What economy, stupid?

If a government that protects ordinary people is a “nanny state,” then one protecting the super-rich deserves the title of “super nanny state.” Bernanke and the Super Nanny-State

Don’t look now America, but your leaders have abandoned any pretensions to economic management. Back in ‘06 I made an unpopular prediction that the Republicans would tank in the mid terms because they ignored the household economy of middle America.

The Republicans were blindsided when rust belt states started turning against them. How could it be? The markets are booming!

You are being led by a bunch of economically illiterate dingos. Sure they gave away economic responsibility to The Fed and a bunch of corporate mates. Maybe they knows more about economics…

Great move, the corporate mates don’t give a rat’s arse about you, unless you are a shareholder. The Fed champions monetarist policy which essentially means looking after the corps, the big money. So when the Fed cuts rates it is intended to help the big boys out, the markets.

The markets aren’t the economy; the markets are a side game like poker in the parlour. Unless you manage to slip a few chips out of the pot while no one is watching the game gives nothing to the house. If you play like me it would probably take a fair bit.

So now the US is in deep shit, and despite what commentators, IMF et al try to tell you, the US is in that shit pit pretty much on their own. China and India might feel a blip, but they are in a major growth period. They have your manufacturing industries.

Australia fell into bed with these giants and is in danger of being swamped in cash, an economy stretching the bounds of growth. Europe is more complex, but has enough diversity and manufacturing to get through.

And don’t let your leaders put all the blame on the sub-prime market. That was just one element of the rampant greed encouraged by get rich quick merchants you believe are there to protect you.

It seems like old Abe was wrong on one issue, “you can fool most of the people all of the time.” But then the US has always rewarded the robber barons at the cost of the people. You are now living in the Super Nanny State.

11 thoughts on “What economy, stupid?”

  1. This is an excellent article. Thanks!

    As I see it the economic woes we face are mostly the result of an economic pyramid that has become so top heavy that the base is collapsing under the weight of the capstone. The politicians are struggling to shore-up the markets, not to help the common people, but to protect the interests of the capstone, because the markets are the depository for much of their wealth.

  2. Republicans would tank in the mid terms because they ignored the household economy of middle America.

    No truer words, and it will come back to bite the Democrats as well if they don’t take reasonable steps to shore up the economic fortunes of the middle-class.

    I did an article on Blognonymous and Unruly Mob some months back referring to this as the “Corporate Kleptocracy,” a corporate/government partnership to move wealth out of the hands of the rapidly burgeoning ‘have-nots’.

    Rate cuts, as an example, only help out the few who are in a position to take advantage of them. That’s not 95% of the American population.

  3. This is an amazing blog- and wow- there is an article by cart….so exciting…to know you are back- I was thinking I should write you a In Memoriam- like you did for me once ;-)

    ( and Welcome Froggette ;-)

  4. Tom, you said it better than me! I note the poll over on your site that shows either disinterest or ignorance of the issue. But I know like froggy you are working on getting some fundamental truths out there.
    Enigma, it is great to be here, especially with the brief to vent some rage – well as much as I can vent rage :)

  5. It never ceases to amaze me how little people learn from history. When you move wealth from the middle class into the hands of the super rich you get trouble. Ever heard of the French Revolution? I don’t think the republicrats have.

    Enigma4ever thanks for the shout out :-)

  6. Gary, E4E…thanks for the ‘welcome back’. Trying to get back in the swing of things.

    Cartledge… I need to check out that poll straight away.

  7. frogette I expect there was an element of that in the American revolution as well. The profits being repatriated to England.

    froggy, it was a small in house poll, but echoes others I’ve seen. During our election here I came to the conclusion people are scared of being called to explain something they don’t really understand, beyond an emotional response.

