The Crash of 2016

by Thom Hartmann

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  In accordance with the U.S. Copyright Act of 1976, the scanning, uploading, and electronic sharing of any part of this book without the permission of the publisher is unlawful piracy and theft of the author’s intellectual property. If you would like to use material from the book (other than for review purposes), prior written permission must be obtained by contacting the publisher at permissions@hbgusa.com. Thank you for your support of the author’s rights.

  To Tim Carpenter, cofounder of Progressive Democrats of America, and a true champion of democracy and the people

  ACKNOWLEDGMENTS

  This book would not have been possible without the help of my friend, colleague, and collaborator in so many things, Sam Sacks. From ideas and suggestions to research to extraordinary editorialist assistance, Sam has helped make this book what it is. Indeed, I’m the author of this book, but you’ll find Sam’s hand and deft touch throughout it. Partly because of my schedule, but mostly because of Sam’s brilliance, I’ve never so relied on a private editorial assistant for any other book I’ve written. It’s been a pleasure and an honor working with you, Sam. Thank you!

  Bill Gladstone, my agent and the CEO of Waterside Productions, also helped bring this book into being, from concept to final publication, and has shepherded it along these many months. Bill has been working with me for decades on my books and is always a source of encouragement, inspiration, and good, solid, sane advice.

  The great folks at Hachette and Twelve have been with us on this book from beginning to end, and I’m so grateful for their help, encouragement, and bringing this book to publication. They include: Sean Desmond, Libby Burton, Mari C. Okuda, and Cary Goldstein.

  I’m not the first or only author to follow the trail of the themes of this book. There have been many over the years, and many have influenced my thinking. In particular Dr. Ravi Batra, author of The New Golden Age and Greenspan’s Fraud and a frequent guest on my radio show, has taught me a lot. As have Richard Wolff, Robert Reich, Paul Krugman, David Korten, David Cay Johnston, Lori Wallach, Ralph Nader, and so many other brilliant writers, thinkers, and economists I’ve had the privilege of knowing and interviewing over the years that I’m reluctant to start a longer list of names for fear I will miss some.

  Finally, without my wife, Louise Hartmann, none of my many books would have been finished over these decades. Thank you, Louise, for being both my life partner and my business partner!

  INTRODUCTION

  Canvas Moon America

  Your home is regarded as a model home, your life as a model life. But all this splendor, and you along with it… it’s just as though it were built upon a shifting quagmire. A moment may come, a word can be spoken, and both you and all this splendor will collapse.

  —Henrik Ibsen, A Doll’s House, 1879

  I was around ten years old, and a total science fiction junkie. Amazing Stories—a pulp magazine of science fiction short stories, commentary, and science news—arrived every month, and that meant that on that day all homework and play were forgotten. These were some of the most brilliant stories, written for a penny or so a word by people such as Robert Silverberg, Jack Vance, Poul Anderson, and Frank Herbert, who would go on to become the biggest names in the field of Fantasy and Sci-Fi.

  And one particular story haunted me for years. Eight years later, when the first men landed on the Moon, that story was brought back to me as if I’d read it the day before.

  In the story, a group of astronauts are finally, for the first time, going to blast off from Earth and circle the Moon. It had never been done before, and because our moon doesn’t itself rotate on its axis like we do relative to the Sun, but instead circles us with a single side always facing us, nobody had ever before seen the “dark back side of the Moon.” These men would be the first in human history to do so.

  The rocket roared to life from the launchpad, the astronauts chatting with Mission Control as they hurtled toward the Moon. When they got close enough, they let the Moon’s light gravity grab their space capsule and, with a few deft rocket thrusts, they put themselves into orbit around it. They were unbelievably excited, as were the NASA folks on the ground, chattering back and forth about what they hoped and expected to see.

  Was the dark side of the Moon identical to the front, or was it more mountainous? (We now know it is the latter.) Might there be frozen water there, since it has a different exposure to the Sun? Might there even be wreckage there from ancient astronauts, or something else exotic like that? Anything was possible!

  As the astronauts began their turn around to the back side of the Moon, Mission Control told them they’d lose communication because the giant mass of the Moon would block their signals, so they prepared for radio silence. But as they made the turn, they could still hear Mission Control.

  What they saw as they glimpsed behind the face of the Moon we see on full-moon nights brought an audible gasp from all of them.

  One picked up the microphone to radio the ground and tell the horrible story. Another knocked the microphone from his hand with a warning gesture. They continued to circle around the back side of the Moon, and the view became even clearer, ever more undeniable.

  “Should we report it?” A debate—virtually a fistfight—broke out in the capsule. What would it mean for earthlings? What if nobody believed them? What if they were quarantined upon returning and imprisoned or sent to a mental hospital?

  I remember what they saw that so horrified the astronauts.

  The back side of the Moon was missing. They were looking into the concave half ball of the front side of the Moon, which was made of canvas stretched over an elaborate superstructure of two-by-fours, nailed together like the scaffolds that held up roller coasters from that era.

