The tip of the iceberg - Fannie Mae, Freddie Mac
September 7th 2008 15:50
5.3 trillion dollars in outstanding mortgages, needing an estimated 25 billion in tax payer money to stay afloat. Today the U.S. government announced they are taking over the mortgage giants Fannie Mae and Freddie Mac. The conservative policy of privatizing profits and socializing losses, writ large. The pathetically impotent argument of letting the free market sort things out seems to be one the government isn't going to follow when it comes to the mortgage market.
Don't get me wrong, I think they have to take the step. But what needs to be noted is why. It is a direct result of conservative policies (and yes, Bill Clinton did buy into most of them too) that have, since Reagan, put the American economy on a track that eventually must be a train wreck. Bush and company accelerated the train when, after 9/11, they decided to make credit even more available and made very ill-advised tax cuts to the wealthy while running up huge deficits.
Let's look at some background as to what got us here. It used to be in America that as productivity increased wages increased, at more or less the same rate, over the long term. Under the idiocy of "trickle down" supply-side economics, that trend has reversed itself. Productivity continues to go up, while real wages are going down. Just look at the minimum wage, for example. It should be about 10 bucks an hour just to be the same as it was in the 1960's, in terms of real buying power. This punches a hole in the ability of the common person to buy goods and services. What was the solution offered? Credit.
As real buying power eroded - 2,000.00 on average just under Bush - credit became the engine driving the economy. Housing prices skyrocketed in many areas, driven in large part by speculation like "condo-flipping." People found themselves flush with cash, which they used to buy cars, boats, or whatever. What resulted was the biggest economic bubble in world history - and one that was very close to everyone - the walls of their houses. Commodity bubbles and even the dot.com bubble were far less likely to be something that hit so many people. This one has tentacles undermining the entire Western World. The failings of Freddie Mac and Fannie Mae are just the latest symptoms of a very ill economy.
Supply-side economics, the support column of Reaganomics, essentially says if you make investments on the supply side, consumers will buy, and the economy will grow, and jobs will be created in the process. The jobs that this does create are mostly lower paying service jobs, which presents another buying capability problem. What neo-cons don't tell you is that supply-side was tried wholesale in America before, most recently in the 1920's. Can anyone tell me that worked out well? It took FDR and strong social programs to bring the United States out of that disaster, and it may well take Barack Obama and another strong social government to bring us out of this one.
Supply-side only functions when the ability to buy increases with the availability of things to buy. A really good example of the breakdown that can occur comes from the former Soviet Union. Under the USSR, people faced shortages of goods. After the fall, stores began to become fully stocked, but no one could afford to buy. The economies are on the upswing there now, but not before the people had to endure alot of hardship. Are the people of America ready to face such challenges?
The biggest mistake Americans can make is to vote to continue more of the same. John McCain wants to continue with all the same very bad economic policies. In fact, he will exacerbate the problems even more. He claims to be a "Maverick," but has fallen in line with rigid neo-conservative policy. We need a big change in direction and approach, and we need it now. Don't make the mistake of not taking these problems seriously. The neo-cons are on the verge of making America a virtual third-world economy - an elite oligarchy lording over laboring underclass - if action isn't taken now.
Don't get me wrong, I think they have to take the step. But what needs to be noted is why. It is a direct result of conservative policies (and yes, Bill Clinton did buy into most of them too) that have, since Reagan, put the American economy on a track that eventually must be a train wreck. Bush and company accelerated the train when, after 9/11, they decided to make credit even more available and made very ill-advised tax cuts to the wealthy while running up huge deficits.
Let's look at some background as to what got us here. It used to be in America that as productivity increased wages increased, at more or less the same rate, over the long term. Under the idiocy of "trickle down" supply-side economics, that trend has reversed itself. Productivity continues to go up, while real wages are going down. Just look at the minimum wage, for example. It should be about 10 bucks an hour just to be the same as it was in the 1960's, in terms of real buying power. This punches a hole in the ability of the common person to buy goods and services. What was the solution offered? Credit.
As real buying power eroded - 2,000.00 on average just under Bush - credit became the engine driving the economy. Housing prices skyrocketed in many areas, driven in large part by speculation like "condo-flipping." People found themselves flush with cash, which they used to buy cars, boats, or whatever. What resulted was the biggest economic bubble in world history - and one that was very close to everyone - the walls of their houses. Commodity bubbles and even the dot.com bubble were far less likely to be something that hit so many people. This one has tentacles undermining the entire Western World. The failings of Freddie Mac and Fannie Mae are just the latest symptoms of a very ill economy.
Supply-side economics, the support column of Reaganomics, essentially says if you make investments on the supply side, consumers will buy, and the economy will grow, and jobs will be created in the process. The jobs that this does create are mostly lower paying service jobs, which presents another buying capability problem. What neo-cons don't tell you is that supply-side was tried wholesale in America before, most recently in the 1920's. Can anyone tell me that worked out well? It took FDR and strong social programs to bring the United States out of that disaster, and it may well take Barack Obama and another strong social government to bring us out of this one.
Supply-side only functions when the ability to buy increases with the availability of things to buy. A really good example of the breakdown that can occur comes from the former Soviet Union. Under the USSR, people faced shortages of goods. After the fall, stores began to become fully stocked, but no one could afford to buy. The economies are on the upswing there now, but not before the people had to endure alot of hardship. Are the people of America ready to face such challenges?
The biggest mistake Americans can make is to vote to continue more of the same. John McCain wants to continue with all the same very bad economic policies. In fact, he will exacerbate the problems even more. He claims to be a "Maverick," but has fallen in line with rigid neo-conservative policy. We need a big change in direction and approach, and we need it now. Don't make the mistake of not taking these problems seriously. The neo-cons are on the verge of making America a virtual third-world economy - an elite oligarchy lording over laboring underclass - if action isn't taken now.
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Comment by Howard
Real Crash