Reading the summaries of the Treasury-blogger love-fest (see interfluidity) brings to mind some recent stuff I’ve read about magic, that it’s all about misdirection. Get the people looking in the wrong places and you can fool them every time.
The cause of our current collapse of effective demand, which is not going to go away soon (proof: consumption is falling 5-10 percentage points from 71 percent of GDP, and the government is too broke to make up the aggregate demand with government investment spending, not to mention that they’re too incompetent to do it, and private investment is still to scared to jump in) is not fundamentally too much debt, although that is a proximate cause, it is mal-distribution of income (and increasingly and massively so, of wealth).
Once the glorification of greed really got going 30 years ago under Reagan, the rich started to manipulate the system (taxes, incomes) more and more to their benefit, with the assent of the masses, who all expected to grab the gold ring themselves at some point. As I point here, as the rich started to pull away, everyone else took on too much debt to try to keep up. The way things are going, I am not alone in worrying about the US becoming a neo-feudal society; Emmanuel Saez, the establishment economics profession’s leading expert on income and wealth inequality, shares the concern. I qualify the profession because the best research on what’s actually happening has been coming from alternative sources for some time now, e.g., Robert Prechter’s book Conquering the Crash, which was early on the timing, as is so often the case, but got the big picture right, which is more than you can say for Bob Rubin, Larry Summers, or any of the other clowns in Washington with the possible exception of Ron Paul.
So all the talk about reforming regulation (Right! We’ll trust them to do their jobs next time?), putting in a systemic risk regulator (we already had one, called the Fed, totally compromised by Wall Street—they let the whole thing happen so the Wall Street bankers could get rich quick), about “too big too fail” and so on ad nauseum is pure misdirection, a shell game. So long as the crooks are running the show there will be no reform.
And why don’t shareholders, who by and large own the companies of America through their pension funds, and who, by and large, are not fat cats—why don’t the shareholders attack the obscene compensation the small club or CEOs and board members arrange for themselves? Peter Drucker wrote about “pension fund socialism” thirty years ago. It didn’t happen, did it? The pension administrators are in on the game. Peter, with whom I discussed this years ago, must be rolling over in his grave
Obscene greediness needs to become so socially unacceptable that its practitioners wither away. Or go away. And lots of luck trying to get your money out of the country.
This is why when I write to my elected representatives I stress that America is a fiscal basket case, and that we need to begin to practice triage, providing necessary human services—a poverty level dole, education and health care—to the unemployed and abandon all stupid imperial ambitions and obscene bail-outs for the well-heeled.
And for crying out loud, get the investment banks out of the Fed’s cookie jar. The carry trade that’s happening now is obscene beyond measure and “will not end well.”
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