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The Fire Bell in the Night and Our Real Terror

While We Debate Reverend Wright, the Economy Goes to Hell

Danny Schechter

New York, May Day: Thomas Jefferson used a phrase in a letter that is still ringing all these years later. Here's his thought, a candidate for "THE WORD," segment on the Colbert Report;

"I had for a long time ceased to read the newspapers or pay any attention to public affairs, confident they were in good hands, and content to be a passenger in our bark to the shore from which I am not distant, but this momentous question like A FIRE BELL IN THE NIGHT (caps mine), awakened and filled me with terror."

So many of us were content like that in the years leading up to the slow motion crash that rocked our economy in August 2007, and many still remain comatose like that today.

We were, all too many of us, confident also that we were "in good hands." On May 2, just a year ago, our President told America's general contractors -- so many of whom are out of work today -- "we're proving that pro-growth economic policies with fiscal discipline can work. And our budgets are shrinking [sic]. The best way to keep them shrinking is keep the economy growing and be wise about -- and setting priorities with your money."

There was a fire bell ringing that very night, and he didn't hear it, that is, if he could ever hear much besides his own voice. (Now he says the economy defies a quick fix!) Wall Street was making money by the ton just a year ago, and our regulators were cheering them on while most of our media was dozing. Worthless securities were being pedaled globally with stamps of approval from credible ratings agencies. Predatory lenders scammed customers. Protests from advocates for the victims were ignored.

At the same time, Credit card debt rose 7.6% -- almost $3000 a person. There were warnings of an impending collapse but few paid any heed.

A one-time Republican strategist named Kevin Phillips was already ringing a fire bell about our mounting debt. He had documented the rise of the Financialization of our economy in which a credit and loan complex -- using debt as its driver -- was dominant, soon controlling over 20% of GDP. He warned of the consequences, of the hijacking of our future and our economy. Our system had become, he argued, a house of cards. Who listened?

In a new book, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism, he documents how those cards started tumbling in painful detail.

This reality should, in Jefferson's words, wake us up and "fill us with terror." (Odd that thought of "terror," written centuries ago. How prophetic!) Perhaps we are fearing the wrong terrorists?

Yet even now, most of the media would rather debate Reverend Jeremiah's Wright's words or Miley Cyrus's photos than examine the calamity facing us and our world. Where are the investigations of the greedy and unscrupulous? That's who gave us the subcrime crisis or in Phillips words, the "reckless finance," that brought the market down, sending prices and joblessness up.

You can't really track these mounting problems by watching TV or even reading many of our newspapers who failed to cover the crisis as it was building steam from 2002 to 2006, and when it might have been stopped.

It is usually only after the fact that we realize that the official response to these crises is also making things worse.

Example: A former top Federal Reserve official now says that the Fed's bailout of Bear Stearns will come to be viewed as the "worst policy mistake in a generation."

Reported the Wall Street Journal: "Vincent Reinhart, who used to be the Fed's director of monetary affairs and the secretary of its policy making panel, said the event would be compared to "the great contraction" of the 1930s and "the great inflation" of the 1970s.

Run that by me again -- "the great contraction?" Duh? Does he mean the Great Depression? Then, we had a government that tried to end it. As of this week, only 2000 homeowners facing the threat of foreclosure have been helped by our government. As many as three million homeowners face homelessness!

If you read the financial blogs linked on essential websites like, you get a much more sobering picture. According to the RGE Monitor, we are in the THIRD year of a housing recession -- did you know that?

They report: "We are in the third year of the U.S. housing recession and the bottom does not seem to be in sight yet. Housing starts (and completions) are falling but not yet fast enough to offset the sharper fall in demand (home sales) and therefore to insure a fast absorption of the rising home inventories that keep putting downward pressure on prices."

Do you realize the extent of the housing collapse? The number of vacant homes reached a record high of 18.6 million units, which was a 1 million increase in the past 12 months with a record 4.1 million vacant homes for rent, and the rental vacancy rate rising to 10.1%.

1 out of 194 US households are now in foreclosure. Housing prices are falling with expectations in some quarters that they will drop a further 20%.

Translation for a society in which realty is considered reality: This is an ongoing disaster with worse to come.

Patrick Net reports:

"Salaries cannot pay for current house prices. This means house prices must keep falling or salaries must rise much faster. You probably noticed that your salary is not rising much, and that inflation in food, energy, and medical care has been very high. This leaves less money available to pay for housing."

Another website, Minranville, sees not just a subprime crisis but a deepening consumer consumption crisis as credit gets tighter. Already the overall growth rate has fallen to 0.6% as consumer spending freezes.

"It's important to recognize that with each passing day, as credit is tightened and unemployment grows, more and more asset classes and population groups will be affected. And you need only look at the news from BMW or last week's earnings report from Harley-Davidson and Starbucks to see that consumers can no longer afford their aspirations."

Another site,, sounds angry, a sign of the ugly mood that is starting to go public as the only upturn appears to be a rise in the lack of consumer confidence:

"If you're operating under the premise that the losses have been (mostly) recognized and we are now going to see 'write-ups' somewhere down the road, you're more than wrong.

You're delusional."

Are we delusional or just distracted by campaign circuses? Are we even aware of the link between the housing crisis and the food crisis?

Mike Whitney argues: "The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe...."

So what now? Will the desperation so many people feel go inwards or outwards? Here are two stories on two tendencies likely to merge:

AP: A man upset over thousands of dollars in fees owed to a condominium association brandished a gun and took two association employees hostage before he was killed by a SWAT team, authorities said. Deputies "were screaming at him to put the gun down, but he didn't seem to be paying attention," said Ross Torman, 30, a resident who watched the standoff from his nearby balcony. "He just put that gun right to his head and that's when they began to shoot."

The Housing Panic blog reaches into history to remind us of an uprising that saw martial law imposed in Iowa in 1933 after "a mob of 150 farmers dragged Circuit Judge Charles C. Bradley from the bench, manhandled the 60-year-old jurist and threatened to lynch him unless he promised not to sign further foreclosure orders."

Don't think never again. If has come to this -- it can come to that. blogger and News Dissector Danny Schechter directed In Debt We Trust, the doc that predicted the crisis ( and will soon publish PLUNDER, a book on this calamity. Comments to

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