  Who Stole the Back of the Moon?

  This sci-fi story from my childhood also tells the story of America today on the verge of the Crash of 2016.

  On the surface, everything seems OK. Our politicians still talk about promise, hope, and change, and we applaud and feel inspired. The world still uses our money. We still have the strongest military in the world. And our standard of living is still far better than the Third World’s (though worse than most of the developed world’s). We’re still by far the wealthiest nation in the world, with too many billionaires to count: Bill Gates, Warren Buffett, Charles and David Koch, Mark Zuckerberg, and so on. We still have civility in the streets. We have reality TV and fancy (gas-guzzling) cars. We still vote (those with a driver’s license and birth certificate can, at least).

  As long as you don’t look too closely at our nation, things seem under control—the United States looks whole. The economically, militarily, and scientifically superior United States, as we’ve come to know it in the past eighty years, seems intact—not only for the whole world to see from afar but also for those of us who live here.

  But when you go around to the “dark back side” of the nation, you see the shocking truth. There you see a nation whose core fundamentals have been hollowed out, replaced by balsa-wood stilts and wrapped in a frayed canvas of nationalism and bravado—a cloak similar to that worn by nearly every great superpower that has ever existed on the planet just before its own eventual collapse.

  Unlike the canvas Moon, the United States was once full and complete. Many of us still have memories of that golden age of the middle class throughout the 1940s, ’50s, ’60s, and ’70s.

  But today that middle class, like the canvas Moon, has been hollowed out. The middle-class neighborhoods still exist across America, but they’re teetering on stilts of mortgage and credit card debt.

  As then Labor Secretary Robert Reich t
estified before Congress in 1994, “[T]he net national savings rate, which was at a relatively robust 8.2 percent of GDP during the 1970s, has dropped to a barely visible 1.8 percent as of the early 1990s.”1

  That was just a decade and a half into the Reagan Revolution. Today it’s far worse. The AP headline from February 11, 2009, says it all: “Americans Have Negative Savings Rate.”2

  Hollowed out, too, is our nation’s democracy. The spectacle of national elections confronts us every other year, but behind the pomp and circumstance our democracy has corroded into an oligarchy, as billionaires finance their own political candidates and corporate-funded think tanks do the work once reserved for elected representatives of writing and passing legislation.

  Stripped clean and hollowed out, the United States is more vulnerable today than it’s ever been—including during the Great Depression and Civil War. Those fortified pillars that supported a booming middle class are stolen, and without them America teeters on the verge of the next Great Crash.

  The Crash

  Ultimately, this is a story of how America was dragged into the Crash of 2016.

  We are standing today at the edge of the Fourth Great Crash and war in American history. The previous three—each about eighty years apart—were gut-wrenching in their horror and bloodshed, but they ultimately transformed America in ways that made this a greater and more egalitarian nation.

  Thomas Jefferson predicted them, as he had lived through one here and observed another sputter and fail in France. Periodic revolutions were necessary for America—or any democratic society—to flourish and grow, he said. And if they were stalled or blocked, then the ensuing crisis would be all the more intense.

  Jefferson said it best: “If this avenue [of periodic revolution] be shut to the call of sufferance, it will make itself heard through that of force, and we shall go on, as other nations are doing, in the endless cycle of oppression, rebellion, reformation; and oppression, rebellion, reformation, again; and so on forever.”3

  That cycle, spanning a few generations each time, has indeed been repeated over and over again in America. And right now we’re in the midst of it being repeated again.

  Numerous anthropologists, historians, and analysts have written about the generational cycles of revolution and crisis, most notably William Strauss and Neil Howe in their brilliant book The Fourth Turning, which extensively documents the previous crises, from the American Revolution, to the Civil War, to the Great Depression.

  But this book is different. While we provide an overview of history, this book focuses specifically on the crisis that is enveloping us today and will soon overwhelm us—and then, ultimately (over the next decade), fundamentally transform our nation.

  We stand today at the edge of the Fourth Great Crash (and Reformation) since Jefferson sparked the First American Crisis by putting quill to paper and drafting the Declaration of Independence in 1776.

  In the coming pages, you will meet the actors who set in motion today’s cataclysmic chain of events: the architects, the conspirators, and the propagandists who have both shaped the twenty-first-century crisis and are trying so hard to exploit it for their own gain. And you will see how our past may well carry answers to rebuilding our future out of the current crisis.

  This crash will unfold in its own unique fashion, different from the three America has previously experienced but also eerily similar.

  From the shock of another economic meltdown, to the horror of war, to the dangers of an environmental crisis combined with radical social transformation, and the gridlock of dysfunctional government, the Fourth Crash—the Crash of 2016—is today’s moment of truth for America.

  For some Americans, the crash is already well under way.

