Jon Hilsenrath wrote this letter to American consumers:

This is my response:

Dear Mr. Hilsenrath,

How are you? I am fine. I hope you are healthy and well. You recently wrote a letter to Americans, which includes me. You said that most of us were stingy and that the economy was depending upon us to be a bit more free with our cash. You also said that I, along with the rest of America, was getting a free ride with zero interest rates. These statements bothered me.

In response to the matter regarding saving, yes, it is true that I have been saving much more of my money than ever before, but that is not to imply that I am socking away the cash for a rainy day. I am saving by paying off debt, which is an odd way of looking at saving for anyone but an economist. However, I used to teach AP Economics, so I get it. I freely admit that I am saving. I will save and save and save some more until I am debt-free.

I want to be debt-free because money, unlike water, flows uphill. Every penny I spend on interest goes to someone wealthier than me. This is the cardinal reason for wealth inequality. People with lots of money lend it out and are supported by my labor in the form of interest payments. Even if I pay off all of my personal debt, I will always be paying interest on corporate debt, as it is rolled into the cost of the goods and services that I purchase. I will never be able to escape debt unless I myself become a lender of sufficient means to make my living off of the labor of others rendering timely interest payments to me.

That is unlikely to happen. Even though Janet Yellen told me to get assets or die tryin’, the fact remains that now is not a good time to start a small business and neither is starting a small business any guarantee of success. In fact, in the oligopolistic structure of most markets, it’s a guarantee of failure. Small businesses simply aren’t getting off the ground like they used to. Markets are increasingly dominated by a small group of players that find it easier to compete against the customer than against each other, with resultant market contortions.

This leads me to the matter of zero interest rates. I have not gotten any money borrowed at zero percent interest, ever, unless it was from my dad. My dad is a great guy. If I can’t make a payment one month, he lets it slide and doesn’t report me to a credit bureau, with consequent disasters implied for my precious credit rating. No, Mr. Hilsenrath, I have always had to pay interest on what I borrowed. I do not know anyone paying zero percent interest on anything other than a car, and that itself is part of a highly rigged gimmick. I do not think that I have gotten a free ride. I do not think anyone in America has gotten a free ride from zero percent interest, unless that person was a corporation powerful enough to qualify for such a rate, and then turn around and use the interest-free borrowings to purchase t-bills or lend it out in consumer credit at higher interest rates.

Now, if you would like to figure out the minds of Americans that aren’t Fed officials, let me help you out. Let’s start with the young.

Kids in school get their money from their parents. If their parents are poor, they’re also poor. Quite a few of them are po’. That means they can’t afford the last two letters, just an apostrophe. Quite a few are even p’. They watch people buying vowels on “Wheel of Fortune” and think to themselves, “One day… one day… I will be able to afford to buy a vowel one day.” Pity those poor, po’, and p’ children.

As for the parents, anyone with a job is poor, at best. That means there is no supply of wealth to tide the family over in hard times. If the job is lost, if there is a dread disease in the family, they are wiped out. Elvis Presley is rich: he continues to earn money from his properties, even though he’s dead. I may have a very well-paying job, but if I were to lose that job, my family’s finances would be dire, indeed.

But let’s consider instead the young person that has just gotten out of high school: that person has a choice to get into the workforce, learn a skill, or go to college. Only one of those paths has a better than average chance of paying off. Ironically, it’s not the college path.

It’s the skill learning path that works for young people. They have to learn to do a job that has to be done here and now, not 12000 miles away at midnight. I have a good friend who is learning computer programming skills in a class full of accountants, engineers, and other people with professional degrees. These are not failed baristas and beauty school dropouts: these are guys that went after the degrees with loads of math and science and then found out that they simply can’t get a job.

My own daughter had three years of college and then realized it wasn’t going to get her anywhere. She dropped out, learned how to do CAD work, and now has a job that pays more than the average salary for a recent college graduate. She has no degree, but has a job that is above the US median wage.

