The protests that have broken out south of the border and are apparently moving north are misguided in their rage. What people remember about the financial meltdown of 2008 was the crashing of the market, the credit crisis and the bank bailouts. They seem to forget that while the banks were certainly a major player in the financial disaster, they were nowhere near alone. I remember shortly after the meltdown CNN was ran some overly dramatic top ten villains of the financial crisis. On the list Ali Velshi presented back then was the American People. They should not be forgotten. The current financial mess is not a result of the rich becoming too rich. It's a result of the average American trying to act like the rich.
The financial crisis of 2008 was upon any amount of sober reflection about the unrealistic expectation of the American dream. For the last twenty years, Americans convinced themselves and their politicians that everyone should have the house in the suburbs with the white picket fence the 2.5 kids and the 1.5 pets. Maybe not my dream, but for a lot of Americans it was the dream, and one that they felt entitled to realize it. Government responded to demand by encouraging home ownership and loosening mortgage rules. Banks responded by loosening lending rules and finding creative instruments to try to water down the worst of the debt. Asset backed credit paper is not a bad idea if you properly assess the risk of the product. The crisis was because no one saw the true value of the product and the underlying mortgages (or at least very few saw it). A society deluded itself that you could own your dream home on minimum wage. The banks were among the deluded. Singling out the banks for outrage doesn't make any sense. You certainly can't blame them because Congress decided to bail them out. Blame Congress. What did you think the banks were going to turn Congress down? The entire society is to blame for the financial mess, no amount of scapegoating will change that.
Being angry with the rich is not productive. Then again, protests rarely are productive. Bluntly, collective consensus driven mobs don't have a great history of affecting change. Particularly, when they have no idea what they want. Yes, there is a growing gap between the very rich and the rest of the country. What should Americans or Canadians do about that? The accumulation of wealth in the hands of a small minority may be discomforting but in a capitalist democratic society, there isn't much that can be done. I don't think there are a lot of people in downtown New York who want to seize the assets of the rich in spite of the "occupy" tone. After all, they didn't loot the Upper East Side, they just walked by angrily. If the protestors want to raise taxes a couple points on the wealthiest Americans, then they should get out of New York, go down to Washington or better yet their local congressional campaign office and start lobbying for change. Urban camping will not close the income gap or restart the economy (okay, maybe a slight boost to the urban camping industry). If the protestors feel disenfranchised and disconnected from their country, they should exercise their franchise and connect. Sitting outside in the cold won't get them anywhere.
Subscribe to:
Post Comments (Atom)
2 comments:
Americans are spending ever less on discretionary items and not more. Indeed, compare the spending habits of a 1970 family of 4 to a the spending habits of a 2003 American family of 4.
The 2003 family spent
32% less on clothes
18% less on food and eating out
52% less on appliances
24% less on a car
76% more for a mortgage on a 6.1 room house than the 1970 family had on a 5.8 room house.
74% more percent for employer sponsored health care
52% more for transportation (more cars and more travel time)
100% more for childcare
25% more for taxes (more two income families meant more taxable income.)
The 2003 family kept cars two years longer, took 33% less vacations and was significantly more likely to live in a home older than 25 years old. The 2003 family devoted 75% of their income to housing, taxes, health care and child care and transportation. The 1970 family devoted 50%. Despite a large increase in family income between 1970 and 2003 (there was a huge increase in the number of two income families) the 1970 family had more money for discretionary spending and savings. Sky rocketing college tuition should also be factored in. Not only has tuition costs gone up 231% since 1970, college education is deemed necessary in ways it was not before. As Elizabeth Warren points out, more people believe the moon landing was fake than believe a university education is not needed for entrance into the middle class.
You: "For the last twenty years, Americans convinced themselves and their politicians that everyone should have the house in the suburbs with the white picket fence the 2.5 kids and the 1.5 pets. Government responded to demand by encouraging home ownership and loosening mortgage rules. Banks responded by loosening lending rules and finding creative instruments to try to water down the worst of the debt."
1) The real estate boom in the States and, indeed, in Canada did not start to boom in 1991. Between 1991 and 2001 prices in real dollars were down in several major markets (e.g., New York, California and Pennsylvania .
2) There were even bigger real estate booms in, for example, Spain, the UK, Australia , Ireland, and Iceland.
3) The leading theory has it that inflows of capital from the Asian Tigers in the wake of the Asian Flu brought down long term interest rates.
Paul Krugman explains: "The term “global savings glut” actually comes from a speech given by Ben Bernanke in early 2005.1 In that speech the future Fed chairman argued that the large US trade deficit—and large deficits in other nations, such as Britain and Spain—didn’t reflect a change in those nations’ behavior as much as a change in the behavior of surplus nations. Historically, developing countries have run trade deficits with advanced countries as they buy machinery and other capital goods in order to raise their level of economic development. In the wake of the financial crisis that struck Asia in 1997–1998, this usual practice was turned on its head: developing economies in Asia and the Middle East ran large trade surpluses with advanced countries in order to accumulate large hoards of foreign assets as insurance against another financial crisis."
4) You have things back wards. The banks were not reactive. They were leading the charge. The Banks pushed for looser mortgage rules both here and in the States and government responded.
Post a Comment