Please.

This article starts out very sensibly, acutely even, noting the problems that the corrupt, laissez-faire policies of Harding and Coolidge brought to the American economy. Focus was nicely put on the huge income disparaties between rich and poor both in the late 20s and now. Land bubbles and busts in both cases (in Florida then, nearly everywhere now) also deserve the attention given to them here.

But the last page of this piece is cuckoo. t's the loss of freedom that's to blame and that we should be worrying about now? It's not listening to libertarians (who continue to want NO taxes, NO regulation, and NO distribution of income)?

What exactly happened here? Was there, as I suspect, a quick trip to the wine cellar between pages? If not, why was partisanship (once again) allowed to trump what had been a pretty sound analysis?

W

The site is acting oddly (and slow today) and my comments didn't seem as if they'd been sent. I also apologize for sending somebody else's joke that I saw here posted elsewhere. I thought I'd cut and pasted my comments, not those remarks, which I'd emailed earlier to a friend.

Again, sorry for all the wasted broadband.

Best,

W

were turned into pitchforks.

Nothing in this article is new for the past month. Why didn't you write it before the bill passed, to argue that we shouldn't support the bailout, instead of arguing it now when it's too late? And what's with this "staff" byline? Stand by your work. Are you afraid of retaliation?

Finally, we are throwing money at the banks. Loaned them two hundred billion at last count at 3% interest. So for instant liquidity, we've done that. Now we just have to get the bad debt off the books.

Correlation is not causation. Finding parallels doesn't indicate anything in particular is guaranteed. Last year, based on all comparisons of teams making the Super Bowl, the Giants did NOT match up well against the Patriots EXCEPT IN 1 CATEGORY:
Only one other team with 10 regular season wins had ever made the Super Bowl, and it was the 49ers. And they won.

Given that single parallel, the Giants proved that parallels prove nothing in the world of football.

In this article, a very meaningful discussion of debt, leverage and easy money devolved into a morass of meaningless discussions on who controls how much of what, and the different views of how regulation played a role.

Fact is, the key here is debt. Whether the top 1% controls 50% of assets or 94% of assets or any % of assets and income is not even remotely comparable. Furthermore, the fact that regulations were reduced (by previous administrations, primarily) has nothing to do with the fact that oversight wasn't lacking, just poorly applied. Remember Columbine? Some 20 gun control laws were broken, so I assume that means the fact that enforcement was lacking, we must need more laws?

In fact, what was needed is not more laws, but simply better application of those laws. We cannot blame the crack addiction on the crack dealers with 100% assuredness. They are responsible for supplying the fix, so they bear responsibility for continued use of the drug. But the addiction rarely has little to do with the dealer and much more to do with the user.

I have only a mortgage. And a manageable one, at that. I know many others who do not. I paid for my kitchen redesign with cash. I know many others who used refinancings.

Am I to believe the entire fault falls at the feet of politicians and bankers? I'm sorry, but that simplistic viewpoint is not going to fly. At some point, consumers must step up and accept their responsibility.
Politicians and businessmen, when they do play the role of "financial cop" or "lifestyle cop" are roundly decried by the populace, until that point in time that the populace wishes the cop had done something. "Stay away from my household, just because we're having some domestic disputes doesn't mean you have the right to be here." Then someone is badly injured and the hue and cry goes out "where were you when I was having this domestic dispute?"

In the end, we must all look to ourselves and simply ask - is it really not our fault? Or is it that we simply aren't willing to allow our politicians to let the business cycle take its course? Don't we vote politicians out of office over economic difficulties they have little say or impact on? Doesn't this get them more interested in playing a larger role? When they play a larger role, don't we realize they are limiting our growth?

Vicious cycles exist because we refuse to accept responsibility when it's time.

I'm not sure I see the nexus between income and wealth differences now and the analogy back to 1929. How did wealth and income differences lead to or exasperate the downturn in 1929? The article NEVER says a word.

And I don't think we are going to repeat what is currently considered poor post-1929 government policy decisions. For example, as the author says, the Fed is offering liquidity and the government is unlikely to raise taxes. And while the U.S. may not enter into any new free trade agreements, I doubt that free trade agreements already in force are going to be unilaterally annulled.

