Tag Archives: middle class

OUT OF TOUCH

Jeb Bush

Following the Republican debate Thursday evening, one newspaper quoted on PBS’ McLaughlin Group observed that Jeb Bush spoke as if he thinks that America’s problems are all psychological and not real at all.   The Bushes have done well and live the dream and can’t understand why others have failed to achieve the same.

On Sunday, reports from Moscow showed a similar problem. President Vladimir Putin, by some accounts now the richest man in the world, thanks to the accumulation of ill-gotten gains, ordered the destruction of 350 tonnes of food from the EU in retaliation for western sanctions on Russia.   Mr. Putin’s decision shows that he is oblivious to the fact that millions of Russians are struggling to feed their families.  40% of Russia’s food was imported before the sanctions were announced.

Jeb Bush and Vladimir Putin aren’t the only two politicians who are out of touch with reality.   It’s difficult, for example, to imagine how Hillary Clinton, who, together with her husband, earned approximately $30 million last year, can possibly claim to represent the middle class.

It’s dangerous when politicians at the top are out of touch with people at the bottom.

In 1789, France’s Queen, Marie Antoinette supposedly said: “Qu’ils mangent de la brioche”—“Let them eat cake.”   That same year, the monarchy was overthrown and, three years later, the hated Marie lost her head to Madame Guillotine.   It wasn’t that simple.   The queen actually did a great deal for the poor through her charitable work and the words she supposedly uttered were recorded over a century earlier, attributed to the Spanish wife of King Louis XIV.

But hungry people don’t care about historical accuracy – they just want to eat.

A lack of food has been a regular cause of revolution throughout history.   In 1917, a bread riot in Petrograd (St. Petersburg) started the revolution that led to the downfall of the 300-year-old Romanov dynasty.   It’s not inconceivable that something similar could happen to Mr. Putin.   Of course, the revolution did not improve the situation – seven decades of communism included many years of famine and regular food shortages even at the best of times.

No nation is exempt.   If billboards in Michigan are to be believed, one in five Michigan children go to bed hungry.

Former presidential candidate Ross Perot warned a few years ago that food stamps are all that stand between us and anarchy – in other words, take away free food for the poor and you could see a revolution in the United States.

In June, 1932, veterans marched on Washington demanding that a bonus they were promised by Congress should be brought forward as, in the midst of the Depression, they could not afford to feed their families.   They built shanty-towns outside of Washington and were determined to stay until Congress met their demands.   President Herbert Hoover sent in troops under the command of General Douglas MacArthur to tear down the camps and send them home.   Reports at the time tell of great hunger amongst the vets and their families, including young children.   President Hoover was seen to be out of touch and uncaring (the shantytowns were dubbed “Hoovervilles”) and lost the election a few months later to Franklin Roosevelt.

Mr. Bush should remember the fate of the last Republican presidential candidate, Mitt Romney, who lost the 2012 election to Mr. Obama.   Mr. Romney was recorded dismissing the “47%” of the electorate who depend on government and who, therefore, were not going to vote for him anyway.

Mr. Romney and Mr. Bush, both claiming to be conservative, should have read a biography of Benjamin Disraeli, the nineteenth century Conservative British prime minister who warned of Britain becoming “two nations,” one rich and the other poor.   He reshaped the Conservative Party to be a party that reached out to the working-man.   If the Republicans are to succeed, they have to do the same, to show how their policies will help improve the life of Joe Citizen.   To do this, they need to distance themselves from Big Business.

They can do it.   The 1896 election was held in the midst of a Great Depression that saw 50% of the people unemployed, at a time when there were no unemployment benefits for those who were out of work.   Understandably, the election saw the highest turnout in American history.   80% of the electorate voted.   The presidential election that year was won by Republican William McKinley.   He promised the people sound money and high tariffs to increase employment at home.   It’s interesting to note that the same issues still prevail.

Left-leaning parties, whether the Democrats in the US or the Labour Party in Britain, do not represent working people.  They are the parties of Big Government, which gives jobs to their supporters, but leads to a rise in taxes.   Those taxes are paid by ordinary people and small businesses, making life harder for the majority of people.

Leaders, and aspiring leaders like Jeb Bush, cannot afford to be out of touch with the common people.   This is especially true in democracies where every citizen has the vote.   Perhaps Mr. Bush and Mr. Putin should copy Britain’s Prince William, who spent the night sleeping on the streets of London to get the feel of homelessness.   At the very least, his gesture showed empathy with the poor, a realization on his part that tens of thousands of people are homeless and unable to take care of themselves.

Only a return to conservative values, including restoration of the traditional family, can help people get out of poverty.   Conservatives everywhere need to convince the voters that they represent them and not Big Business.

