America was re-discovered by Europeans by mistake. Every American school child is taught the story of Columbus' search for the gold and spices of the Indies by a new sea route only to land on an entirely different place. The goal was riches and commercial wealth, and in that respect the discovery has been realized many times over. With the exception of small English religious orders escaping persecution, everyone else has come to the America(s) in search of wealth and opportunity. The goal is the same, whether it is realized by growing sugar cane, extracting gold, discovering exotic spices (which mostly weren't there), or cultivating new land, the explorers were in search of wealth, and the American Dream has always been about wealth and success.
The search for gold was not immediately successful in North America, but more so in central. Sugar became a major source of wealth in central and South America, though only marginally in the North. Plantation agriculture with the use of slaves became a source of wealth in southern US. And when land on the east coast was significantly economically exploited, pioneers moved West, motivated by gold discovery in California, and other metals in western mountains. The eastern region became a center for manufacture and production of large and small goods, with patents providing the opportunity for wealth. Railroad monopolies, and oil monopolies, coal, and iron and steel, all contributed to creating the "Robber Barons" of the late 19th and early 20th century. Do not forget film and media production in the west as a dream of success. And a new dream of wealth was created in the west by semiconductors, technology, computers, and the internet. And a new cadre of extremely wealthy were created in the 1990s-2000s.
What is the next dream? How do individuals become wealthy and fulfill the American Dream in the 21st century? There are indications from events occurring in the late 20th century. The collapse of the economy in the 1990's was the result of a typical technology bubble, the "dot-com internet bubble" and the errors of investors. This was a typical "tulip mania" of excess investing, seen with most technology development in capitalism, like the railroads, etc. But the solution to reviving the economy was a new approach to stimulation by creating "investment products", the mortgage speculation, and associated aggregated mortgage investments, which resulted in a repeat bubble and bust by 2008.
For most of the 20th century, wealthy individuals had used investment strategies to maintain the value of the income they created in the primary businesses they developed. Much of this was based on the consistent value and return of corporate bonds and other bond investments, which held relatively stable value because of the stability of interest rates over much of this era. But the "monetary theory" economists proposed significant manipulations of interest rates to stimulate economic growth, and the stability of bond investments was undermined. What happened next is a warning signal for the future of the economy.
Evidence accumulated that ordinary investment strategies are not much more stable than the average indexes themselves, and rarely "beat" the indexes. And bond investments became speculative as interest rates varied because bond values are inverse to rates. Suddenly, there was no clear path to preserving wealth for the wealthy. (Or anyone else seeking a "retirement".) A series of investment advisors entered this gap, proposing that using complex investment strategies, they could "hedge" the ups and downs of the markets and protect the investor from risk. Naturally, this offer came at a high price and was only realistic for the very wealthy. No one seemed to notice that these advisors had not protected anyone from the 2008 or 1990s busts, but they claimed to have a new strategy that would prove itself. Money flocked to these advisor's "hedge funds" after the dot-com bust. Since then, no data documents the enhanced outcome of the average of the funds, and specific funds that seemed to be highly successful use insider trading or other illegal methods to boost returns. Despite this, the funds remain highly invested, particularly in regions like Dallas where there is a pool of wealthy individuals and a strong sense of speculation.
Bernard Madoff entered this scenario as an investment advisor promising to guarantee returns to his investors. Though his company had started in the 1960s, it did not begin to surge until after the dot-com bust, and grew in funds until 2009 when the reality of his manipulations as a ponzi-scheme were revealed. He had been creating false statements of investment return for clients, and used new investment money to cover older client payouts, with overall poor market returns. This strategy collapsed in 2008 with the recession created by mortgage manipulations, causing many of his clients to want to suddenly withdraw their investments, which were gone. Madoff worked out of the NYC area, was an established brokerage company, was evaluated by the SEC, and had mostly wealthy well education clients. How had he succeeded in fooling so many for so long? The answer is that he understood the fear behind the American dream: that money is not stable over time and that somehow you must secure it to hold onto it. Like "hedge funds" he promoted his "strategy" for protecting income, though unlike "hedge funds" which were not always successful, he seemed to be. And the need for some form of economic security is the enduring, underlying fear of a strong capitalist economy, and the less the individual is protected by social system measures, the stronger the fear.
Madoff's fraud demonstrated two important lessons: 1) Americans will go to any length to protect the future of their money, and the wealthier they are, the more desperate to protect it! and 2) There is no financial scheme or product, "hedge fund" or ponzi-scheme that will provide a guarantee.
The result of the collapse of 2008 has been several terrible trends in the US economy that threaten its future stability:
1) The wealthy are desperate to get even wealthier, not trusting any scheme to protect their wealth but accumulating more of it. This opposes taxes, and other redistribution to poorer citizens and has exaggerated the wealth inequality.
2) The fantasy of magical financial manipulations that will"stabilize" ones wealth has now been transferred to the government itself, and the search for, and belief in, some financial method that will allow deficits to turn into government equity is being debated everywhere.
3) The poor drift farther and farther into fantasies like lotteries and casino returns, get rich fraud schemes, fake education ploys, and the plethora of ways that moderately wealthy people exploit the very poor. And as a great they are becoming more desperate and hopeless.
4) Lower middle class individuals, someone with a house, or rental, and marginal work as long as they are healthy, are now at extreme risk of drifting into the class of poor and losing any hope of a future.
All these statements are true. In this environment, candidate Trump promised to solve the problems by blaming the situation on immigrants (who were taking away jobs of the poor), the Chinese (who were profiting on our failure to manufacture on this continent and provide jobs), and expensive health insurance (while planning to eliminate it entirely!). His solution was to cut taxes to the wealthy, making it easier for them to follow their delusion that increased wealth would protect them, and pretend to encourage return of manufacturing to this continent by putting tariffs on Chinese goods, which mostly reduced the Chinese use of US farm goods, and increased the cost of the consumables (that are destroying the economy). He also blamed policies of environmental protection which reduced the profit of various industries, including the oil industry, though these industries were not the major offshore problem!
These have all failed and he is no longer president. The new economic team will have to struggle with the same economy he faced, and the distortions he caused in failing to address the problems. But the biggest challenge by far is the failure of the American Dream: Wealthy people no longer have any confidence that their wealth protects them, and have become obsessed about how rich they must become, (what shelters they must build to prepare for the revolution). And everyone else is noticing that the dedication to working consistently at a productive job is not available to most, and does not lead to a secure if modest life. Between 10% and 15% of Americans live in poverty now by our own country's definition, and probably another 20% are one disaster away from bankruptcy and homelessness. The homeless rate per 10000 in the US is higher by far than any other developed economy.
THE AMERICAN DREAM HAS BE DESTROYED. IT IS NOT CLEAR HOW OR IF IT CAN BE REBUILT. TO DO ANYTHING IT IS NECESSARY TO FACE THE REALITY THAT IT IS NOT CURRENTLY OPERATIONAL.
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