In which I write about something of which I know very little

Always closest to the flame
Ever closer to the blade
I am poison crazy lush
Built these hands to lift me up
We are servants to our formulaic ways

I am not an economist. John McCain and I share a stated lack of understanding about the economy. Hell, I’m not even that good with managing money. So, I’m really the last person in the world who should be writing about the current American economic crisis. But I’ve really gotten sucked in to this latest Bush mediated catastrophe, particularly into how it came to be. I’m not sure how the country is going to get out of it, but I’m pretty sure that letting new president Hank Paulson bully his way into unlimited power is not the best way out. Here’s hoping, for the sake of my friends and family still living in the People’s Republic of America, that our Congress finds a pair.

The reason that I feel qualified to declaim today is that you don’t really have to be an economist to figure out what happened in the States last week. You don’t even have to be particularly bright. President George Bush summed it up perfectly back in July when he exhibited a bit of uncharacteristic honesty and even more uncharacteristic accuracy saying, “Wall Street got drunk.” This is the first and hopefully last time you will see these words on my site: George Bush was right. “Wall Street” – the investment bankers, traders, speculators, Captains of Industry, Masters of the Universe  and their greedy ilk – were on a binge that they thought would never end. I imagine that there’s a few of us that can relate to that feeling, a party that we hope can go on forever, regardless of consequences, ignorant of the fact that we’re just drunken assholes staggering around in the cruel light of dawn.

In a way, the Wall Street revelers aren’t completely at fault. Someone continued to serve them as they staggered up to the bar, puking up dodgy mortgages and mumbling about liquidity. Someone was there providing the booze to keep the illusory party going. Someone failed to follow the unwritten rule that every good bartender knows – there’s a point at which some drinkers need to be cut off, for their own safety and the safety of others. The bigger failure in this crisis is the bartender’s.

The man behind the bar in this case was the federal government. After the last economic crisis similar to the scale of the one we’re in today, the one so great that we call it Great and study it in history, the Roosevelt Administration and Congress put a number of checks on the banking industry, a number of regulations to prevent a collapse such as the one in 1931. A lot of people didn’t like these regulations, considered them Socialism. But our well regulated financial system kept us in a state of prosperity for nearly 40 years. During these four decades, the hardcore capitalists where whining like petulant children about the undue hardship placed upon them by the government. Somewhere in the mid 70’s, our elected officials started to listening to these guys. And slowly, FDR’s legacy started to be chipped away. The crumbling started under the Carter administration, under pressure during the gas crisis in his administration. Reagan came in like a bulldozer, crushing banking regulations in his wake. Under a recession, Bush I was limited in his deregulation, but the last two presidents – Clinton and Bush – basically eliminated any controls that the Federal Government had over investment banks. Although the G.O.P. is in charge of this meltdown, it’s been a real bipartisan effort to get us here. All of these leaders had the misfortune of listening to the capitalist lie that the markets would regulate themselves, that everything would be OK if the government just got out of the way.

Now, if that sounds like madness to you then you are one of the sane people. Anyone with a modicum of insight knows that “The Market” is only interested in one thing – “The Market”.  Capitalism is at its very core, a purely selfish economic philosophy. It is all about a few folks that have a lot making a lot more  and everyone else, everyone in their way, be damned. It is about greed. The current problem revolves around mortgages. The credit market, not satisfied with its customer base and free of any restrictions decided to branch out and find some new suckers. Led by a few brave innovators, they began to offer credit to people who probably shouldn’t have them. Competition drives capitalism and soon the innovators were followed by all manner of lending agencies and the requirement for huge loans pretty much thrown out the window. After a while, surprise, some of these people couldn’t pay back their loans and the lenders suffered a real shortage of capital. Capitalism without capital equals a problem, panic ensued and here we are today with the Paulson administration ready to bail the lenders our of the drunk tank. What has failed in the U.S. this time, and in most of our previous economic crises, is capitalism itself. “The Market” failed to regulate itself. The government, stripped of its power, was ineffective to stop the few from screwing the rest of us. Ironically, and somewhat satisfyingly, the only apparent cure is socialism.

There is one group of people in this giant mess who are absolutely not at fault, despite what you may hear on Fox News and talk radio. The Cavutos, O’Reillys and Hannitys of the world are trying to place the blame on people who were offered and accepted these dodgy mortgages. These people took on mortgages and then watched their lives fall apart as the “variable rates” varied skyward and they could no longer afford the repayments. The right-wing jerkoffs would have you believe that these people intentionally went in to take advantage of their drunken mortgage lenders. That there was a conspiracy among “the poor” and “minorities” to bring down the American economy. This is clearly ridiculous; who would go in to buy a house with the knowledge that they would not be able to afford it and that the bank would come and take that away? Are there that many sadists about?

I know this to be true from personal experience. When still living in Oxford (yes, Britain has had the same problems and is suffering as well), Dr. O’C and I talked to a mortgage consultant about how much money we could potentially borrow if we were to buy a house. She quoted us an insane amount of money, several times more than our combined income. When we expressed surprise and mild concern, she turned on the hard sell and threw a lot of words at us – variable rates, interest only, incentivised risk – that we didn’t really understand. Now, Dr. O’C’s dream is to own her own house and I know that both of us were tempted to take this woman at her word and jump in to the financial deep end. I think that Dr. O’C and I are reasonably bright people, but we were nearly wooed by this brokers big talk of dreams fulfilled and money almost literally growing on trees. In the end, thankfully, we decided to wait. Thank goodness for that. I know for a fact that we would be one of the people on which the Retread Right is trying to, as a distraction, pin the blame.

I don’t know how this is going to turn out. I don’t know which presidential candidate would do a better job of sorting it out. Actually, I’m pretty sure that Obama would do a better job as he seems to have a better grip on what has gone wrong. McCain just seems to be reacting.  I don’t know if it’s going to get worse of if President Paulson’s bailout will sort it out. But I do know who is and who is not at fault. We can blame this on Wall Street greed, an incapacitated Government and Capitalism. Not at fault are people who were unwittingly sucked in to the whole mess and who now, apparently, are the only ones who aren’t going to be bailed out.

———————–

I should point out that I don’t really care that much for Bush – they were kind of grunge posers – but this song just fit perfectly. But “Razorblade Suitcase” from .

 

 Bush - "Greedy Fly" [4:29m]: Play Now | Play in Popup | Download

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