They could start by following the example of Menachem Begin, an Israeli conservative and former prime minister.   Mr. Begin spent many years in prison under the Bolsheviks.  Reading a biography of Benjamin Disraeli helped him maintain his sanity and inspired his future conservative course.   Focusing on struggling voters makes more sense than pursuing big business!  After decades of Big Government, people want change.

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STATE OF THE UNION NOT SO GOOD

State of the Union

President Obama’s State of the Union speech, given before Congress late Tuesday, took me back fifty years.

In October 1964, the British people voted into power a Labour (socialist) government after thirteen years of Conservative rule.

Obama’s promises last night reminded me of the Labour government’s agenda.

The theme running through both was this:   government will take care of you, government will provide everything.

Except for a vague tax on the wealthy, nothing was really said about how all these programs will be paid for.

Most people are aware that the wealthy can afford expensive tax accountants who help them to reduce their tax obligations, sometimes down to zero.   Nothing is going to change that.   The president and members of Congress are not about to become paupers because of new taxes – they will find a way around them, just as other wealthy people will do.

Mr. Obama promised more help for the middle class.   The term “middle class” has a different meaning in the US to what it means elsewhere, as Sky News pointed out the following day.   The middle class in the US is mostly working class people who own their own homes and have been struggling to make ends meet for quite some time.   The biggest challenges they face are rising health care costs and falling wages and unemployment.   It’s difficult to see how taxing the rich will help them.

But the promises do provide for a massive expansion of government, which will only add to the burdens of the middle class.

A few days ago, I saw, also on Sky News, a massive fire burning in South Oxfordshire in the UK.   An extensive building was on fire, the result of arson.   The person covering the fire explained that 440 people worked in this building, which served the community in various ways, including housing.   That’s 440 jobs that did not exist seventy years ago – 440 jobs to serve a relatively small number of people in the southern part of one county!

This is what the US is headed for – bigger government programs mean bigger government buildings and bigger (higher) taxes.   If history is any guide, that tax burden will fall mainly on the middle class, the ordinary people who cannot afford expensive accountants to take advantage of the inevitable loopholes.

Government is always expanding.   Here in Michigan, there is a proposal before the electorate to increase the sales tax to pay for road repair.   But it doesn’t seem that long ago that the gas tax was increased to pay for roads.   Meanwhile, the state has had to give $191 million to Detroit to help bail the city out.   An additional high figure (close to $100 million) is being allocated to build a new “Welcome Center” at the Capitol.

It never ends.

That’s exactly what God said when He warned the Israelites what would happen when they asked for a king, for a human form of government like all the other nations, choosing to reject the theocratic government He had given them.

In I Samuel 8:5, the elders of Israel asked Samuel to “make us a king to judge us like all the other nations.”  God granted them their desire, but forewarned them (v. 9) of what to expect, to “show them the behavior of the king who will reign over them.”

In a long and very descriptive passage beginning in verse 11, God showed them how the king would take more and more of their wealth to pay for what he wanted, whether it be soldiers, servants (government employees) or just spending in general.

He concludes with these words:   “And you will cry out in that day because of your king whom you have chosen for yourselves, and the Lord will not hear you in that day” (v. 18).

Of note, here is the expression “your king whom you have chosen.” This passage includes democratically elected presidents, as well as kings.

What it’s saying is that governments inevitably expand.   The more government programs we have, the more money government needs. And, as government is inherently wasteful and generally inept, the burdens on the people grow and grow.   Dissatisfaction with the state of the economy has been evident in the polls for a few years – the people are already crying out!

However, in a democracy, the people only have themselves to blame.

Fortunately, Mr. Obama, a Democrat, is unlikely to find any support for his programs in the Republican controlled Congress.   However, programs already in place continue to grow.   It’s doubtful that even a Republican Congress will be able to reverse them.

The 1964 Labor government in England was a turning point.   Three years after taking office, thanks to their profligacy, the country had to devalue its currency against the dollar.   This led to the collapse of the sterling area, made up of mostly former British colonies that traded in the British currency, a system that meant they kept most of their financial assets in London.   Twelve years later, Britain had to turn to the International Monetary Fund for a bail-out.   It wasn’t until Margaret Thatcher became Prime Minister in 1979 that the country started to turn around.

Mrs. Thatcher believed in sound money, otherwise known as living within your means.   There was no evidence of that Tuesday night when the President addressed the nation in his annual State of the Union address.

LESSONS FROM WEIMAR

Weimar_Republic_1919-1933-300x225

At the birth of the euro, The Economist magazine reminded readers that one of the great lessons of history is that paper money eventually always fails.

That doesn’t just go for the euro – it applies to dollars and pounds, too.

One way it fails is through hyperinflation.

