Different, Yes, From You and Me

How screwed up is it? How far off balance have we gone? Well, consider what Lady, the owner of the café where I write, told me today.

“I’m so angry I could spit. I told him I had the money, and I told him it wasn’t a gift: it’s for all the stuff he’s done for us that we never paid him for, since he never charged us. So when his back window got smashed on his car—parked right outside of your house, by the way—he didn’t have the 200 bucks to get his car fixed. So what did he do? He pawned his computer, and now it’ll cost him $250 to get his computer back….”

This guy is a hard worker, an unfailingly cheerful worker, who’s somewhere in his mid-fifties. And he doesn’t have $200 to fix his car? He has no savings?

“Well, he’s not the only one,” said Lady, “there’s Julio, who lives day to day as well. And then, María…”

Names changed to protect the…impoverished.

Then it occurred to me. Just as New York had the “broken windows’ theory,” Puerto Rico has the broken tooth theory. For it’s hardly uncommon to see an attractive, well-dressed person driving a respectable car. But when he or she smiles? There are one or two gaps amid the teeth.

A dental implant costs about $2000, and no, not even the best plan covers it. And what is our personal savings rate? Well, in seventies years, it’s never been positive: in 2000, it was –3.2. And for the States? As of July 2014, it was 5.3. That’s still pretty bad, but at least it’s positive—however weakly.

What I didn’t know, until I began watching the YouTube clip below from the BBC, is that London has experienced its biggest increase in super wealth since the Industrial Revolution. The difference? As I understand it, the Industrial Revolution created new products and, especially, new ways of making old products. OK—so furniture for the first time was mass-produced. Not so good for Mr. Chippendale, but great for the farmers who became factory workers and who could, often, buy furniture at a reasonable price. In short, the Victorians had figured out a way to—sorry about this—make the pie bigger.

And now we have a new breed—not super but perhaps über-rich. And has all that lovely money trickled down to us? Well, in one of the luxury estates shown in the film, there are no less than five swimming pools, which has to argue that Mr. or Mrs. Gotrocks is paying a chunk of money for pool maintenance. But beyond the maids and domestic help and private pilots—is anybody else benefitting? A Carnegie or a Mellon created thousands of well paid jobs—are these new moguls doing the same?

Short answer—no. They are playing around with money, taking advantage of an interest rate held artificially low by the Federal Reserve Board, buying up distressed assets from the financial crisis of the last few years. Consider this, from The New York Times:

 The average home in Ferguson sold for $45,032 last year, up from a low of $28,499 in 2011, but still only about half the average price for a home when the market peaked in 2006, according to RealtyTrac, a company that monitors housing sales and foreclosures. Ferguson’s slow recovery has created an opening for dozens of investment firms, flush with cash, to descend, buy up homes and rent them to mostly low-income residents. The firms account for roughly a quarter of home purchases in Ferguson, according to RealtyTrac.   

Yes—this is Ferguson, Missouri, the site of the killing of Michael Brown. Certainly a crime, however it seems to have gone unpunished. But can anyone out there tell me why it’s OK to create a housing bubble, sell inflated mortgages to anyone with a pulse, crash the market, foreclose on a zillion people, and then buy all those foreclosed houses at rock-bottom rates and rent them to the people foreclosed on? Is it legal? Probably. Is it fair?

Well, well—that all started me off thinking: what are our favorites bastards—David and Charles Koch—up to now? And I could probably tell you, if the documentary, “Citizen Koch” that had been commissioned in part by PBS hadn’t been yanked by PBS. So I headed off to YouTube—always a fount of dubiously-copyrighted material—to see if I could see it there. Nope! So I invested the 4 dollars of so and rented it in a streaming version from Amazon. If you have four dollars, and can stand to cavort in bed with the enemy, it’s well worth it.

The real question is—why Wisconsin? Because Citizen Koch is less about the Koch brothers than it is about how Citizens United—which allows unlimited money from corporations to be reported anonymously to political campaigns—has completely altered the political landscape of Wisconsin. Which left me wondering—why? Why did the Koch brothers and their ilk single out Wisconsin? Weren’t there bigger fish to fry?

Run over to Wikipedia, and there you’ll find it: Koch has manufacturing in a score of states, operates Georgia-Pacific (which makes “Brawny” brand paper towels), has a cattle company, owns pipelines, fertilizers in the US, Canada, Trinidad and Tobago, as well as Venezuela. In short, Koch Industries operates in Wisconsin, but hardly to such an extent that it would invest the kind of money it has.  So what was the big deal?

I can only conclude one thing, which I cheerfully filch from Isthmus:

 I was aware of Wisconsin's frac sand mining boom. The number of permitted or operational mines and processing facilities rose from 10 in 2010 to 130 this year. Nearly 100 more mines and facilities are proposed or under development.

Later on in the article, you come to this:

On geological survey maps, the world's best frac sand stands out as a brown swipe down the western third of the state.

So why did the Koch’s invest so heavily in Wisconsin? Well, for all the paper products, cattle, commodities trading—what is Koch’s core business? My guess—since it started as a petroleum company—is that the apple hasn’t fallen far from the tree. So what do we have?

A house built on sand.

Think it will stand?