An Example From Our Current Economy
by Handsome Matt
Paul Volcker should be listened too more often. I’ve cited him before in an earlier post, and I want to point him out again.
He said something that has stuck with me:
Yes. It collapsed on us. And I think that’s the test of a financial system—is it facilitating reasonable stability and growth? No, it’s had a breakdown at great risk to the economy. It became dysfunctional, and it is still largely dependent upon government assistance.
Putting aside my personal issues with banks, loans, FICO, and being reduced from a person to a three digit credit score, let’s look at the basic of our current economic situation and our consequential responses to it.
At its simplest: A system failed, dramatically, and we’re rebuilding it with the same parts that failed. At the direction of those who caused the failure.
When a car engine fails, you rebuild it. Replacing the broken parts with newer and/or stronger parts. If it is particularly bad, you buy a new car.
Or suppose your computer fails. You try and repair it, or buy a new computer. My family had a Dell computer some years ago, and the motherboard kept warping and failing. It turned out to be a design flaw with Dells, and the only replacement part you could buy was from Dell; at a premium price. After one repair, that was it. And we haven’t bought another Dell computer since.
Our economy imploded, and dragged every facet of our lives down with it. In any other situation, in our everyday lives, we would repair it once or twice, and then finally buy something new or different.
Yet we aren’t. Looking at the current trends in Washington, apart from the opiate of the masses in the form of the FCIC, we’ll return to business as usual. This isn’t the first time our financial sector has failed us. There have been recessions in every decade from the Great Depression onwards. This isn’t safe, stable, or steady growth. It’s more akin to manic-depressive swings, a sort of reckless all or nothing style of economics.
With a bit of historical perspective, I would argue that it is the inherent nature of our current financial system to operate in this boom or bust cycle. And yet we aren’t attempting to significantly change anything within the system, because banks and other financial institutions say we shouldn’t.
Radical Ideas, Too Radical
We had opportunities to radically change how we did business. Main Street Americans had a hundred solutions that would have worked as well, if not better as the bailout. And yet, nothing. They were too radical, and directly benefited the American people, not a business.
My favorite, was the immediate forgiving of personal debt. This would automatically have freed up, hundreds to thousands of dollars for every US citizen every month. That would have immediately stimulated the US and world economies. And what’s better, those who hadn’t learned their lesson would be back in debt in a quick amount of time. Everyone would have benefited.
Here’s the connection. Our current industrial system is based on fossil fuels and as a by-product, it pollutes. Not just greenhouse gases, but pollution. By-products, waste products, emissions, toxins, carcinogens, trash, litter, etc etc etc.
It’s a broken system. Just like the financial system. And yet in both cases, those who benefit from the system most want to keep it. “It’s basically a good system, it just needs to be tweaked,” it’s only good because they’ve made copious amounts of money on it. And it doesn’t need to be scrapped, rebuilt, or changed because they will lose copious amounts of money.
The ideas that might actually work, that might actually make our economies cleaner, more stable, and ultimately better; have been dismissed as radical. Written off as unfeasible, in the same way that Main Street ideas were written off.
We’re returning to a broken set of systems, with no move towards reforms and changes that could actually benefit the economy.
Is this really change? Wasn’t our president elected on a campaign of change of hope? Where is it?
Meet the new boss, same as the old boss.
Check It Yourself:
List of Recessions – Wikipedia article listing the recessions of the United States from 1797 onward. Based on National Bureau of Economic Research data.