We tend to think that hyperinflation only happens in banana republics like Zimbabwe, Ghana, and Argentina, forgetting that we also like bananas.  It can happen here, too.

It happened in Germany.

After fighting and losing World War One, Germany entered a period known as the Weimar Republic.  Its constitution was written in Weimar, a city 50 miles from Leipzig.

The victorious powers made the great mistake of forcing Germany to pay reparations after the war.  The French, in particular, insisted on their neighbor paying for everything – even invading the German industrial heartland, with assistance from Belgium, in 1922.  If the Germans wouldn’t hand over their wealth, they were simply going to take it!

All the main participants in the war suffered greatly.  This does not include the United States, as America was only a factor in the closing months of the conflict.  The established order in Russia, Germany and Austria-Hungary was overthrown, replaced by chaos and confusion.  Serious financial problems also developed as somebody had to pay for the war.

In most countries it was the working class that had to foot the bill.  In Germany, it was more the middle class.  Successive Weimar administrations – and none of them lasted very long – gave in to the workers’ demands rather than try to enforce fiscal discipline.   Additionally, Germany had the most generous welfare benefits in the world at the time, introduced by Otto von Bismarck in the 1880’s.  Together with reparations, the result was a high rate of inflation.

Hyperinflation is when inflation gets out of control and prices are increasing at more than 50% a month.  Very quickly, that becomes 50% per week, then 75% and 100%.   Eventually, workers have to be paid hourly in wheelbarrows full of money, which then has to be spent quickly before prices go up even further.

Weimar-MArk

The fixed-income middle class, professionals on salaries or pensions, soon suffers.   Skilled workers can often barter their skills for food.  In an attempt to control inflation, mistakes are made – freezing rents, for example, with resultant negative effects.

This was Germany in the early 1920’s.  By 1923, the situation was out of control.

The Downfall of Money explains all this very well.  The book is written by an Englishman named Frederick Taylor.  It shows clearly how World War One led inevitably to World War Two, via hyperinflation and the rise of right-wing parties, culminating in the Nazis coming to power.

When economies collapse, people look for simple solutions – jobs and food are far more important than constitutional niceties and democracy. 

The parallels in the United States and Great Britain today are disturbing.

Our governments are recklessly over-spending, borrowing to excess.  The US is printing an extra $85 billion per month, “quantitative easing” as it’s called.  This is enabling some to take advantage and make a lot of money, while the vast majority is finding it harder and harder to make ends meet.

Part of the justification involved in QE was the fear of deflation after the financial crash of 2008.  The value of homes dropped dramatically in the crash; some commodities have been dropping as the global economy enters a slump.  Deflation is the worst thing that can happen to an economy.  It’s almost impossible to stop the downward spiral.

Hyperinflation is the second worst thing that can happen.  One can lead to the other.  As central banks print money to avoid the one, it can inadvertently get out of control and hyperinflation can take over.

The end result is that almost everybody loses everything!  Those that gain by taking advantage of the situation also lose as the people will turn on them as they did in Germany.

“The Germany of the inflation was paradise for anyone who owed money.”  (The Downfall of Money, by Frederick Taylor, page 206)  A high rate of inflation reduces the amount of debt people owe.  “By the same token, this was a very bad time for creditors of all kinds, for savers, and for investors depending on a fixed return.  That meant large numbers of the old German middle and upper middle classes suffered a drastic, even catastrophic, fall in their standard of living.” Appropriately, chapter 21 of the book is titled:  “The Starving Billionaires.”

Inflation is not something new.  The prophet Haggai wrote about it 2,500 years ago.

“You have sown much, and bring in little; you eat, but you have not enough; you drink, but you are not filled with drink; you clothe yourselves, but no one is warm; and he that earns wages earns wages to put it into a bag with holes.”  (Haggai 1:6)

We all hope that hyperinflation is not the consequence of over-spending by the US, UK and other governments.  But it’s difficult to see how it can be avoided.  It seems as if the only way we can create greater wealth today is by printing more money – a recipe for inflation.  In turn, inflation can quickly get out of control, soon turning into hyperinflation.

It can all happen very quickly as it did in Zimbabwe a few years ago and in Germany in the 1920’s.

A spiritual lesson we should remember in these turbulent times is found in Matthew 6:19-21:  “Lay not up for yourselves treasures upon earth, where moth and rust does corrupt, and where thieves break through and steal.  But lay up for yourselves treasures in heaven, where neither moth nor rust does corrupt, and where thieves do not break through nor steal.  For where your treasure is, there will your heart be also.”

The Economist was correct with its warning of all currencies eventually collapsing.  It’s only a matter of time.  The accumulation of wealth may seem important, but clearly we need to be prepared for losing it all as did millions in Germany.  As Jesus Christ pointed out, treasures in heaven are more important and more reliable than treasures on earth!