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?

Convention Tidbits.

It may come as a surprise to some, but I haven't been paying much attention at all to the Democratic National Convention. I caught bits of information leading up to the event, and have since heard a few excerpts from the speeches delivered on the floor. I heard Nancy Pelosi comparing the policies and positions of Obama and his opponent, and trying to stimulate audience participation by chanting "...McCain is wrong". I listened to the thoughts of John Warner, as he imagined a time just four month from now, when we could possibly have a presidential administration that "believes in science". And of course I heard Hillary Clinton speak about potential unity.

I have also gleaned some concerns and reactions from hack radio. There have been the standard issue claims that nothing substantive is being discussed. According to Rush Limbaugh it's all just been "re-packaging of re-packaging". He had some remarks about the surprise appearance of Ted Kennedy, but they were mostly veiled observations that the ailing Senator lacks the energy to be truly inspiring. Limbaugh did point out that he thought it was ironic that they introduced Kennedy with a video montage that began with images of water. Naturally this blowhard is capable of calling the opposing playbook "tired" while still referencing an event that happened nearly 40 years ago. He even supplied the word "Chappaquiddick" for any of his listeners that weren't following closely.

Speaking of water, Limbaugh did have an interesting concern regarding the coming Republican National Convention, to be held in Minneapolis starting on September 1st. He's been tracking the development of the Gustav storm system off the coast of Haiti. One of his sources projects Gustav to develop into a category 5 hurricane, and head straight for New Orleans. Obviously if this happened it would be an effective reminder of how the Bush administration (and by extension, the entire GOP) failed to react strongly and quickly, and left thousands of victims to meet their own fates. Since Katrina, there have been numerous accounts from affected families who report that promises made by Bush and Co. have been left unfulfilled.

Limbaugh predicts that should Gustav visit the Louisiana coast, the "drive-by media" (as he calls the press) will surely dredge up the lingering problems associated with the re-building of New Orleans. In addition, he claims that there will be no coverage of the Republican Convention if all of this happens. I find it amusing to hear him construct contingency justifications for the possible defeat of the GOP in November. It's as if he's preparing his audience to accept that fate has decreed an Obama victory. In that case it will have had nothing to do with the failed policies of the last eight years. It won't be related to the thwarted expectations of Middle America, or the breakdown of the neo/theo-con coalition.

Tonight the nation will hear from Bill Clinton and Joe Biden. Everyone will be picking closely over the words of the former president, looking for any hesistancy in his support of the offical nominee. There have been times over the last few months when I have just wanted ol' Bill to shut the hell up. In my opinion he has subverted his own legacy with his doggedly desperate attacks on Obama. Now he has a chance to redeem himself and help heal the fissures created during the primary battle. I have every reason to expect that he'll rise to the occasion. As far as Biden is concerned, I have no idea what he'll bring to the campaign. Although he seems pretty vanilla, he has a reputation for being a mouthy guy. It might be worth tuning in.