Ding-Dong, the Witch is Dead. Now What?
There have been a lot of theories tossed around during the last several months to explain the economic crisis that has finally hit the United States. Perhaps it's because the effects of the long-brewing situation intensified during a presidential election, but it's notable just how political so many of the explanations have been. So many citizens are curious as to how the arcane manipulations of the system are going to hit them. For too long, otherwise intelligent and informed folks have taken it for granted that the markets work themselves out over time. There was no great perceived need for the populace to follow along too closely. I am certainly guilty of giving the workings of the economy little consideration.
It's become imperative that I drop my personal distaste for the details of the economy. Everyone seems to agree that we are in for a long period of tumult, and many are sure that we are entering a period of depression. How is that going to affect me and my family? How can I ensure the value of the money I have saved over a period of years? What is my life going to look like if shit really hits the fan? No doubt there are a lot of people asking themselves the same exact questions nowadays. But where can someone with little background in economics turn for substantial answers to these questions? It stands to reason that anything that has been said in the midst of a presidential election should be viewed with skepticism.
I do have recourse to a couple of friends that have been paying attention to the markets for a long time. These individuals have developed perspectives that go beyond the simple conclusion that we are "screwed". They offer insights into what may happen over the next several years. Still, it's obvious that no one can say for sure. People can't even agree on the reasons why we are in this terrible position in the first place. If you've been paying attention, you have no doubt heard from some "free market" capitalists that it's actually the fault of what little regulation has existed in the housing markets over the last decade. These guys are still pimping 80's-era mythology. The last refuge of the ideologue is denial.
Yet there are still "conservatives" that will blame the entire Wall Street debacle on Bill Clinton, Jimmy Carter, and the Community Reinvestment Act. The blame (under this theory) rests solely at the feet of low income (minority) borrowers that got in over their heads with mortgages that they could never afford. If you research the numbers, you discover quite quickly that this is a smokescreen. The percentage of subprime mortgages that were mandated by the CRA is minimal. There were people from all over the class spectrum taking out loans that exceeded the amounts that conventional wisdom dictated as prudent. Who was responsible for perpetuating the myth that housing values would increase by exorbitant amounts forever?
Naturally there were others (besides Clinton) identified as culprits. Alan Greenspan refused to raise interest rates despite the cautionary warnings that observers were delivering. Greenspan, a disciple of objectivist Ayn Rand and true believer in the "free market", failed to recognize the housing bubble until it was much too late to stave off the crisis of its resounding burst. As late as 2004 he was still encouraging prospective buyers to take out adjustable-rate mortgages. Greenspan's love affair with derivatives extended to mortgage-backed securities as well. He absolutely refused to entertain any regulations concerning these unproved and shaky financial instruments. Such tools have been identified as a further compounding cause of today's perilous economy.
Despite the fact that Greenspan was still trying to defend his outmoded libertarian views as late as this past April, he finally admitted his culpability on October 23, 2008, in testimony to Congress. In his dotage, Greenspan finally had to admit the fallibility of his lifelong commitment to "free market" ideology- "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity -- myself especially -- are in a state of shocked disbelief." Always admired for his qualities of understatement, when asked whether that meant his views had been wrong Greenspan responded, "Absolutely, precisely”. Little good that does us now. We'll pay the price of for his faith. But now that the "free market" witch is finally dead, what happens now?
It's become imperative that I drop my personal distaste for the details of the economy. Everyone seems to agree that we are in for a long period of tumult, and many are sure that we are entering a period of depression. How is that going to affect me and my family? How can I ensure the value of the money I have saved over a period of years? What is my life going to look like if shit really hits the fan? No doubt there are a lot of people asking themselves the same exact questions nowadays. But where can someone with little background in economics turn for substantial answers to these questions? It stands to reason that anything that has been said in the midst of a presidential election should be viewed with skepticism.
I do have recourse to a couple of friends that have been paying attention to the markets for a long time. These individuals have developed perspectives that go beyond the simple conclusion that we are "screwed". They offer insights into what may happen over the next several years. Still, it's obvious that no one can say for sure. People can't even agree on the reasons why we are in this terrible position in the first place. If you've been paying attention, you have no doubt heard from some "free market" capitalists that it's actually the fault of what little regulation has existed in the housing markets over the last decade. These guys are still pimping 80's-era mythology. The last refuge of the ideologue is denial.
Yet there are still "conservatives" that will blame the entire Wall Street debacle on Bill Clinton, Jimmy Carter, and the Community Reinvestment Act. The blame (under this theory) rests solely at the feet of low income (minority) borrowers that got in over their heads with mortgages that they could never afford. If you research the numbers, you discover quite quickly that this is a smokescreen. The percentage of subprime mortgages that were mandated by the CRA is minimal. There were people from all over the class spectrum taking out loans that exceeded the amounts that conventional wisdom dictated as prudent. Who was responsible for perpetuating the myth that housing values would increase by exorbitant amounts forever?
Naturally there were others (besides Clinton) identified as culprits. Alan Greenspan refused to raise interest rates despite the cautionary warnings that observers were delivering. Greenspan, a disciple of objectivist Ayn Rand and true believer in the "free market", failed to recognize the housing bubble until it was much too late to stave off the crisis of its resounding burst. As late as 2004 he was still encouraging prospective buyers to take out adjustable-rate mortgages. Greenspan's love affair with derivatives extended to mortgage-backed securities as well. He absolutely refused to entertain any regulations concerning these unproved and shaky financial instruments. Such tools have been identified as a further compounding cause of today's perilous economy.
Despite the fact that Greenspan was still trying to defend his outmoded libertarian views as late as this past April, he finally admitted his culpability on October 23, 2008, in testimony to Congress. In his dotage, Greenspan finally had to admit the fallibility of his lifelong commitment to "free market" ideology- "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity -- myself especially -- are in a state of shocked disbelief." Always admired for his qualities of understatement, when asked whether that meant his views had been wrong Greenspan responded, "Absolutely, precisely”. Little good that does us now. We'll pay the price of for his faith. But now that the "free market" witch is finally dead, what happens now?
Labels: Alan Greenspan, Apocalypse, Ayn Rand, Bill Clinton, Corporate Excess, Corporate Media, Economics, Free Market, Mythology, Religion
posted by Merge Divide at 4:08 PM
1 Comments:
To Mr. MERGE DIVIDE.
The present recession would recover soon, as now a day everybody is postponing his/her expenditure for one or another reason. But we cannot live without goods and services, we will have to fill our tills in homes. So there would be new, enhanced demand and the production cycle would get energy.
Naval Langa
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