Financial Resource

I had an “a-ha” moment the other day!  I suddenly realized why the government might be allowing the debt to skyrocket. But I will get to that soon.  First…

It’s becoming more well known that elements of the US government and US big business have been involved in stealing large amounts of money from the American middle class.  Before I begin writing about Social Security, left me outline theft from the middle class.

This article of mine mentioned the thousands of comments demonstrating public outrage over the SEC’s refusal to stop financial institutions from engaging in theft.  Institutions were stealing money directly from investors, through the issuance of massive numbers of counterfeit shares.  The SEC allowed this to occur for many years.

Lately, I had been thinking that there were few remaining areas from which the criminal elites could plunder middle class wealth.  I believe that the middle class (and in some cases the upper and lower classes) have had money directly stolen from them in the following areas:

THEFT FROM AMERICANS

1)Gasoline: You could argue that there’s been enormous theft resulting from criminals illegally raising the price of oil (which leads to higher gasoline prices). There is substantial evidence of this; however, I will analyse this in a future article.

If gasoline prices are, say, 50% higher than they would be if the market was fair, and if a typical American spends, say, ,000 a year on gas, then the extra ,000 spent as a result of criminally high prices (meaning one spends ,000 instead of ,000 annually) results in theft of about 0 billion from Americans from criminal gasoline related action alone!

2)Higher retail prices: Although I haven’t extensively investigated this, I think it’s reasonable to assume that big business has probably been charging higher prices for their products since the 2007-2009 recession. One reportdid suggest that 2010 prices have been rising quicker than inflation:

“Holiday spending reached the highest level on record last year, but that news isn’t as good as it sounds.”

“Although inflation has been tame over the past few years, holiday spending would have had to clear 8 billion to signify spending was back to pre-recession levels.”

How is it that retailers have apparently been able to raise prices?  After all, even though the recession is officially over, the economy is still in the dumps!  If it wasn’t for the artificial boost to GDP that has resulted from government borrowing, the economy would appear to be in far worse shape! (And that is its actual condition, since borrowing can eliminate every single recession by simply pumping in more money to produce more GDP!”)

That fact that retailers are apparently raising prices at a rate quicker than some of their costs are rising (inflation) is perhaps more astonishing given this:  People’s recessionary shift from buying at higher priced stores to buying at lower priced stores, like dollar stores and WalMart (although that shift in habits may have begun to reverse, which would negate some or all of this paragraph’s argument).

Rather, perhaps Walmart and dollar stores are some of the businesses that are actually also raising their prices at a high rate?  Just because their final prices are lower than their competition doesn’t mean they can’t raise their prices at rates higher than inflation (or their competition’s rates).

Regardless of which US businesses are the culprits, what accounts for this apparent overall phenomenon of disproportionately higher prices being charged by big business?

Well, this is my theory:  I believe that so many small businesses have failed and gone bankrupt during the recession, that big businesses now have far fewer competitors post-recession as compared to pre-recession!

And when you have less competition, you can charge higher prices, everything else being equal.  It’s simple supply and demand.

This brings me back to my initial assumption:  that prices are rising.

One reason I didn’t do an extensive investigation to confirm that prices have been rising is because it would be expected that prices would rise more than they would otherwise, resulting from the above mentioned change in supply:  Since small businesses have been hit disproportionately hard during the recession; it means that big businesses have less competition and it’s to be expected that they would be raising prices at a rate greater than their costs are raising and greater than they otherwise would.  (Small businesses have been hit hard in a variety of ways:  When consumers spend less, they are more likely to reduce spending at the small businesses who charge more due to higher costs, and consumers tend to gravitate to big businesses that have lower costs and can charge less.  When the credit crunch occurred and lending froze, many small businesses were out of luck, while large businesses were more likely to have enough cash to weather the lending freeze, and some businesses were able to borrow from the government instead!)

So, why do I consider the price raises to be considered criminal theft?  Well, I don’t consider them to be direct criminal theft, at least in most cases.  I believe it’s indirect criminal theft:  because criminal actions led to the theft of wealth from investors, a high unemployment rate and less retail spending, it led to more small business failures; therefore, the criminal actions eventually contributed to small businesses failing.  As a result, big business has less competition and raises prices, indirectly benefiting from the criminal actions that started the recession!

3)Home Prices:  there is no doubt that home prices were artificially and criminally high as a result of loans given to people that weren’t actually qualified.  Because there were more people buying homes than there should’ve been, more people bid for homes and bid prices up.

Now, it is true that wealthy criminals also suffered from the housing downturn, and in fact they initially probably lost a greater dollar value than the middle class did, in absolute terms.  However, in respect of the housing related criminal actions, I believe it’s likely that the wealthy criminals will still end up having benefited in the long term.

In the short term, their criminal actions results in a starting advantage, resulting from the fees they earned on illegal mortgage transactions and artificially high prices.  They then suffered a loss in their home’s value that was greater than the middle class suffered, but the middle class was more likely to be forced to foreclose as a result of the decreased home value and greater subsequent unemployment (foreclosure means a complete loss of their investment, since one loses all of the money they’ve paid on their mortgage when the bank takes over the home).

Also, the wealthy criminals were more likely than the middle class to be able to buy a second home at their newly depressed prices, positioning them to be able to profit in the long term if home prices rise.  The second home could also provide them with immediate revenue by renting the homes out to people (and you’d think there might be even more demand for that these days, pushing up rental prices, given the huge numbers of people that have foreclosed on homes and been forced to become renters again!)  In fact, the Census stats from Q4 2010 show a large increase in the number of housing units that are being rented: a one million unit increase from 37 million to 38 million!

However, some of the middle class victims may have been able to actually benefit, in one sense at least, from foreclosure, by being able to simply walk away from the home.  By doing that, although they lost their entire investment in the mortgage, they have avoided paying the difference between the home’s new lowered price and the original mortgage value. Although mortgage holders have benefited in this regard, remember that they haven’t actually benefited by an amount that you might think they’ve saved, because their original mortgage value was artificially high in the first place!

It would probably take a complex analysis in order to estimate whether the advantages homeowners enjoyed by being able to walk away from their mortgage would outweigh the costs they suffered when they paid artificially high commissions and housing transaction fees that they otherwise wouldn’t have, since they shouldn’t have been sold the home in the first place!

Also, even if the middle class had an advantage when looking only at their ability to walk away from the mortgage, certainly not all walked away from their mortgage, and I would venture that most didn’t.

Also, even if homeowners did enjoy an initial advantage resulting from being able to walk away from their mortgage debt, there are two more costs resulting from having walked away:  1) A lower credit score (which likely resulted in their paying higher interest on some existing loans, difficulty getting new loans, and prevented them from buying a home again anytime soon);  2) Money lost by being forced to rent a home, meaning none of their monthly payment is going towards an actual investment!

4)The stock market:  Widespread theft from the investments of the middle class has been well documented, I don’t need to investigation it here.  Needless to say, Deep Capture provides numerous articles confirming the theft; here’s a good article of theirs outlining the massive amount of theft resulting from sales of counterfeit shares.

5)  Free trade agreements:  If free trade agreements have led to greater ability of big business to fire American workers and

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