Posted by: michelle2005 | December 14, 2008

“Atlas Shrugged? I Think Not!”

atlas-with-house-on-shoulders-large

Recently the American economy has been assaulted on multiple fronts.  These attacks should have been all too easy to predict had the stewards of industry advanced a modicum of common sense.  To whit, it is reckless to establish an economy that requires people to use increasingly large amounts of credit at the expense of saving.  Notice all the applications from banks one receives in the mail each day, even our dog had one addressed to her.  This is particularly true when the extension of that credit has been accomplished by using the equity in one’s homestead.  Nevertheless, the issuers of said credit (banks) continued to encourage careless practices.  Recall the commercials that explained to viewers that when having  trouble paying the mortgage, or  the boat, the car, and other perhaps even a cottage, the solution could be found by taking out a second mortgage.  Some companies even touted that these individuals “saved” so much money that the recipients of such loans were about to use the excess to build a backyard pool or go on vacation.

 

 

 

In reality we should all have known that the “savings” realized was in the form of lower monthly payments at the expense of increasing debt and much, much longer financial obligations to the banks.  This extension of equity alone would not have been enough to weaken the economy.  Rather this was the first symptom of an even greater disease…greed!

 

 

Conservatives believe that an unbridled free market guided by the “invisible hand” will always benefit society.  As long as money is made, the collective good is being served.  We have all watched the Dow Jones Industrial Average soar to new heights in the past years, in theory everyone should have benefited.  The truth is that thanks to tax cuts that favored the richest 1%, our country has experienced one of the largest income disparities since the 1930’s. ( http://www.cbpp.org)  Jobs that were created in the past eight years paid less, so that the middle-income levels have not increased with respect to those at the top

 

 

 

Now many will say that each person should have the ability to earn, as much they are able.  The creative should not be stifled in their endeavors.  Ayn Rand wrote the novel Atlas Shrugged to emphasize that without an external incentive such as making profit humankind would stagnate.  No one is begrudging the wealthy their due, but the truth is those at the top of the income level do not need more money.  By cutting taxes mostly for the wealthy, while fighting two wars our national debt level has soared.

 

 

 

The solution I have heard, is to cut benefits from those who can ill afford to lose another penny.  Conservative writers have belittled these people since they do not pay federal taxes.  Some writers argue that all individuals should pay taxes, and that the burden should be shifted to the lower income groups.  This becomes the conservatives’ logic, because after all these lower income individuals and families use more of the services, such as Medicaid, food stamps etc.  There is a reason that these people are using Medicaid and food stamps. This due to the fact that their income will not sustain the necessities of life.  Most of the pundits who decry wasteful government spending complain that these people are looking for a handout.  Writers on the National Review Online pointed out a You Tube video of a woman who stated that when President Elect Obama was in office, she would no longer have to worry about paying her bills.   Some interpreted this to mean that the woman was under that impression that the money would flow freely to her.  This is reminiscent of the “welfare queens” driving Cadillacs that many on the right invoked in the early 1980’s.  Today people are struggling with all of their bills.  Contrary to President Bush’s belief that anyone can get healthcare you just go to the emergency room, I know of many families who cannot afford proper medical and dental care, or to send their children to college.   Without a college education, how can one hope to advance out of poverty?   I would encourage people to spend time with the less fortunate before criticizing their way of life. 

 

 

 

 

Today we find the economy needs people to purchase more and more big box items. To grow the economy we need to purchase a new automobile before all the payments have been made on the one we are driving.  Auto dealers encourage people to bring in one’s payment coupon book and trade in their used car. We are bombarded with advertising imploring us to purchase big screen televisions, I-pods, Play Station, Wii, X-box and of course new computers as our old ones become obsolete in less than 5 years.  All these purchases should strain households with incomes below $50,000 given that the mortgage and two cars alone exceeds $2,000 each month.  This does not include groceries, clothing, health insurance, out of pocket health costs, and ever-increasing college tuition.  To be able to pay for all this many have begun to live on credit.  Look, around you everywhere you turn you can now pay for such items as your doctor bill, dental care, groceries, and even fast food with your credit card.  This all works fine as long as credit is available.

 

 

 

 

Now for the sobering reality, in an earlier post I remarked that the sub-prime mortgage market allowed investors to make exorbitant fees, and realize large obscene profits while creating complex new products such as credit defaults swaps.  As long as home prices increased, the market could grow.  However, to continue selling homes and taking more fees lenders decided that they no longer needed valid proof of income.  This became possible since the lender was intending to sell the mortgage to others. The buyers of these poorly rated mortgages would then use complex mathematical formulas to bundle and then slice up these collective mortgages thereby creating higher rated securities.  This bit of prestidigitation would have astonished even the master of escape Houdini. 

 

houdini-upside-down

Now what happens when you lend money to those who do not qualify for a home?  Answer, they are foreclosed and they lose everything that they can’t carry on their backs.  Have you ever heard of the term “Trash Out”.  This is a relatively new term in our vernacular.  Trash out  refers to people who leave all of their possessions behind when they default on their loans.  A company is hired to quickly remove all items and personal effects in each household. They leave no stone unturned, there’s another house waiting.