  Just One of Us Ducks

  In February 2010, we got a glimpse of the sort of inequality-induced violence that may accompany the Crash of 2016 when Joe Stack woke up in his cozy middle-class neighborhood, set his home on fire, and then drove to the local airport just outside Austin, Texas.

  He hopped into his single-engine Piper Dakota airplane, took off from Georgetown Municipal Airport, and minutes later, like a missile, dove his plane right into a glassed-facade office building that housed a local IRS tax collection office, instantly killing himself and an IRS agent and former Vietnam veteran, Vernon Hunter, who was working at his desk in the building.

  When the American economy first went into meltdown a few years earlier, it was people like Joe Stack who were hit the hardest. He was a software engineer who watched his clients and income dry up, yet he didn’t get a bailout the way Wall Street did. His bills piled up, he sank into debt, and the taxman was knocking down the door. Uncle Sam needed to bail out hundred-billion-dollar transnational corporations—many of which, coincidentally, paid no American corporate income taxes.

  Joe appeared calm on the surface, a regular guy who lived in a run-of-the-mill middle-class home at Dapplegrey Lane in North Austin. He played guitar in a local band.

  But there were clues: He named his band Last Straw and his only album was titled Over the Edge.4 And what seemed like inconspicuous songs were anything but. There was a quiet desperation consuming Joe Stack, and he was nearing a breaking point.

  Eventually he hit it. That’s when he resorted to becoming our nation’s first modern suicide bomber.

  It would be easy, and convenient, to write Joe Stack off as a deranged man who, faced with financial troubles, resorted to a desperate act of violence. But he was far from that.

  “[Joe] seemed like one of us ducks floating down the river,” Stack’s brother said. “We just didn’t realize he was paddling so furiously under the water.”5

  Eventually Joe Stack got tired of paddling.

  In his suicide letter, Stack highlighted the very real problems in Royalist America.

  “I remember reading about the stock market crash before the ‘great’ depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything,” Stack wrote.6

  “Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem,” he added, “they just steal from the middle class… to cover their asses and it’s ‘business-as-usual.’ ”

  Taking on the Royalist corruption of government, Stack wrote, “Why is it that a handful of thugs and plunderers can commit unthinkable atrocities… and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours?”

  He went on, “Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year… and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies?”

  Recognizing the cancer in our nation, he even went after the idea of capitalism itself, writing, “The communist creed: From each according to his ability, to each according to his need. The capitalist creed: From each according to his gullibility, to each according to his greed.”

  Thanks to this diseased Economic Royalist rule, there are millions of Americans just like Joe Stack who are confronting difficulties—people who are one foreclosure, or one layoff, or one denial of a medical procedure away from reaching their breaking point.

  There are still sprawling middle-class neighborhoods across America like the one Joe Stack lived in. But what we can’t see is the debt financing, the credit card bills piling up, and the kitchen-table conversations over how the utility bill will be paid that month.

  There are still students across America attending colleges, preparing for their jobs in the future. But what we can’t see is the massive $1 trillion student-loan bubble handcuffing them to lenders for the rest of their life. Things all look the same on the surface, but just below, the substrate is deteriorating.

  We’re all d
ucks like Joe Stack desperately paddling to stay afloat. And day by day more and more of us are sinking.

  Joe Stack thought he was doing what needed to be done. As he wrote in his suicide letter, “I can only hope that the numbers quickly get too big to be white washed and ignored and that the American zombies wake up and revolt. It will take nothing less.”

  Death by Bankster

  Norman Rousseau and his wife did everything they were supposed to do. They were responsible homeowners who did business with Wachovia and Wells Fargo (which acquired Wachovia) and put a 30 percent down payment on a home in California back in 2000, and they made every payment from then on, never missing even one single month.7

  But in 2007, the bank began to exhibit its psychopathic nature. According to a complaint filed by the Rousseaus, the bank approached them about changing their mortgage to an adjustable-rate mortgage. The Rousseaus stressed they were interested only in a fixed-rate loan and that they wanted to pay the same payments throughout the life of the loan.

  But they trusted the bank—which was a big mistake. So when Wells Fargo told them that the “new industry standard” is adjustable-rate mortgages, that they could save more than $600 a month in mortgage payments, and that the “worst-case scenario” would be an increase of only a few dollars on their monthly payments, the Rousseaus gave in to the salespeople and took the new mortgage.

  But a few years later, in 2009, the Rousseaus knew they were stuck with a bad deal. Their new interest rate was higher than it was before 2007, and even higher than what they were told it could increase to. But as responsible homeowners who had done everything they were supposed to do, the Rousseaus still made each and every monthly payment on time.

  That’s when, judging from the Rousseaus’ complaint, Wells Fargo’s psychopathy took flight. In May of that year, the bank claimed that the Rousseaus had missed a monthly payment. The Rousseaus said that was impossible, that they had made the payment, and even gave proof that they had made the payment at the bank with a cashier’s check that had been cashed by the bank.