offered me such a nice early retirement, I couldn’t refuse. And then, I began to buy up houses in the Toulouse area. It’s a great city...the center of research and the aeronautical industry in France. And the second biggest student population after Paris.
“I realized that you had to get good tenants. Otherwise, they damage your place...or they miss payments. All it takes is one missed payment per year and your revenue goes from plus to minus. Each month’s rent is 8% of annual revenue. So if you’re running at 8% positive yield and a renter misses a payment, your profit for the year is erased.
“Obviously, you try to build a few missed payments – and vacancies – into your figures. But if you can eliminate them...with no vacancies...and no problems from tenants...then you can operate more efficiently and more profitably...and you can acquire more property.
“So, all I did was to ask more questions. I want to see bank statements. I want guarantees. I want cancelled checks. I want tax returns. I check references. I always meet the people. And if I don’t like them, I don’t rent to them.
“It’s work...but I’m retired. I enjoy it. And it pays off...
“Well...it paid off so well that the French tax authorities came after me. They’re awful. I think they monitor my bank accounts, because they seem to know a lot more than they should. And they tax me so heavily that I wonder why I bother. Now, at my age, all I’m trying to do is to build up some wealth so I can pass it on to my children. But it’s very hard to do. They take so much away...
“I let my daughter live in one of my apartments, for example. They claimed that I would have to pay tax on the amount of money that the apartment should rent for. I told them to ‘drop dead.’ But of course, they always have the last word.
“I think France is headed for ruin. People with ambition...rich people...and young people...are all leaving the country. And I’d leave too if I were younger.”
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