But similar to the author, I do believe that prodigious DEBT accumulation is at the heart of the problem; confidence is quickly shattered if you don't think the guy you are lending to will be unable or unwilling to pay you back. And many Americans and illegal aliens seem to feel like they have no obligation to pay back their debts.

And what do our elective and business leaders do? They make excuses for the deadbeats and attempt to pass laws to let the deadbeats stay in their house and keep their cars. It is a new form of welfare. No modern economy can operate if those who take on debt are unwilling to pay it back.

lies in the debt load and inflated assets. (Yes, Virginia, the housing values CAN fall by 80% if there are no jobs.)
Asset values are based on asset sales, not actual need for those assets to be usefully doing something (homes bought for show and flipping, not for living).

I have to agree with some of the comments, though; in that this article doesn't do a very good job of explaining some of the connections brought forward.
Income disparity: it's a problem because it takes local money out of diverse local economies, thereby increasing risk for towns and villages, making them even more dependent on home building and low interest rates. Rich people buy expensive stuff (read "imported") and hedge funds, they aren't re-investing locally in craftsmen and town infrastructure.

As for the government not making the same mistakes it made in the '20's and '30's: they already have. Lowering interest rates to inflate the economy under Greenspan simply threw gasoline on the flames of an already bloated market. The economy should have been cooled down and re-oriented long before reaching a predictable oil peak (and thus, housing bubble), but that would have taken real leadership.

"America's 60 Families" by Ferdinand Lundberg covers the actions of finance and government in the Depression quite well, including the congressional investigation results. After Iran-Contra and Monicagate, we tend to scoff at congressional investigations, but try to keep in mind it was a more serious civilization back then.

Ron Paul's libertarianism wouldn't help anything here. People who don't believe in government shouldn't run for office. There are some things government does very well, some things it does in secret even better, and some things we should be doing without government. The point of the Fed was to stabilize markets. They failed to do that because everyone fell for the Perpetual Growth model. Libertarianism is a fine thing to preach, but you can bet libertarians wouldn't be letting people starve in the streets every time the bubbles pop. That's not 'freedom', it's lazyness and avoiding responsibility.

Gen 4:9 And Jehovah said unto Cain, Where is your brother Abel? And he said, I do not know. Am I my brother's keeper?

Libertarians do not want the elimination of government. They want a return to the founding fathers principals that the power government wields over its citizens is highly restricted and enumerated. That the government is responsive to an educated populaces demands for a just and equitable system empowering them to be self suffcient.

This just isn't the case anymore. The reason: your quote "...its lazyness and avoiding responsibility" to maintain our liberty because we've forgotten how we achieved it.

Make no mistake and do not let the current deciet cloud the issue. It is documented evidentially that the government is the purpetrator of this financial fiasco. To the point of forceful, coercive and manditory participation by the banking industry to support subprime and Alt-A lending. Seek info to Jimmy Carters Economic Community Development act from the 70's. Then it's expansion under Clinton and Bush. Ultimately to Barny Frank and his FRE and FNM involvment tied to expanding this fraud.

Some suppoerting historical quotes:

The Constitution is not an instrument for government to restrain the people;
it is an instrument for the people to restrain the government--
lest it come to dominate our lives and our interests.

Patrick Henry


I would have government defend the life and property of all citizens equally;
protect all willing exchange;
suppress and penalize all fraud,
all misrepresentation,
all violence,
all predatory practices;
invoke a common justice under law;
and keep the records incidental to these functions.
Even this is a bigger assignment than governments, generally,
have proven capable of.
Let governments do these things and do them well.
Leave all else to men in free and creative effort.

Leonard E. Read


"You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away men's initiative and independence.
You cannot help men permanently by doing for them, what they could and should do for themselves."

-Abraham Lincoln


It is not true that the legislator has an absolute power
over our persons and our property
since they pre-exist him,
and his task is to surround them with guarantees.
It is not true that the function of the law is to regulate
our consciences, our ideas, our wills, our education,
our opinions, our work, our trade, our talents, our recreation.
Its function is to prevent the rights of one person
from interfering with rights of another in any of these matters.

