While I’ve mostly been posting about the ins and outs of high-flying Wall Street firms and numbers in the billions and trillions, it’s important to keep a local perspective on just what this all means for average, paycheck to paycheck folks like you and me. I’m not a Wall Street mogul, I work in IT and get by one month at a time just like most of us.
I’ve had to cut back on my spending and entertainment, I’ve worked to lower my debt and worked to keep myself mobile in case I need to move, in case of a forced job change. It happens.
Prices are up. Your money is worth less. Your wages are worth less. And the Fed policies mean a lot to you and me here in the trenches.
What has the Bush Boom meant to you and me? Here in Ohio, more people than ever are on food stamp programs.
Nearly one in 10 Ohioans now receives food stamps, the highest number in the state’s history.
Caseloads have almost doubled just since 2001, with 1.1 million residents now collecting benefits, according to the Ohio Department of Job and Family Services.
Low wages, unemployment and the rising cost of groceries, gasoline and other necessities are to blame for financial hardships facing many Ohio families.
Caseloads have been rising steadily in the past seven years, said Brian Harter, spokesman for the state agency which oversees the food-stamp program.
“Look at unemployment during this time,” he said.
Ohio’s jobless rate is 5.3 percent, up from 4.4 percent in 2001.
Things are tough all over. This is what the Bush Boom has meant to normal folks here on Main Street and not Wall Street.
“The economy and loss of manufacturing jobs are at the root of what’s going on. But lately (it’s) the rising cost of transportation and food — people who were barely getting by, are not getting by,” said Jack Frech, director of the Athens County Department of Job and Family Services.
“It has pressed folks to the edge to have to rely on food stamps.”
Advocates estimate another 500,000 Ohioans are eligible but not enrolled in the food-stamp program.
There’s still a stigma of “being on food stamps”. Nobody really wants to admit they can’t afford something as basic as food, and yet a half million people in Ohio would qualify for them and don’t get them. That stigma’s going to vanish when people realize they don’t have much of a choice.
That’s going to change as gas prices continue to go up. Here in Cincy they are $3.29 and rising. People can’t afford to buy the good and services they used to. We’re still a consumer economy, not a manufacturing one. That ship has sailed, literally. If goods and services aren’t being purchased, we’re in serious trouble down the line.
Hell, we’re in serious trouble now.
Individuals in households with incomes up to 130 percent of the federal poverty level and with assets no greater than $2,000 in most cases are eligible for food stamps. That’s earnings of no more than $22,880 a year for a family of three.
Recipients receive $100 a month. The federal government pays for the benefits while the state covers administrative costs.
But as the price of milk, fruits and other groceries climb, advocates say, recipients can buy less and less with that $100.
“Food stamps provide only about $1 per person, per meal. Who in the world is buying groceries with that?” asked Lisa Hamler-Fugitt, executive director of the Ohio Association of Second Harvest Food Bank.
On average, food stamps are now providing less than two weeks of groceries.
Who can feed a family of four for $100 a month? I spend that much on groceries and there’s only one of me. Even two weeks is pushing it. Of course this means food banks aren’t able to keep up.
The increased demand coupled with rising food costs and fewer donations have forced the food bank to reduce the five-day supply of food it had been giving out to a three-day supply.
“Milk is up 25 percent,” said Mid-Ohio president Matt Habash. “Applesauce, a big staple at food banks, has gone from $9 to $15 a case.”
In other areas of the state, pantries with their supplies depleted have been forced to temporarily close.
“The shortages,” Hamler-Fugitt said, “are a double whammy for people who have been relying on food stamps and pantries.”
But of course to Wall Street and the GOP, people on food stamps need to simply work harder and stop being welfare queens living on the government dole. You know, not like Bear Stearns execs.
And people are having trouble making ends meet. They are turning to what amounts to legalized loan sharking, the dreaded Payday Loan outfit.
As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.
While figures are hard to come by, evidence from nonprofit credit and mortgage counsellors suggests that the number of people using these so-called “pay day loans” is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.
“We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).
A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.
The Center also estimates pay day lenders issued more than $28 billion in loans in 2005, the latest available figures.
800 percent. A $325 loan that costs you $793. Look around where you live and see if there are payday lenders around. I know of at least 5 within a mile of where I live in Cincy, places like Advance America and Check N Go. They are all over the place here and this isn’t a broken down place to live but a relatively nice suburban area on I-71/75.
