Written by Michael Clark
Author’s note: This Op Ed was inspired as a response to Peter Wallison’s book, “Hidden In Plain Sight” which argues that the HUD (U.S. Department of Housing and Urban Development) pressured the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to expand home ownership, and this caused the financial crisis.
Both liberals and conservatives have made mistakes. In truth, no one thing or group CAUSED the financial crisis. Time simply ran out, as it always does. Creative Energy turned entropic, as it always does, every 36 years. We have 18 years of creation; always followed by 18 years of destruction; always followed by 18 years of (re-)creation. It always feels good to blame bad fortune on our political enemies.
The White Ego loves this (the Republicans); the Black Ego also loves this (the Democrats). But this is an illusion. The laws of nature drive everything. Creation is Time; and the alarm clock is set for 18 years; and then, as Yeats said in the 1920’s ‘things fall apart’.
One thing to keep in mind when assigning ‘blame’ for the cause of the global meldown is that there were housing bubbles all around the globe, Japan first, in 1989, followed by similar bubbles in America, Ireland, Spain, China, England….I know the Right wants to blame Leftist Socialists for the CRASH, but even if the Left did pressure Fannie and Freddie to lower housing purchase standards, this did not cause housing crashes in Japan, Ireland, Spain etc.
Bubble politics came from Wall Street and the FED. The destruction of Glass-Stegall marked the political triumph of Wall Street, nearly 72 years after greed for unlimited power helped to trigger the last great international depression. Unlimited Greed is always the last stage of the Business Cycle, when people begin to understand that it is all ending. This is a thesis which Wallison openly denies.
The Housing Bubble was one of a series of bubbles: stocks (2001), Housing (2004-6), Commodities (2008-10), Stocks again… In fact this is what happens when we leave interest rates low AFTER the Business Cycle (expansion) ends. The Business Cycle ended in 2001. The appropriate action at the end of the Business Cycle is to begin slowly and steadily raising rates. It is illogical to lower rates after the expansion ends and claim low rates are to support growth when growth has ended and is not possible until after the cycle is completed.
Here is a brief timeline summary:
- 2001: Business Cycle ends. SPENDING CYCLE ends.
- 2001-2019: Rest Cycle, no growth possible. SAVING CYCLE begins. Raising rates short circuits debt bubbles (cancers) and supports the transition away from SPENDING to SAVING, from energy expenditure (Youth) to energy conservation (Age).
Economic cycles need energy to burn (low rates) when they are young and growing; when Youth transitions to Age (2001), the energy changes direction and the cycle changes from spending energy to conserving energy or saving. This is the natural cycle of economic activity.
Republicans (and Wall Street) drove the global economy train over the cliff through greed and very quickly turned the finger of blame on Washington. Their propaganda: If it wasn’t for all those government services and entitlements this would not have happened.
That is a lie.
One might say the Republicans wrecked the train, and have tried to save face by blaming it on social security and liberalized housing rules (read: housing for the black and the poor). This is the political spectrum at work.
But Democrats and Obama went along with it – because Obama is no reformer. Obama (and Clinton before him) wanted to be part of the winning team, wanted to be accepted at the Country Club; they did not want to reform Wall Street – they wanted to be accepted there, where the gods eat.
I don’t blame the Republicans that Time ran out. It is not their fault that Time caused the Crash. Being selfish and building an ideology of how God rewards selfishness is what the Republicans do. This is part of the energy of growth: selfishness, individuality, competition. Of course, it is morally dubious. So, when it crashes, there is a lot of judgment thrown around. Growth makes us rich and comfortable — we put morality out of sight for a while.
If Obama would have blamed Wall Street for the crash and used all his energy to reform Wall Street we would have had a more cleansing ideological confrontation — but he probably would have been assassinated and America would have come apart at the seams. So, Obama suckled up to Wall Street, and kept Bernanke as his Chief Lacky. Bernanke began to shovel helicopters of money to Wall Street and all the banks of the world.
Thus we began a transition from a noisy messy democracy to a feudal society in which the lord and ladies ran the world again (financialization of the Truth) and the vast sea of humanity became a vassal state, dependent on debt. This made the banks the overlords they wanted to be (which Glass-Stegall had made more difficult).
Welcome to the New Feudal Times.
Wall Street decided that we had to compete in the global economy by making the advanced world more like the banana republics, with a tiny majority owning everything and running everything, and the massive working glass fighting each other for part-time jobs and peanuts and nickels and dimes. The first victim in this, of course, had to be the middle class. And we sat by and watched it happen.
Global advances, growth cycles, the Business Cycle, can be driven by wage inflation or by debt inflation. Wage inflation is paid for by corporations. Debt inflation is paid for by the lower class, workers, consumers.
Following debt inflation corporations cut costs, cut jobs, raise prices, and when the FED lowers interest rates to zero, they buy back their own shares and get rich beyond their imaginations, beyond their greediest dreams. This is how kings are made. I don’t hear near as much screaming in the media today when the rich are getting all the welfare checks as back in the 1960’s and 70’s when the poor were getting all the welfare checks. Things have certainly flipped.
Au Revoir Ancient Regime.
One last point. The God I know, worship, admire, does not appreciate being used as a justification for greed, theft and injustice. He is angry. And that is why everything is falling apart. If we expect the chaos to end, we will need to re-adjust our values so that decency is on top and selfishness and greed are on the bottom again. We seem to have gotten things mixed up, to our bitter detriment.