John Sidney McCain III said today "the fundamentals of our economy are strong," sounding exactly like Herbert Hoover after the crash of 1929. The parallels are interesting. Republican policies largely caused the Great Depression. Hoover had done honorable and even miraculous work before the presidency (feeding World War I refugees). He was a progressive Republican but became a reactionary. The biggest similarity, besides "the fundamentals" lines, is that the world had passed both men by. The world had become too complex for their remedies or policies. They were/are overwhelmed. Except Hoover didn’t have Karl Rove, "the base" (which interestingly translates in Arabic as al Queda) and so many ignorant, easily led voters.
On the other hand, maybe the key word in McCain’s statement is "our" economy. As in the economy represented by his rich friends and supporters, the nationless corporate oligarchy and his Treasury secretary-to-be, former Texas Sen. Phil Gramm (also prime architect of banking and Wall Street deregulation). He of the "nation of whiners" and "mental recession." For them, the winners at a time when income inequality is worse than anytime since before the crash of ’29, the economy is strong. So maybe unlike his campaign of late, McCain actually spoke the truth.
The recession that’s all in our heads claimed two of the most powerful and influential investment banks in the world over the weekend. Anybody who claims to tell you what will happen next — much less that the worst has passed — is about as reliable as all those telephone mortgage chislers during the housing bubble. What is more clear is how it happened, and, perhaps, some of the ramifications.
The causes of the mess: lax regulatory enforcement, lax anti-trust enforcement, a government mandate to let markets police themselves, deregulation, the encouragement of an unregulated "shadow banking system" and the Ayn Rand-reading former Fed Chairman Alan Greenspan’s promotion of a monstrous credit and housing bubble. Greed is good. These are all Republican policies. Policies from the party that wrecked America. Republicans controlled the White House and/or Congress for 26 or the past 28 years, and their control of the ideas that shaped policy were a near monopoly. Why the kinds of regulation that were good enough for Eisenhower or Nixon or Ford — why, that’s socialism!!! Or so we were told. These were the policies of Bush and they will be the policies of McCain, whatever he might say to gain power.
Well, you’re watching how markets police themselves and it’s rough justice. They collapse and devil take the hindmost, which is most average Americans, including the duhs and ignos ("low information voters) that are taken with Gov. Palin. The reality: there’s no free market. Markets are always gamed one way or another. They can be gamed for the good of all by regulation that ensures transparency, fairness and competition, or gamed for the good of the few, as they are now.
And you’re watching socialism — private socialism. It’s on display with the rescues of the shadow banking system — profits go to the rich while losses and costs are bourne by taxpayers, in other words, socialized. (they will do this with Social Security, too). "Our" economy is doing well, indeed, Mssrs. McCain and Gramm.
If the Democrats can’t turn this to advantage, they deserve to go the way of the Whigs. If the American people return the party that wrecked America to power, they deserve what they get. But why do "high-information voters" and everything good and decent about our country have to go down with the fools?
If the duhs and ignos get in, lay low, garden, save money (or tradable items), stockpile seeds, grain, and ammo. Have a good gun handy (semi- or fully auto is best).
“The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.” — Bertrand Russell
Mr. Talton wrote:
“The reality: there’s no free market. Markets are always gamed one way or another. They can be gamed for the good of all by regulation that ensures transparency, fairness and competition, or gamed for the good of the few, as they are now.
“And you’re watching socialism — private socialism. It’s on display with the rescues of the shadow banking system — profits go to the rich while losses and costs are bourne by taxpayers, in other words, socialized.”
Wow! This is so good. Way to tell it like it is, Mr. Talton.
Here’s something else to consider:
Consider the economy systemically: total wages and salaries paid equal the total amount these worker-consumers have to spend on goods and services. But this would make labor costs equal to or less than (with savings) consumer purchases, whereas capitalism implies that final prices of goods and services equal labor costs plus a mark-up, with the difference being profit.
So , a profit-based economy cannot be supported on the basis of wages and salaries alone, even if workers spend all wages and salaries on consumption and save nothing. Because wages + salaries = labor costs, whereas profits equal sales – labor costs. This implies the existence of purchasing power in addition to wages and salaries.
Where does the additional purchasing power come from? In large part, credit. What is the ultimate basis of credit, whether in the form of mortgages, car loans, business loans, or consumer loans? Well, credit must be repaid by means of deposit accounts. The basis of deposit accounts are bank reserves. Systemic bank reserves can only be increased by actions of the Federal Reserve System (or in other countries the central bank equivalent).
So, ultimately, the profits in excess of labor costs, which go to support the incomes of the owners, must be paid by the central bank.
Exactly how this works is the subject of another comment, but consider the fact that if this analysis is accurate we already have a form of “socialism” where the government pays the incomes of the owners! Then ask yourself if this is the best form of socialism possible, or merely a perverse version of it.