Posted inPolitics: National

Let’s look at the fundamentals of the American economy

Republican John Sidney McCain III is trying desperately to back away from his "fundamentals of the economy are strong" line, even going so far as to say he meant American workers. But not so fast. In fact, it is the fundamentals of the American economy that are in dangerous trouble. Let us count the ways. I’m going to have to give you some straight talk, my friends:

1. Debt. The nation is deeply in hock to creditors worldwide. We used this line of credit to finance the housing bubble, wars in Iraq and Afghanistan, tax cuts to the richest Americans, rebate checks that went into the ether and the privatization of hundreds of billions of dollars in government services. It’s paying for the bailout of Bear, Sterns and it stands to take a devastating shock from Freddie and Fannie. From government to business to consumers, Americans are debtors, and most of the debt has been pissed away on war, sprawl, speculation and corruption, as opposed to building something for the future.

As the economist Nouriel Roubini has pointed out, the current account deficit in the ’90s came back as investment in private innovation, but for the past eight years it has been used to finance deficit spending and debt. Moreover, now much of this debt is held by nations that do not necessarily wish us well, including China and the petro-states such as Saudi Arabia.

This situation dangerously limits our options in foreign policy. It makes it a near certainty that living standards will take a big hit as we have to pay it back. Remember, when the Soviet Union collapsed, the first people in the door were the bankers, wanting to be repaid for the debt the Bolsheviks defaulted on after the 1917 revolution.

9
Posted inPolitics: National

Can candidate Hoover fool us again?

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.

2