You Live in Squanderville
You live in Squanderville. Big house. Sparkly car. Lots of gizmos and gadgets. Life could hardly be better.
But what if Squanderville’s richest man told you that your finances were actually a shambles, you were going bankrupt, and that you would soon be homeless? To keep doing what you were doing would be financial self-destruction—a road to economic destitution.
Yet, that is exactly what America is doing.
Way back in 2003, Warren Buffet, one of the world’s richest men, began calling America “Squanderville” for its proclivity for big spending. On a national level, he said that because the country was spending far more money importing foreign goods than it earned from exporting, the country’s wealth was being squandered for toys and trinkets. That year, America’s trade deficit was a record $489.4 billion.
On both a personal and a national level, it is impossible to live beyond your means forever. Thousands of people are being rudely awakened to find that their credit has been cut. The national credit card will be next. But we continue to fixate on toys and trinkets. A future of candlelit nights and empty cupboards is on the way.
“Both as an American and as an investor, I actually hope [I am wrong],” Buffet said. But in the meantime, prepare for the dollar to collapse, he warned.
Since then, the dollar has plunged by almost 20 percent, and official unemployment now sits at 9.5 percent. But that hasn’t fazed our leaders in Washington. How to fix the problem caused by too much borrowing and spending? Encourage people to go out and borrow and spend more, they say.
And the trade deficit continues to climb: $673.3 billion last year.
Now America may be reaching a crisis point. The national debt is shooting through the roof, and America finds only a short list of lenders available. The government will attempt to borrow $1.8 trillion more from foreigners over the coming year. In one year, the government will borrow an amount equal to the total amount of debt accumulated by the nation from its founding to 1985.
Where will the money come from? No one knows. But just in case it is needed, the Federal Reserve is already creating money out of thin air to lend to the politicians.
The federal government says the national debt is now $11.5 trillion. But this is like General Motors pretending it doesn’t have union obligations. According to the Dallas Federal Reserve Bank, the real national debt—when calculated using generally accepted accounting principles that take Social Security, Medicare and Medicaid liabilities into consideration—is a practically incomprehensible $100 trillion!
And what happens when you can’t pay? The bank takes your house, and you are out on the street. Just ask the owners of the 1.8 million homes that were foreclosed on in the first half of this year.
In case that figure didn’t register—that was 1.8 million homes. In 2009. So far.
Millions more will lose their homes over the coming months. For years, America’s savings rate has been negative. People were spending more than they were making. Where will those people go now that the economy has turned south and borrowing more money is no longer an option? An epidemic of homelessness is on its way.
Squanderville is about to become Squattertown.
Between 14 and 19 million housing units currently sit empty across America. Another 4.8 million vacation homes sit empty for part of the year. But not for long.
According to the Atlanta Journal-Constitution, squatting is becoming a scourge in many neighborhoods—along with increased crime, drug traffic and prostitution.
Sometimes, the neighbors are not even aware that those living next door aren’t entitled to. The squatters just move in as if the home were their own. People break in, change the locks, cut the grass, turn on the water, illegally steal electricity, and pretend all is normal. In other cases, individuals pose as the owners and rent out empty homes to unsuspecting families.
If neighbors suspect something is amiss, it can still take months for the police to do anything. First the officers must find the owners, which, due to all the bank foreclosures and the mess created by subprime mortgage bundling, can be challenging. Then the owners are given adequate time to correct the problem before the issue can be taken to the courts. Finally, the owners must file a complaint for the police to respond.
In other cases, the police don’t want to do anything. Why force a family with children into the streets just because they are living in a house that is sitting empty?
In addition, tent cities are popping up in America.
The homelessness problem has become so huge that radical extremists like the Association of Community Organizations for Reform Now (acorn) and Picture the Homeless are finding fertile ground. acorn has organized squatters into communities in 35 cities across the country.
“Sometimes you have to force change on people,” says Picture the Homeless organizer Rob Robinson. “If you’re going to make squatting effective, you have to keep it on the down low.”
Max Rameau of the Take Back the Land movement says, “Being against oppression and exploitation in your mind is not enough.” His organization actively searches out bank-owned homes to put homeless people into. The banks received billions in taxpayer dollars, he notes, so why shouldn’t poor people live in vacant homes owned by the banks?
Michael Stoops, executive director of the national Coalition for the Homeless, says “it is a sign of the times. It is going to get worse.” He says there are 12 organized squatting operations around the country.
Homeless shelters are filling up. Soup lines are growing. Cities have set up parking lots where people living in their cars can park at night. In distressed sections of cities such as in Louisville, citizens battle to reclaim vacant blocks.
America is only a year and a half into this recession. But it may be about to get worse.
“Three decades of massive [trade] deficits have converted the United States from the world’s banker—able to ‘pay any price and bear any burden in the cause of freedom’—to the world’s largest debtor, utterly dependent on … foreign interests,” said Charles McMillion, chief economist of Washington-based mbg Information Services.
America’s weakness is becoming blatantly obvious. On June 26, America’s most important creditor, the People’s Bank of China, warned the United States about its fiscal policies. It said that it was worried that the U.S. might be tempted to use the printing presses to pay its way out of its debt hole. That’s how far America has fallen. Communist China is lecturing it on economic policy.
“We are so deeply in debt … that it hamstrings our monetary, fiscal and trade policies,” warns McMillion. “We’ve really mortgaged our financial future.”
That national mortgage is coming due, and we don’t have the money to pay it. What happens next? Just ask the banks and all the foreclosed homeowners.