Frédéric Bastiat, The Law 1850


Can the law — which necessarily requires the use of force — rationally be used for anything except protecting the rights of everyone? I defy anyone to extend it beyond this purpose without perverting it and, consequently, turning might against right...

Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should guarantee to every citizen the free and inoffensive use if his faculties for physical, intellectual and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation.

This is the seductive lure of socialism. And I repeat again: These two uses of the law are in direct contradiction to each other. We must choose between them. A citizen cannot at the same time be free and not free.

— Frédéric Bastiat, The Law (1850)


For we know that when a nation goes down and never comes back, when a society or a civilization perishes, one condition may always be found —
they forgot where they came from.
They lost sight of what brought them along.

— Carl Sandburg
Speech at Wade House Historic Site 1953


The proliferation of bureaucrats and its invariable accompaniment, much heavier tax levies on the productive part of the population, are the recognizable signs, not of a great, but of a decaying society. Historians know that both phenomena were especially marked in the declining eras of the Roman Empire in the West and of its successor state, the Eastern or Byzantine Empire.

-- William Henry Chamberlin


Remember democracy never lasts long.
It soon wastes, exhausts, and murders itself.
There never was a democracy yet that did not commit suicide.

John Adams, Letter to John Taylor (April 15, 1814)


At no time, at no place, in solemn convention assembled, through no chosen agents, had the American people officially proclaimed the United States to be a democracy. The Constitution did not contain the word or any word lending countenance to it, except possibly the mention of "We, the people," in the preamble . . . When the Constitution was framed no respectable person called themselves a democrat [meaning here one promoting democracy].

— Charles Austin Beard and Mary Ritter Beard, America in Midpassage [1939]



I sit on a man's back, choking him

and making him carry me,

and yet assure myself and others

that I am very sorry for him

and wish to ease his lot by all possible means -

except by getting off his back.

-- Leo Tolstoy 1828 - 1910


What difference does it make to the dead, the orphans, and the homeless
whether the mad destruction is wrought under the name of totalitarianism
or the holy name of liberty and democracy?

-- Mahatma Gandhi Non-Violence in Peace and War [1949]


"Half the world is composed of idiots,
the other half of people clever enough to take indecent advantage of them."

Walter Kerr

"The American taxpayer will never see a dime of that $820 billion paid back. When was the last time a government program actually worked?"

The Trust created at the time of the S&L crisis worked, in that all the money was paid back. Many other government programs work, though often inefficiently. Your position seems more extreme than the facts warrant.

You have told us how bad it will be if Obama is president, who will ask us to do such Socialist things as pay our national debts before the nation defaults. Now tell us how bad it will be if McCain is president, who will keep Bush's war time tax cuts and reduce taxes even more, assuring that the national debt will cripple us.

Of all those quotes, you should double check the Lincoln one. I think that's attributed to him, but isn't really Abe..

Nice collection. Do you keep that around for every time someone makes a quick dig at the Doper Party?
I'm all for Libertarianism, I just don't think the members of its party are smart enough to understand what needs to really be done in order to achieve the freedom they seek.
Society/civilization is an agreement between individuals and the group. The quid-pro-quo is that the individual submits to society's rules in order to gain the freedom from the work it takes to be a true loner. Society agrees, in turn, not to attack the individual without cause (unless you break the rules).
An "educated populace" also requires educated individuals. Since our education became 'standardized', there is little open discussion of the real needs of people: only the topic du jour which usually means black vs. white issues that aren't resolvable, and thus, they are meaningless. Everything meaningful is left to the Invisible Hand Job and moneyed interests are the final morality. Libertarianism ends up in the same picture, only even sooner than Republicanism. The Invisible Hand does not exist because the System of systems is not a free market. It cannot be allowed to be a free and natural system because it lacks proper evolutionary factors to dampen the mechanisms.
Regulatory systems evolved, but have been co-opted by the size of the inputs, thus breaking the machine.
Same thing happened to our democracy, as Jefferson et al didn't foresee that all three branches of government could be purchased by an entity they didn't predict: the immortal corporation and the massed economic power of technology.

