Infinite Debt

harpercoverIf you’re anywhere near a newsstand this weekend, look for the April issue of Harper‘s. I scanned in a photo of the cover. There’s an article in it by Thomas Geoghegan called “Infinite Debt” that’s a must read. As in must. read.

It’s a long and complex article, but Geoghegan makes a case that the financial sector has been sucking the life out of the economy. There’s a huge imbalance between finance and industry. Money has been going into financial instruments, not manufacturing. Consumer debt plays a part in this mess also.

Here’s a snip:

What is history, really, but a turf war between manufacturing, labor and the banks? In the United States, we shrank manufacturing. We got rid of labor. Now it’s just the banks.

Which is why the middle class is shrinking. Basically, we’re all waiters now; we’re bowing and scraping and working for the banks. Look closely at any American, and it’s even odds that he or she, directly or indirectly, is somehow employed by the “financial services sector,” which covers insurance and real estate and financial instruments of any kind. As brokers, lawyers, loan collectors, loan consolidators, secretaries at big investment firms, chauffeurs of private limousines, or even the high-tech types who exist solely to service banks — all of us, millions of us, are part of it, living off it in some way, as three generations ago we lived off manufacturers.

10 thoughts on “Infinite Debt

  1. Very interesting. But Obama does not seem willing to challenge them. He is relying financial industry advocates for guidance. Where is the team of rivals and proponents of opposing ideas? He administration seems overly steeped in the status quo to me.

  2. Yes, and the insurance “industry” is part of the banker scheme.
    No insurance: no work, no driving, no playing in anything.A trip to the emergency room? “who’s your insurance carrier?”Want to hold a ralley or gathering? Need a permit and insurance………
    Get pulled over by a cop? “proof of insurance please!”
    And the insurance companies have the power to audit clients.
    In Florida, a working person MUST secure an occupational license if they want to do work on their own. A requirement for the license is to have general liability insurance, and either a workman’s comp policy, or a certificate of exemption WHICH YOU PAY FOR. If you choose to do construction work, anything “structural” in nature ( the definitation varies county to county) may require a contractor’s license.
    Due to the economic “downturn”, the State has announced a “crack down” on unlicensed contracting. This means that a whole bunch of people struggling to make ends meet by hanging doors, replacing windows, or repairing driveways, etc. (which in my younger days many tradesmen did as “side jobs” on Saturday)
    could land you in jail.
    In other words, the Banksters want their 10% from everything,
    Each time the bunny exhales, the python tightens his coils.
    Here’s something to ponder….
    Were Ivan Boeski, Michael Milken,Marc Rich, and Bernie Madoff required to carry insurance to protect their clients?
    Are politicians required to carry general liability insurance to protect those the “serve”?
    Are politicians, bankers, and insurance executives required to pass drug tests and backround checks?
    I believe it was Don Henley that wrote “a man with a brief case can steal more money than any man with a gun”
    (crap, I’m begining to sound like a libertarian………)

  3. erinyes,
    It’s ok, relax. We all get like that sometimes.
    Take two aspirin and, wait, I have to ask this before I even make the recommendation, sorry… Uhm, you DO have an aspirin-taking license, don’t you?

  4. Don Henley borrowed that line from Woody Guthrie!

    “Yes, as through this world I’ve wandered I’ve seen lots of funny men; Some will rob you with a six-gun, And some with a fountain pen”

  5. I believe the banks taking fees out of unemployment checks are just one more example of how individuals have to spend their money in banking instead of manufacturing or even basic survival.

    I know someone with a 25% interest rate on a credit card. It sounds like she could do as well with a loan shark to me. I try to stay away from credit cards. That is the only thing that has saved me, but the amount she pays in interest could be more she spent on products if she had it.

    I do have to deal with insurance companies often and they are worse than the banks. My son wrecked his bike and they took him by ambulance to the hospital for cuts and a thumb injury that required an ace bandage. The insurance company denied it because he didn’t call them first? The list of times they just deny things is too long to go into, but they just take the payments and look for ways of getting out of giving it out.


  6. I’m reminded of that brilliant old Simpsons episode, “Hurricane Neddy,” in which hurricane-force winds destroy only one house on Evergreen Terrace: the home of the extremely religious Flanders family. After the storm abates, Ned, Maude, Rod and Todd are left with nothing but a pile of sticks. “Don’t you have insurance?” Marge Simpson asks. “No,” says Maude Flanders sheepishly. “Ned thinks it’s a form of gambling.”