 

Computers, big screen televisions, appliances, furniture etc.are quickly removed and thrown into a dumpster. 

 

 

 

Finally, as more and more homes are foreclosed, the value of all homes decease and interest rates rise.  As interest rates rise those with adjustable rate mortgages began to feel the pinch and they too begin to default as they are unable to pay the increased mortgage costs.  Eventually the holders of those highly rated securities that are in reality based on mortgages that are being defaulted have found that they do not have a way of valuing these securities.  This uncertainty lead to the dissolution of the venerable investment house  Lehman Brothers and the need for the $700 billion TARP payments.  All  to save the financial industry for their own short sighted stupidity.

 

 

 

Oh, finally yet importantly, credit is much harder to qualify, and people are purchasing less.  If this continues, more people will be out of work as companies will be selling much less.  This whole downward spiral happened because people wanted more and more external incentives. Ayn Rand would have been proud, but what she never saw was that unbridled greed could bring us all down.        

   

 

 

At least my dog won’t get any more credit applications!

 

cowgirl-edited

Michelle

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Responses

  1. As usual, you know what you’re talking about.

    If your dog doesn’t get any more credit applications, how will she buy more cute outfits? 🙂

    SteadyCat,

    When Jenny got that credit card application we almost laughed ourselves silly! I called the credit card company…and I was told they prefered to speak to the person the credit card application was addressd.

    I told the lady that it would be impossible to speak to her as she was asleep in her crate!

    Michelle (**Jenny*** waves at SteadyCat)

  2. I disagree – Ayn Rand did see unbridled greed, It is in-fact all over in her book Atlas Shrugged. Right from Orren Boyel, James Taggart and countless others in the book as against the few who got fed-up and went to the mountain sanctuary where they rebuilt their lives using their abilities and brain.

    Read agin my friend.

    I left a comment for both you and bsand below.

    Michelle

  3. she also said that a honest man knows he can’t consume more than he can produce.
    I agree with anuragashok you need to re-read agin my friend in fact if you just re-read Francisco’s speech about money, that alone shoots down every thing you have said.

    I left a comment for both you and anuragashok below.

    Michelle

  4. […] By cutting taxes mostly for the wealthy, while fighting two wars our national debt level has soared. The solution I have heard, is to cut benefits from those who can ill afford to lose another penny. Conservative writers have belittled …[Continue Reading] […]

  5. Wow amazing not only does anuragashok and bsand both spell again without an i, they also refuse to see the forest for the trees. The larger argument that was presented by Michelle is plainly illustrated; Our economy is based on credit. Greed caused investment houses and lenders to develop exotic new means of producing money. (If you think about this, you know it to be true. You cannot create AAA bonds out of BBB mortgages, with anything less than deception.) From this all credit has been affected, banks are not lending and economy is suffering.

    With regard to Ayn Rand and the understanding that one cannot consume more than one can produce; these are fancy words to dissolve the mind from the reality of greed. A USA today story written in 2002 pointed out how CEOs have dusted off copies of Atlas Shrugged to justify their huge salaries and business practices. http://www.usatoday.com/money/companies/management/2002-09-23-ayn-rand_x.htm

    When a CEO can make in less than 10 minutes what the average worker makes in one year then something is wrong. With regard to the hedge fund managers the top twenty five averaged 890 million and five had incomes of over $1,000,000,000.00. In the end all the words of Ayn Rand does nothing to remove the need for more than extrinsic rewards, self-interest has betrayed us.

    Allan…

    I want to thank you for such a well thought out comment. It appears, however, that two individuals had no clue as to the reasoning behind this particular post.

    Thank you, too, for including the link.

    Michelle

  6. Anuragashok & bsand…

    Just as there are two sides to every coin, you learned fellows, have chosen to look at the road most often traveled. Few who glance at the road less traveled would realize the utopian capitalist society of Any Rand is but a dream. In the real world human nature frequently interferes, and self-interest becomes immoral.

    Michelle

  7. Wonderful post. The two negative comments you received were obviously from two individuals that think the world revolves around them. I can say this with confidence as I at one time read Ayn Rand. Fortunately, I got some sense by the time I reached the age of 30.

  8. I had to read Atlas Shrugged during my first year of college. The main theme of the book was that anyone could make it. Yes, you may have to step on some toes in the process. But, oh well.

    This was not the kind of person I wanted to be. I was very glad when this assignment was over. I laughed when I read the comments that were made applauding this book. The folks that like this sort of thing are out for one thing. Themselves.

    When are you going to do another post on pet care? Thank you for answering my emails, but I still need advice on Chole’s manners around new people.

  9. I know from time to time you’ve said that both you and your husband work together on certain posts. My guess is that he had a hand in this one.

    It was great! You always refer to him as “the greatest guy on the planet”. Sounds to me like after so many years of domestic abuse, it was the Lord that has blessed you.

