Monday, December 3, 2007

A Vivisection of the US Economy

By Phoebe Loosinhouse

I call this a vivisection, since at the moment anyway, the economy is still breathing feebly, albeit on life support with the family members gathered.

Basic Premise : Alan Greenspan was and is a moron as are all the Republican supply siders and trickle downers who espoused and put into practice measures that for decades have favored corporations and the wealthy while cannibalizing the middle class and ending upward mobility as we know it.

Our real spending power is an illusion. Our economy as a whole is an illusion.

Deregulation was supposed to make goods and services cheap and affordable for the American consumer. Did you ever think 20 years ago that you would be spending HUNDREDS of dollars a month for telephone and television services? How about those utility costs - Boy, they really went WAAY down too, didn't they? And your health insurance went from double digits a month to triples with your employers paying less and less every year or picking a crappier provider every year. Fuel costs - they did a good job with that too, didn't they?

One basic premise of Greenspan and the supply siders was that the cost of money (interest rates) should be cheap.

Think about that. If interest rates are really low all the time, there is little incentive to save in the traditional manner as people had done previously. Your CD is getting 3-4% and barely keeping up with the fake inflation figures. So, everyone in the country is forced to speculate (that's what it is) in the stock market in order to attempt to get any type of decent return. They also FORCE more people into the market when companies do away with defined benefits (pensions) and put us into 401Ks which are all about the stock market. (How many 401Ks ANYWHERE have options like good old American savings bonds or T-bills?)

This was a wealth transfer. And did American industry use this huge influx of dollars responsibly? No, they did not. They put all this money into giant cookie jars and they paid our dollars out to the top tier while simultaneously cutting back on the wages and benefits of the average worker while also closing down production and offshoring labor.

Then, oh my God, the stock market itself tanks from market mania in the tech sector (our bubble of the 90's). People discover that hey! you can lose money in the stock market! There is one place for frightened America to put it's dollars - again shored up by artificially cheap interest rates- and that is REAL ESTATE. Real estate investment/speculation reigns supreme. Close to one third of real estate purchases are investor driven.Excess demand drives up prices and then causes builders to continue to overbuild with the cheap dollars. Alan Greenspan himself decries the wealth that America has tied up in untapped equity and sings the praises of ARMs.
Not just home buyers, but home owners decide to take their long-term security and turn it into plasma Tv's and SUV's and granite countrtops.

Everyone takes out fake, cheap, illusory, non-regulated mortgage products which are then turned into fake, cheap, illusory, non-regulated securities which then pollute the entire financial substructure. A cancer, if you will. Dollar plummets.

The teratagen was the underlying idea that what is good for American Corporatocracy is good for Americans in general. Let's put this canard to rest. The American Corporatocracy has proved that they are no more responsible than your self-indulgent teen age son who wrecked your car while you were out of town and then lied about it. They can't HANDLE the responsibility of little or no government oversight and regulation. They have proved this time and time again. Our economy is in a shambles as a result.

So, where do we go from here?

1. A reinstitution of government oversight and regulation of those areas of the economy that I would consider to be non-optional -
Natural Resources, Utilities, Healthcare, Transportation, etc.

2. Free money is not necessarily a good thing and drives up prices due to increasing demand while depressing savings. So, If I were Ben Bernacke, I would actually RAISE the interest rates.

3. Some type of government intervention in the unfolding mortgage mess is absolutely necessary. People who don't understand this will see most of their housing equity ( the major component of individual American wealth) evaporate.

Posted in full with author's permission.

Originally posted at

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