My son is getting ready to join the labor force. He doesn’t want to spend a day in college, and I don’t blame him. It’s a gamble of time and resources that has a poor chance of paying off. Even at a state school with junior college, that’s a proposition that involves borrowing at least $50,000 at non-zero, non-negative interest rates to have a degree that is not a real qualification for any entry-level job. Should he do as I did at the end of my teaching career and invest just a few thousand dollars in IT training, he could have a very well-paying job and be free of personal debt. That is a huge thing.

The sad fact is that most kids will either get an unskilled job, a job with low skill levels, or go to college and then get the unskilled/low-skilled job – if they get a job. U3 unemployment may be low, but have you looked at the U6 number lately? There are an awful lot of people that are still out of work, and they’ve given up to the point where they’re no longer trying to compete for the meager jobs out there.

The Panic of 2008 was more than a big whack to unemployment and 401K programs. It signaled a major structural change in the US economy. Now, the structural change in question had been underway for some time, but The Panic of 2008 removed any doubt in my mind of the irreversibility of the changes.

Globalization of labor markets did not result in rising tides for everyone. Rather, minor wage improvements in developing nations were matched by eliminations of high-paying jobs in the US. The globalization of the labor market meant the end of the days of walking out of college and into a job that typically had nothing to do with one’s major. Those jobs went to college graduates, sure enough, but they were graduates of Indian and Chinese universities, and paid Indian and Chinese wages. This meant that US workers either had to accept wages in those areas or not have a job at all.

The jobs that remained were part-time service jobs. Waiters and waitresses have swelled in numbers as accountants have fallen by the wayside. People living off of $2.15 an hour plus tips are not going to provide for a robust consumer economy.

At least they young have their health, for the most part.

So why did the Great American Consumer not show up to spend money? It’s because he or she has no money to spend. Those waiters are not going to go out to eat all that often, let alone buy a house.

I did not care for the tone you took towards the end, berating the poor for being poor and telling them that they were lucky not to be Greeks or Chinese. Mr. Hilsenrath, we *are* Greeks and Chinese at the end of the day. Our wages are already approaching Chinese limits, and our government is approaching Greek levels of indebtedness.

You speak about raising interest rates as if it was a threat against us, the people of America. A person paying credit card interest doesn’t care much between a change from 23.99% to 24.99%. It’s all the same sort of hopelessness for him. Maybe it triggers another massive round of default on debt, which puts those TBTF institutions into a very failure-prone stance. With a higher interest rate, they can’t be sustained as was the case in the wake of the Panic of 2008. Would we lose jobs in the wake of such a thing, if JP Morgan or Goldman Sachs went belly-up? You bet we would.

The question that should really be dealt with is, “will we lose our temper?” Seeing that the non-violence of Occupy has been replaced by paroxysms of urban rioting, the answer is most likely yes. This makes sense of all the war-drums beating around the world: better to have that rage directed externally than internally.

So, should the world plunge into war, will it be the fault of the American consumer? No, Mr. Hilsenrath, it will not. For the American consumer is, if nothing else, loyal and obedient to his government and its guidance. Whatever the ills of America these days, Mr. Hilsenrath, I assure you that the average American is but a victim and not a general contributor towards. We cannot vote for visionaries to lead us when the lobbyists and major donors only give us puppets that they can control. You say yourself that you listen to Fed officials all the time at the Wall Street Journal: it is because you know full well that the average American is powerless and voiceless, so why bother with him, eh?

A question you should perhaps ask is if the Fed officials ever listen to the WSJ, or is your voice and the voice of your collective colleagues powerless in their view, and therefore beneath their consideration?

Well, long story short, we got no money because it all flowed uphill to the very rich. The very rich don’t spend the way us poor folks do, so that’s why the US economy is poleaxed. It won’t recover unless the very rich decide they don’t need as much profit or return on investment as they’ve gotten in the past. I don’t see that happening, so why not save your lectures for those guys, Mr. Hilsenrath, and then wait and see what it’s like to be completely and utterly ignored.

I’ll be happy to discuss this stuff more, if you would like.

Kind regards,

Dean Webb