The market is insisting on full disclosure of all assets of banks and financial companies. There is rot and it needs to come out. Investors will force it out, either the easy way or the hard way. The market is driving towards pricing all mortgage backed securities, and the paper built on them - as worthless. At this time the only mechanism the market has to discover what paper is worth, is to bankrupt the company (by total loss of faith – whether justified or manipulated). Then the paper is exposed.

Let's change this before any more taxpayer money is spent. Mandate full disclosure now. That will not cure the patient immediately, but it will identify the rot and let it be handled by the market. Many companies will go bankrupt, yes. But many, many more will go bankrupt as the market tears apart any company that depends on credit. And how many companies depend on credit?

The nexus, Steve, is this: a strong economy is broad based meaning that the bottom and middle have opportunity and are prospering and, thus, are able to contribute to growth by purchasing, investing, or being an entrepreneur. Societies that have wide gaps in their income distributions and wealth are historically weak and prone to collapse at least in economic terms, but sometimes those spill over to political instability too (i.e. Rome, South Africa). That is the inherent flaw in trickle-down economics: it leads to instability by focusing all the prosperity at the top. Think of it like a pyramid. The base is wider than the top. After years of these policies, the base is smaller than the top...how stable is that pyramid? any gust of wind or sudden movement and it will fall over. That is why the comparisons are apt between the 1920's and now.

The worldwide banking system is a shambles. Same as in the Great Depression. Each country is protecting only their own banks. The Euro will soon collapse do to these protectionist actions. China and India will go into a free fall as the U.S. and Europe stop importing their goods and services. The emerging markets will totally collapse by New Year.

This is the Great Deprssion 2 a little different beginning but the same ending!

It's a much better comparison. All the same elements we have today - credit bubble, real estate boom (both in Europe) new super power - the USA - today it;s China, and a complex financial scheme by US railroads.

First: Thanks for this piece. I know it bugs people to be reminded that 1% of the country controls a significant plurality of its wealth, but I think you can't remind people enough. Unfettered capitalists can argue until we both fall asleep that a middling Wall Street trader deserves to make 10x what the country's best teacher makes, and I'm still never going to believe you.

As for all the rest of complaining about this post, I'm sure there are a few small points of merit, but the key is the DEBT, the MONSTER DEBT. I'm hardly any kind of expert, but if there's not enough money to go around because everybody's in hock up to their roof of the second vacation home, there's only two ways to go: Print more money or massive failures to pay off debts. Either way, it's a nasty downward spiral.

Again, I'm no expert, but I'm guessing we're going to see another Big Drop or two in the markets, then a long, slow, sad, scary downward trend on the stock market as businesses slowly fold and unemployment slowly rises, just like in Great Depression I. George W. is going to be in the history books like Hoobert Heever, and deservedly so.

tws

Good article, thank you.

Good quotes too Mike Oconnor.

Argue politics and market mumbo-jumbo all you want gang.

Riots and social upheavel are coming.

Obama and Socialist-Fascism with a smile will lead us deeper into depression and the shackles of indentured servitude to government.

"Praise the Lord and pass the ammunition."

It's true Bernanke has pumped money into the banking system. People tend to think it's not working, but this might be what success looks like.

The Obama comments are a little over the top. Obama has demonstrated that he thinks before he acts. We need prudence. Obama has already said he will adjust his plans in accordance with the economy.

Lenin told the peasants what they wanted to hear, so did Stalin as behind the scenes he had millions sent to "re-education" camps to die or be slaughtered. Ditto for Mao and Mussolini and Hitler.

They gained power through the dual use of fear combined with promises of freedom and a chicken in every pot (oh yeah, forgot FDR). What do we have now? Fomenting fear along with promises of everything (cutting taxes, free healthcare, etc., etc.). It's nothing but a power grab.

Obama is a self-avowed Marxist and Black Liberation Theology believer, as is his Wife and their associates (Ayers, Raines, etc.). You won't get the truth from Chris Matthews or Wolf Blitzer or the New York Times.

Google it and watch the videos and read his record not the messiah headlines. Pravda is alive and well in the American media.

If you trust a politician from EITHER side please send me some of what you are smoking/drinking/popping so I can envision the delusion.

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