An Alaskan journalist's perspective on local and national issues

Posts tagged ‘Alan Greenspan’

America’s Economic Troubles Are Only Just Beginning

A lot of people have had complaints about the way that President Barack Obama has handled things.  There are the far-right complaints that are unintelligible, like he’s a socialist, Hitler, un-American, communist, and stuff like that.  Then there are those who aren’t along those lines who have much better forms of criticism, like this reporter.  Some believe that Obama has failed, in some pretty serious ways.  And there is a lot of evidence to support that theory.  The problem with this President and his time in office seems to be – he doesn’t seem to take the problems that are already happening very seriously.  What’s more, these are real problems that really affect this world right now.

Here’s a nifty little story that was in The Wall Street Journal on June 9.  It talks about how China’s housing bubble is also about to burst.  People in this country should be scared of this concept, very scared.  The problem is that most people don’t know, and most people don’t care.  This reporter is scared, scared to death.  After seeing how close things got to collapse in this country, people should be incredibly afraid.

For those of you who may not know what the “Housing Bubble” is, it was the chief cause of the destruction of the United States’ economy at the end of 2007.  It was caused by Over-the-Counter Derivatives, along with other things.  But when the housing bubble burst, that sent things crashing down very quickly.  There was a rather engaging episode of Frontline which talked about this in detail.  It told the story of Brooksley Born and her efforts to warn people, while going up against Alan Greenspan.  She saw what was coming from the sale of over-the-counter derivatives, and nobody would listen to her.

We didn’t truly know the dangers of the market, because it was a dark market.”

That was a quote from Born, and a very good one.  The average person doesn’t understand the inner workings of the market.  On the episode mentioned above “The Warning,” several sources commented that you couldn’t understand what Greenspan was talking about, but you wanted to believe he knew what he was doing because he sounded smart.  This was a dangerous thought process, and only too late did we find out that it was wrong.

Ronald Reagan had won.  Government was seen as the problem.  And even though Bill Clinton was someone who believed in government and wanted to use it, he was kind of forced into that Reagan-esque ideology because that was what people wanted to hear.”

That was from Joseph Stiglitz, who had worked as Clinton’s economic advisor.  The fact is that for so long, things in this country were going so well that people just didn’t want to hear that there would be problems.  Honestly, who would want to hear that?  Who would want to hear that the system that is giving them so much money might be flawed?  Born saw things for what they were, but, like so many other things in this country, people just didn’t listen.  People don’t want to listen now, either.  They really don’t.  People don’t want to hear that they need to be taxed more.  People don’t want to hear that regulation is a good thing.  Nobody wants to hear these things, but they need to, because right now we are at an interesting time for things.

It was all bad timing, really.  It was just the timing of things was so unable to be planned for.  Here is what is happening right now that could shape the future of our economy and destroy the only hope we have left.  The Butterfly Effect couldn’t be understood more if it was viewed at any other time than right now.

1. The tsunami in Japan, and the subsequent chaos with the reactor in Fukushima.
This was just bad timing.  Of course, it is a terrible tragedy that will continue to effect Japan for years to come.  But the worst part of all, aside from the horrible death toll and property destruction, was the fact that their economy has been torn to shreds.  Until this moment, Japan was the third largest economy in the world.  It used to be that Japan was the second largest, but China overtook them in 2010.  The likelihood that Japan will fully recover from this within my lifetime is almost non-existent.  For as well as they weathered this tragedy, they have been torn apart.  It is an awful event, but not only for their country, but it could affect the entire world.

2. The US economy is slumping again
This year, early this year, the economy of this country has hit the brakes.  A lot of things went really wrong.  The housing market hasn’t bounced back.  Consumer spending is going way down.  Prices were surging.  A lot of things have gone wrong.  Some economists think that this will bounce back, and that it was just a bad first quarter.  This doesn’t mean was are declining, but the growth has slowed to a crawl.

3. Democracy in the Middle East
As peaceful revolutions hit nations like Egypt, Tunisia, Syria (it didn’t work for them, but they tried), gas prices started to soar.  As a result, people started driving less and less.  There is a sad irony about this country that our economy is contingent on oil.  Were it not for gas, this nation’s economy would be destroyed.  Same as military spending, which is even more depressing.  If somebody were to come out tomorrow and say that they have found a cheap reliable fuel that can power everything, our country’s economy would die that same day.  So, the massive rise in gas prices decreased sales.

4. No significant regulations have been placed on Wall Street
The average American thought that after the meltdown in 2007, this country would buckle down and get ahold of the corporations that had done this to us.  Ironic that none of the criminals who had done this to us are in jail, except for Bernie Madoff.  Obama passed Wall Street Reform, but that was nothing more than a watered-down piece of legislation that really did more harm than good.  It was a lot like the Healthcare Reform bill in that regard.  The fact is that business-as-usual in this country has been institutionalized.  Obama promised that he would be putting the screws on Wall Street and cleaning house, and instead the only thing that he delivered was putting the screws to the credit card companies.

5. China’s housing bubble is about to burst
This is the most dangerous part of it all.  China has a much higher inflated housing bubble than America.  It is looking to burst in the very near future.  The reason that Japan was brought up is because of what is happening in China, and the situation of not only the Asian economy but also the global economy.  China is part of a group of four nations that dominate the Asian economy – China, Japan, Taiwan, and South Korea.  They are known in economic vernacular as “The Four Dragons.”

If China and Japan collapse, this won’t just affect their countries.  We have made this world so interconnected that the domino effect is genuinely terrifying for everybody.  True isolationism is impossible anymore.  If China and Japan collapse, Asia collapses, if Asia collapses, the world collapses.  The United States is in a very dangerous place right now with out economy.  What scares me, and what should scare other people a great deal more than it does, is the fact that the rest of the world doesn’t notice.  Most people are happy enough to be ignorant.  These are huge issues, and most people are content to just keep to their own world.

But what will Obama do?  He seems to be nothing more than a career politician, and that is sad.  It is sad because he has capitulated on everything so as not to have a battle and to avoid confrontation so he can get the moderate voters to look at him and say, “he’s not like the others, he tries to talk.”  While admirable at heart, this kind of thing doesn’t work, has never worked.

Will America find out too late?  Will another Brooksley Born come and tell us that things are getting awful, and nobody will listen?  Alan Greenspan shut her down.  It was poetic to watch him do the walk of shame after the Congressional committee roasted him for his view on the market taking care of itself after the meltdown.  Will anybody learn?  Will anybody care?

Peace out,

Eli

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