Meanwhile, on Wall Street, the Fed will give you $30 billion at 90 days and take your IOU, then extend the loan ad infinitum. That’s what the Bush Boom has meant to Cincinnati.
In the Union Miles district of Cleveland, which has been hit hard by the housing crisis, all the conventional banks have been replaced by pay day lenders with brightly painted signs offering instant cash for a week or two to poor families.
“When distressed home owners come to us it usually takes a while before we find out if they have pay day loans because they don’t mention it at first,” said Lindsey Sacher, community relations coordinator at nonprofit East Side Organizing Project on a recent tour of the district. “But by the time they come to us for help, they have nothing left.”
I’ve considered one of these loans before when I was tapped out for a while after being unemployed for a stretch a while back, between contract jobs. I’m glad I didn’t. But these places are doing so much business that there can be several lenders in the same place…in the case of Ohio, hundreds of them.
Bill Faith, executive director of COHHIO, an umbrella group representing some 600 nonprofit agencies in Ohio, said the state is home to some 1,650 pay day loan lenders — more than all of Ohio’s McDonald’s, Burger Kings and Wendy’s fast food franchises put together.
“That’s saying something, as the people of Ohio really like their fast food,” Faith said. “But pay day loans are insidious because people get trapped in a cycle of debt.”
It takes the average borrower two years to get out of a pay day loan, he said.
Robert Frank, an economics professor at Cornell University, equates pay day loans with “handing a suicidal person a noose” because many people can’t control their finances and end up mired in debt.
“These loans lead to more bankruptcies and wipe out people’s savings, which is bad for the economy,” he said. “This is a problem that has been caused by deregulation” of the U.S. financial sector in the 1990s.
Two years to pay off a two week loan. Great work if you can get it. And you wonder why we’re in a recession. You wonder why there’s nothing but raw, naked greed on Wall Street and in Washington. You wonder why the Bush Boom has left 98% of America worse off than before while enriching the top 1%.
Keep in mind these loan sharks are 100% perfectly legal in dozens of states. Many have moved to cap interest rates, some states have banned them entirely. But others are still making loans, because hey, capitalism is always good.
Is there any wonder consumer confidence is at its lowest level in 35 years?
U.S. consumer confidence fell more than forecast in March as Americans’ outlook on the economy dropped to the lowest level since Richard Nixon was in the White House.
The Conference Board’s confidence index fell to 64.5, a five-year low, from a revised 76.4 in February, the New York- based research group said today. A separate report showed home prices in January fell by the most on record.
It’s a disaster. People can’t afford to buy things, period. Demand will shrink and prices will come down, but by then it will be too late. I asked my grandmother about the Great Depression this weekend when I called her for Easter. She was just a child then in Buffalo, but she remembers not having a whole lot of anything as a kid, and my great-grandfather having to go off to work whatever jobs he could find.
She told me she’d never seen things this bad, not even during the 70’s.
“It’s a discouraging environment,” Pierre Ellis, a senior economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. “We are almost certainly in a recession. The question is how deep and how long it will be.”
The Conference Board’s gauge of expectations for the next six months slumped to 47.9, the lowest since December 1973, when the Watergate scandal rocked the Nixon administration and an embargo by a group of Arab oil exporters was in effect, the report showed.
Keep in mind consumers power the economy. If consumer sentiment is that bad, and with skyrocketing prices and payday loans preying on people, you have to just ask yourself “why that can possibly be?” after all, then recession may not begin to describe the situation.
Demand is going to drop like a rock. People will buy necessities and not much else. That will lead into a deflationary spiral eventually. Inflation may start out being the problem now, but it won’t be the real problem down the road.
It wasn’t the 1929 stock market crash that created the Depression, it was the bank runs of 1930 and 1931 that toppled the financial system completely. That’s an important lesson to remember, because we’re headed down an eerily similar road again. People took all their money out of banks because the banks were failing. They didn’t spend their money because they couldn’t afford the basics, and the basics weren’t available.
We’re getting perilously close to that point again. Maybe not this year, but soon we’ll be facing a systemic breakdown. It’s just not economically feasible, and as more links in the chain that get your food and water to your home break down because of the economy and an infrastructure that’s rotting underneath out city streets, drought and damaged crops from global climate change and pollution and lack of oversight and regulation from the Bush administration, it’s all going to catch up with us.
It’s just a question of when and how hard. The reckoning is already starting for a lot of us.
Be prepared.