    The post “The Dog Did It” was hysterical. Has she ever gotten a license to practice medicine?!

  10. Excuse me, but Atlas Shrugged is one of the best books ever written. Your attitude is one of arrogance. Why in the world would you think this was not a book to bring enlightenment to the populace? The answer most likely due to you thinking you’re somehow above others.

    There is nothing wrong with putting yourself first and foremost before others. If you don’t take care of yourself and your own interests, who will?

    Grow up!

  11. Andrea…

    Where shall I begin? I’m not sure I ever addressed the worthiness of the book. I may have need for that later. From the comments I have recieved, “me thinks thou doth protest too much”.

    Amazingly you attack my writing for being elitist, and then proceed to ask “what’s wrong with putting yourself first?” By your standards I have done just that, however you would be quite wrong.
    Since you know nothing of my work, I would suggest that you at least leave time to read my previous posts.

    As for growing up, I have journeyed to more lands and witnessed the suffering of people of whom their only crime was being born. One can’t help by mature while witnessing such injustice.

    Finally my post was with regard to the careless nature of the stewards of our economy. In trying to create something from nothing, they managed to wreak havoc upon our nation. And these were the people who believe in the philosophy that you espouse!

  12. Hi All,

    I guess my dissent has not been welcomed here but I still choose to disagree with the learned friends here.

    I start with the famous saying in the book – “Contradictions do not exist, if you find a contradiction, check your premises and you will find one of them is wrong”

    I have studied Ayn Rand’s philosophy quite deeply and infact if you take what happened in the book and map it with what is happening today, you will see that the results could be the same.

    Our society today, is symptomatic of what is there in the book – There is no contradiction here! The capitalist state of America gravitated towards and became the People’s state of America.

    Now see, all the bailouts et al prove that – It is gravitating towards “to each one according to their needs” and not “to each one according to their abilities.”

    The society portrayed in the book is no different from the one we have today around us. People taking shortcuts to making more money which is not a product of their thinking ability and productive useful work. We all know that unearned money destroys the people who possess it because money only sticks with people who have “earned” it. This I am sure everyone will agree is common sense.

    If we take the situation we have today and accelerate it (fast forward), we will end up where the book took us.

    America was built on the Smart Work of millions of people from diverse background who had freedom, liberty and the environment conducive to creating a great country and a great economy. There were, are and always going to be politicians and greedy people looking for shortcuts and they are the ones who brought the financial systems of the entire world to its knees.
    Lets ask ourselves one question, are there people today in the US who are not affected by this crisis and are still financially secure who were not greedy and worked hard ( I can name many) to earn what they rightly hold? The answer is yes so if they are possible then the hypothesis floated here, which is based on generalization of everything is wrong.

    Now I will tell you a bit about me – I don’t live in America but in India since I was born. I started my career from the street with nothing. I had read Atlas Shrugged when I was in college (and have re-read it many times till I understood it – I still refer to it) and have followed it like a bible. This is a country where in 1980’s there was abject poverty, not much opportunity and everything regulated – the country was poor in the true sense of it. I held my believes and did not create debt, worked hard and used my brain. (I dont cheat and enjoy what I earn “selfishly”). Now am I supposed to be guilty for all those people who did not make it or are still poor – Answer is no. Should I do something for them – Yes, If i desire so. Should I be forced to do so – Answer is no.

    Anuragashok…

    Whether or not we all agree…you are always most welcome here! I enjoyed reading what you had to say. Plus, you came back by and not only left an additional comment… which was both kind and thoughtful.

    I’ve written posts on numerous topics. Some are sure to give you a good laugh.

    Thanks for stopping by again…it’s appreciated!

    Michelle

  13. Anuragashok,

    We can all agree to disagree. I have respect for you and your accomplishments. I would caution you to understand that what works for you (Atlas Shrugged) may be repulsive to others who also produce. There is more than one way to succeed. Some ways are more just. Please note that my comments and Michelle’s column do not reflect you, but rather many, “Captains of the industry” and the so called “masters of the universe” from Wall Street.)

    I must ask you, why is it that when deregulation leads to bank failures those who profess allegiance to the beliefs of Ayn Rand and readers of Atlas Shrugged always claim that these people are the greedy and the corrupt? Maybe they were also the stupid. But these people are also disciples of Ayn Rand, many CEO’s as was noted in the comment use the book to defend a whole host of stupid and misleading practices. Regulation can be thought of as a way to prevent stupidity. ENRON, Lehman Brothers et al may still be standing if proper controls were employed. We can’t always wait for the market to correct itself, otherwise we may loose.

    Michelle’s larger comment was that unregulated self interest contributed to the fall. Continually encouraging people to go deeper and deeper into debt did not help. CEO who follow the words of Ayn Rand now fall back on her words to defend their position.

    Again I applaud your accomplishments, but I would hope that you begin to see that you are but a part of the whole. We are all in this world together.

    During our great depression in the United States not everyone was affected but the those that were brought almost everyone else down. “Brother can you a dime” was heard throughout the land.


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