  8. Greenspan’s housing crisis euphemism: social security and Free Market myths.

    There are some interesting side issues to the sub prime housing crisis that are not so generally discussed. Are free markets efficient, as the GOP/corporate mantra goes, or prone to excess and economic dislocation? Who pays for the economic dislocation, those receiving the bonuses prior to the crash or John and Jane Doe? If the total housing market is in effect a commodity subject to ups and downs why were the financial big boys all invested in an ever upward scenario? Who lends trillions collateralized by a commodity with little or no equity margin? Greenspan et al, to some degree knowingly, destroyed the S&Ls so Wall Street could get their hands on mortgage paper. This sub prime crisis is actually Part Two of the earlier S&L takedown.

    Also, while considering the effects of Congress, the Fed and Corporate (Bank) America’s destruction of one institution, i.e. the Savings and Loan Industry, ask again why Bush, the GOP and Wall Street say trust us that privatizing social security is a guaranteed boon to our aging citizens.

    First, the myth that free markets operate efficiently: In the 60’s, financial institutions’ equity got hammered by overlending to REITs. Then, as a result of a Latin America lending binge in the 70’s and 80’s, several household name banks disappeared via mergers. Followed on by the the S%L crisis which happened when the biggest commercial banks and investment houses talked Greenspan et al into deregulating these economically safe and efficient entities in order that they could get their hands on what would become known as securitized debt or mortgage obligations. Without legislation to destroy the Savings Industry’s niche, what we now call the sub prime fiasco could not have occurred. It is interesting to note that this is actually the S&L debacle, Part two.

    My labored point is that the financial big boys go on binges. They regularly wipe out enormous chunks of their equity capital and in so doing they wipe out their lending capacity. If free markets were efficient this would not occur. In this fiasco the financial industry bought crap assets. Forget both the borrower and the broker who made the loans. Billions of these mortgages were known to entail a high degree of risk and yet they were bought at par so to speak. There is no evidence of market efficiency here. The supposed best, biggest and brightest bought junk.

    Let’s hear Alan Greenspan’s (hilarious) euphemism on this subject: “Over the past five years, risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.” (As I said the big boys, hedge funds, etc bought crap loans.)(Hence gov’t intervention.)

    Another different light that could be shed on the Collateralized Mortgage crash is that, in overview, housing is or became a commodity. I was a lender in the oil patch in the early eighties when the collective equity of the Texas and other Southwest banks seemingly disappeared overnight. A barrel of oil had risen to $26-28 and when it fell to $12, a domino of bad loans left the US Government as the Southwest’s banker.

    Leading up to our present liqiuidity crisis, all housing became commodified. It had to increase in price for the sub prime CMO purchase and sale system to stay afloat. What I find interesting here is that there are written and unwritten rules that the financial world follows when retail or wholesale customers or the institutions take a position in a commodity. Common sense as well as in-place regulations mandate that a sensible liquid margin be in hand before, in this case, a person or an industry bets trillions on the price direction of a commodity or particular asset.

    A regulator presenting a case for earlier intervention by using this commodity analogy might have presented a simpler, more cogent and forceful argument. Saving John and Jane Doe from resetting mortgages was not an argument likely to get a patient ear from our entwined Corporate America and Congressional decision makers.

    And harken well to the underlying economic rationale and philosophy espoused when George Bush, the GOP and Wall Street attempt to entice the public that placing their retirement benefits in security related private accounts is a guaranteed boon to their retirement well being. The banks and the Fed and their Congressional enablers had their way with the Savings and Loan Industry and the results have not been pretty. When they come asking for commissions on the nation’s social security assets ask them to explain that bit about how markets only rise in value.

    (Nice to hear and see Kvatchian snarkery. (once again))

  9. Bloody hell cog, you really know how to make a bloke work.
    “…underlying economic rationale and philosophy espoused when George Bush, the GOP and Wall Street…” My point is that Americans delude themselves with the word economy. Bush and co don’t have an “underlying economic rationale and philosophy” they have replaced it with pure monetarism and the markets.
    I heard an interview with Merrill Lynch ‘Chief Economist’ the other day. He didn’t talk about economics he talked about markets. The word economy has been totally devalued in American language and the country will pay the price.
    Thanks for the comments.

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