- Politics and Social Issues
Rich people are broke.
The reason they called it a 'Debt Crisis'
The problem is, so many rich people don’t actually have any money.
Why is Betty White still working, and what was that Charlie Sheen crisis really about, and why... oh, I get it. They're all broke.
The Bernie Madeoff story shows how one person with no money at all can make it seem as though hundreds of people have millions of dollars. And celebrities, many of them are actually flat broke. Not so long ago, a very popular singer had broadcast info-mercials from her home, while pregnant, all the way up to the day she went into labor. This is not what rich people do. This is what people do when they are broke. Broke, as in total assets minus total liabilities equals a negative number.
Most people fall into this category. Most people are in debt for five year’s take home pay or more. But as time goes on, more Americans are living debt-free and that is putting pressure on the posers who pretend to be rich. The age of substance is upon us.
There was a time when a person could rent a suit and a car for a couple of days and then, based on their wealthy appearance, buy a mansion in Beverly Hills. Then they’d rent it to a celebrity and declare themselves rich because they own a mansion occupied by a celebrity and move on to bigger and better demonstrations of wealth. With any luck at all, they might actually achieve a positive net worth. And the wise among them would then start paring down the assets slowly, pay off the accumulated debts and settle down to a comfortable debt-free retirement. But too few were wise. Perhaps none of them. The euphoria of tossing around seven and eight figures is addictive, great fun on the grandest scale. Entire groups of socialites, all of them actually flat broke, slinging borrowed money at one another for decades.
Then Gen X comes along and screws up the whole thing. They don’t want to borrow any money. The money supply contracts. Without new debts to fuel the charade, old debts get liquidated. Those without positive net worth get exposed. Like Bernie Madeoff, like Lehman Brothers. Like Allen Stanford. (He’s the fund manager who put investor’s money in offshore banks, safely out of the reach of US regulators. But when he went to withdraw the money, the offshore banks beyond the reach of US regulators shrugged and said, “What money?”)
And there would have been more. The entire palace of lies, house of cards, prosperity of debt, whatever it’s called, was crumbling fast. All the fake-rich, not rich at all, were about to find themselves in bankruptcy. And the debt-free were on the brink of becoming kings, lording over the land they once toiled. They went so far as to elect a food-stamp, only son of a single welfare mother to the highest office of the land, the most powerful office in the world, the office of the President of the United States of America.
But the US congress stepped in and gave the Banksters 750 billion dollars of taxpayer money so that the fake-rich could keep pretending to be wealthy. Congress also extended tax cuts for the wealthy. (It’s near impossible to juggle debt and pretend to be wealthy when it’s also necessary to come up with actual money to pay taxes.) The Fed also stepped in and printed bazillions in more dollars to fill the void of non-existent money, and pinned interest rates down to zero. Imagine that, negative real interest rates while the real money supply is growing. I used to think that was impossible.
And that’s supposed to be okay. I suppose it is. In theory, if we had no fake bazillionaires to bow to and grovel before, society as we know it could collapse. Or not. I personally would like to give it a try to see how things turn out.
The top oil company executives are also broke.
- Chesapeake Board Backtracks on What it Knew on CEO Loans - Bloomberg
Chesapeake Energy's board backed away from a week-old endorsement of Chairman and Chief Executive Officer Aubrey McClendon’s practice of using personal stakes in company wells to secure loans, pledging now to investigate the transactions.