The quote in the title of this post comes from Gretchen Morgenson, who writes the MarketWatch column for the Sunday New York Times, on the 9/19/08 episode of PBS’ Bill Moyers Journal. Watch it.
I am so thoroughly disturbed by the current state of affairs in the US economy that I must put all political correctness aside for a moment and ask you, dear reader, for a reality check.
It appears that our government is about to take on a tremendous amount of debt by nationalizing private entities, buying trillions in bad debt, and by some accounts, taking on some 70% of the mortgages in the United States.
This is unprecedented. Cataclysmic. Terrifying.
I spent some time last night actually watching TV, something I do less and less of these days, catching up on a backlog of Tivo from the past week. I watched a bunch of news reports, pundits, and analysis of how and why this economic crisis has come to a head, what the government is doing about it, what those who have been reporting on the financial sector for 30 years think about it, and the whole time I’m thinking to myself, wow: I have absolutely no faith that anyone in the US government or otherwise actually knows what they are doing with regards to this imploding/exploding economic mess.
If you somehow aren’t following this, you should be. Every American citizen certainly should be, because we the American people are about to be saddled with TRILLIONS of dollars of more debt – and I cannot imagine how this won’t impact the rest of the world in some way – so you should be paying attention even if you aren’t in the US. Did I mention _trillions_ of dollars in new debt? I can’t really fathom a trillion dollars, personally, it’s still hard for me to wrap my mind around billions of dollars. Here’s a quick primer, if you’re trying to catch up:
So, from what I can tell, the last 30 years of banking deregulation (i.e. relaxing the laws, standards, and oversight of what financial institutions and Wall St. investors are allowed to do), has led to ever larger financial institutions creating ever more complex financial “products” that have become so damned shady and complicated that even Wall Street itself doesn’t understand what they’ve gotten us all into.
You’d have to have been hiding under a rock to not know that a bunch of companies made a bunch of risky loans for people to buy houses they couldn’t really afford, and as the price of everything (especially energy) began to soar, a bunch of these people couldn’t afford to make the payments on their homes anymore. The companies that loaned them the money weren’t too worried, cause they’d “packaged” up big bunches of these loans and “sold” them to other companies and banks, who then themselves sold pieces of this debt to a bunch of other companies and banks, and so on and so on. And as more and more people stopped being able to pay their mortgages, more and more of these companies and banks were stuck holding the bag on all this debt that no one was paying on. This is the “Subprime Mortgage Crisis” that we’ve been hearing about all year.
Except it seems that the people in the US government and the geniuses on Wall St. either didn’t know or didn’t want to admit that these “packages” of defaulted loans had become so widely sold, traded, and mixed in with other stuff, that even big, stable, long term financial institutions and companies were in big trouble as more and more people became unable to pay for their houses. Suddenly the troubles of “Main Street” were wreaking havok on “Wall Street” and everyone began to panic. It got so bad, that big name companies that everyone thought were safe and stable started filing for bankruptcy and begging other big banks to buy them, it got so bad, that people and companies began to take their money out of money market accounts and other funds and that caused even MORE people to panic.
And so, in the span of a week, the Bush Administration’s people have stepped in and said, don’t freak out, we, the US government, will take over some of these failing companies, and we, the US government will insure your money market funds, and we, the US government will take on the debt of all these houses that no one is paying for anymore. And Wall Street rallied at this news on Friday and had a big party that Uncle Sam was going to swoop in and save the day.
From what I can tell, this is the craziest, scary economic situation of our lifetimes. The financial health of the United States of America hasn’t been this jeopardized since the Great Depression.
Now one of the analysts on PBS said that you don’t stop to fix the leaks in your roof when the hurricane is still going strong, you just do what you have to do to survive the hurricane, and you fix the structural damage when it’s over. I think that’s true. I think if the government had not stepped in, goodness knows how far reaching this crisis might have become, it’s truly terrifying to think about, particularly considering how much US debt is owned by foreign investors.
It seems to me that this means that the US government is going to make damned sure that the free market capitalists don’t loose THEIR homes and savings and retirement, and the ordinary people who have already lost their homes and savings and retirement are just out of luck. For all of my living memory, the REPUBLICAN PARTY has stood for business, for smaller government, for telling regulators to butt out of what business does, let the all-knowing all-wise market sort out the winners and losers. And when they were winning, all those profits, all that money, was THEIR money and the government shouldn’t tax it, shouldn’t take any of it, the American people as a whole shouldn’t share any of it, because it was the gutsy risk-taking of the capitalists that led to the profit in the first place, and the market rewards winners and punishes losers. Not two weeks ago I saw a political ad for John McCain talking about making the tax cuts to the wealthy that the Bush Administration enacted early on permanent.
Except now, when the all-knowing, all-wise market started doing exactly that, started punishing the risk takers who were taking TOO MUCH RISK, now the REPUBLICAN PARTY is saying wait, hold on, the American people, the US government (you know, the ones who didn’t get to share in the wealth cause it was all YOUR money), well, we’ll take on a bunch of your debt. We’ll take on a bunch of the risky crap that you’ve gotten yourselves into. Hell, we’re even going to take over some of your companies. And the free market capitalists are saying HALLELUJAH, yes please, please take all this mess we’ve gotten ourselves into. PLEASE TAKE IT. The financial press is using words like toxic, poisonous, and radioactive to describe this debt. The wonky economic analysts in their rumpled suits and crooked ties and silver hair, the people who have been studying this stuff for their whole professional lives admit that even they don’t understand exactly how “toxic” this toxic stuff is.
And me and you, Joe, we’re about to get handed that bag of toxic stuff.
My undergraduate degree is in Political Science. I (sadly) didn’t focus on economics as much as I wish I had, and I can’t claim to understand everything that’s going on right now if even the pros don’t have a clue, but I just have to put this out there, publicly, for my own conscience.
The REPUBLICAN PARTY, representing free-market capitalists, has largely had their way in terms of economic policy, they have successfully gutted many of the laws put in place after the Great Depression, and they have successfully protected the profits – the sickeningly vast profits – of a very, very tiny percentage of very, very wealthy Americans.
I’ll sit tight with everyone else while the hurricane is upon us, but when it’s over, we have a LOT more than just repairing the roof to do. I personally know people in my family, people in my social circle, who are facing homelessness and dire economic circumstances. I personally know people who got a few thousand dollars into credit card debt (and I’m talking $4-5000 range) who then had something bad happen, an illness, a job loss, who were unable to get out from under it and are struggling to just plain feed their kids. And I didn’t see Uncle Sam coming to bail THEM out.
I am angry. Afraid. Worried. And I genuinely believe that the REPUBLICAN PARTY has quite literally wrapped themselves in the American Flag and used every dirty trick in the book to keep the average, church-going American distracted by issues like guns, abortion, and gay marriage so they can rob our country blind. And they seem to be getting away with it.
When does it stop? When does the party of “Country First” actually start putting the country – the whole country, not wealthy investors – first?
I do not understand how any sane person could vote for John McCain in this election. I really don’t. I don’t know how any sane person could be watching this and not see the horrible irony of wealthy “government keep your hands off” investors begging the government to take on their private debt, so much money than I can’t even fathom it in any real sense. 35% more than the entire US defense budget. 4/5ths of the output of our entire national economy in debt.
It’s staggering. Just plain staggering.
And the last time I looked, this is what CNN’s homepage looked like. The only indication of this on the front page? A tiny link on the right.
And on that depressing note, I’m off to finish laundry and go to my grandpa’s house. He grew up in just-post depression America, and I hope he has some damned good advice for me.