    As I’ve mentioned before, I work (not entirely by choice, but it keeps me from being homeless and hungry) for a small, regional property & casualty insurance company. My “day job” is to recover our claim payments, and our insureds’ deductibles and out-of-pocket expenses, from third parties whose negligence or crime caused the loss.

    SCENARIO 1. Marge Simpson is stopped at a red light in her 6-year-old station wagon, when she’s rear-ended by Lindsey Nagel driving a huge, heavy Canyonero SUV going 35 mph, and looking down while texting on a cellphone. Lindsey Nagel has no insurance. The Simpsons don’t have Collision coverage on Marge’s car, but she does have $5,000.00 in Medical coverage, which is quickly used up by the ER treatment, an MRI and physical therapy. Marge’s Uninsured Motorist coverage eventually pays all her med bills (plus her salary as a part-time realtor, for when she couldn’t go to work). Through an attorney, the Simpsons’ insurance company goes after Lindsey Nagel to recover the Medical and UM payments, and Marge is able to include the cost of her totaled sedan in the lawsuit. The attorney gets a judgment against Ms. Nagel, and garnishes part of her wages, so that a little of the judgment is recovered each month for a long time. (The company where I work makes sure our insured, not the company, recovers their loss first. It may be years before the company recovers anything, but our insured is spared a financial disaster.)

    SCENARIO 2: The Wiggums family has scrimped and saved for 5 years and is finally getting a new roof on their house. The roofer has torn off all the old shingles, and is in the midst of nailing down the underlayer of tar paper when he gets a cellphone call: he has to go take his kid, Milhouse, to the emergency room. He leaves his summer temps Jimbo and Kearny in charge, and they finish the underlayer but forget to cover the roof with a plastic tarp. That night, it rains heavily, and the inside of the Wiggumses’ house is soaked– ceiling, walls, carpet, furniture, clothing, Sara Wiggums’ beloved vinyl-album collection. Sara inherited the house from her grandparents, there’s no mortgage on it, and the Wiggumses don’t have homeowners insurance because they just can’t afford it. So they turn in a claim to the roofer, who has liability insurance through a major national company. The company pays 100% for cleanup and repairs, and actual cash value on the Wiggumses’ personal property. Their mess gets cleaned up; the roofer stays in business; no lawyers are involved. And yes, the roofer’s liability premium rates go up. It’s the price one pays for hiring idiots.

    So Ned Flanders actually had it backwards– going without insurance is a form of gambling.

    Considering all the variations on Scenario 1 that I see day in and day out, I’m glad when somebody loses their driver’s license because they were driving around uninsured and “gambling” that they wouldn’t run a red light and seriously injure someone. I’ve seen hundreds of variations on Scenario 2, as well. If service people are required to carry liability insurance before they tinker with your plumbing, work on your one and only car, or strip the roof off your house, well, Neddy, that’s a regulation against gambling.

    And I need to be absolutely clear: health insurance and property/casualty (including auto) insurance are completely different industries. I still see confusion on that point sometimes. They involve different companies, are under different regulations, and are subject to different market forces.

  7. Joan, I understand your view, my wife works for a large insurance co.
    We have discussions around this issue frequently, and MOST of the time I agree with her point of view, I’m certainlt NOT in favor of people driving around without auto insurance, contracting firms without Liability or worker’s comp, etc. My complaint is that it is a REQUIREMENT to carry insurance in areas beyond the obvious areas I mentioned, NOT an elective.The worker’s comp issue(FL.) is one main gripe, and the fact that everyone is on a data base, cross referencing is now at Orwellian levels.

  8. A couple comments. I follow Tom Gleason, who is largely unknown, but writes a free financial newsletter that I respect. He comes down pretty hard on both the Republicans and the Democrats. In the recent issue (you’ll need the latest Adobe Reader), he has some interesting prose and graphs to show the growth of the national debt of the last 30 or so years. Reagan made the decision to turn us into a debtor nation; Bush accelerated this, and Obama plans to accelerate it even further. Gleason is pretty level headed, but the stuff he writes is downright scary.

    I had a chance to talk with somebody from England recently. Their financial situation is worse than ours, because, he claims, even moreso than the US, they let their manufacturing base go. And so all they had, more or less, was the financial industry.

    Haven’t yet seen the Harper’s article.

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