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How the Leaders following the Great Recession of 2008 Gave Us the World We Live in Today

Sunstone

De Diablo Del Fora
Premium Member
PLEASE NOTE: This is a discussion thread, not a debate thread. State your views. Provide your reasons for them. Ask respectful questions of other posters. Discuss your views with them. Even compare and contrast your views with other positions purely for the sake of clarification. BUT DO NOT ATTEMPT TO PROVE OTHER POSITIONS FALSE OR WRONG! Moreover, please report to the Mods any posts that engage in debate, or attempt to.​


Twelve years ago, the Great Recession of 2008 -- and especially the political response to it -- went far towards destining us to live in the world we have today. The fact that today ordinary people in most nations around the world are experiencing declining prospects for their future (fewer well-paying jobs, lower standards of living, stagnant wages, etc.), can by and large be traced straight back to how the leaders in power during the Great Recession and immediately afterwards handled the Recession.

The facts that Donald Trump rose to power in the United States, that Europe's leftist parties are almost everywhere suffering defeats, and that neofascism is on the rise worldwide -- from India to Brazil and from Brazil to Hungary -- are largely attributable to how such people as Barack Obama dealt with the Great Recession twenty years ago. Mr. Obama was and is a remarkably good man, but he put his faith and confidence in the wrong economic policies -- as did leader after leader around the world.

Here is a relatively short excerpt from a New York Review of Books article that is very much relevant today:

The New York Review of Books said:
The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations.

In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis. Far from breaking up the big banks or removing their executives, Obama’s team bailed them out. None of the leading bankers whose fraudulent products caused the economy to crash went to jail; criminal prosecution took a back seat to the stability of the system. Obama’s tepid program provided just enough stimulus, via a modest public-spending program and cheap unlimited credit for bankers, for a slow recovery. But the economic security of most Americans dwindled, and the legitimacy of the system was called into question. One consequence has been the rise of the far right; another is Donald Trump.

In Europe the aftermath was worse. Fragmented into twenty-eight member states, the EU could not pursue even the minimal policies of Obama. Germany had already spent some E1.3 trillion on the economic integration of the former DDR and was in no mood to underwrite the recovery of the entire continent. Germany insisted that the struggling countries had to practice austerity in order to restore the confidence of private financial markets. In a deep recession, even orthodox economists at the International Monetary Fund soon recognized that austerity was a perverse recipe for economic recovery.

But the German demands dictated policy for the continent. In addition, the European Central Bank (ECB) had neither the formal powers nor the political consent of its national masters to become a lender-of-last-resort, as the Fed has been in the US since 1932. After the crash, the Fed kept interest rates down and made credit easily available to the financial industry, which prevented the collapse from becoming a general depression. The US government took on debt to pay for services without having to raise taxes (a policy known as fiscal stimulus), and it could extend credit to keep markets liquid. But Europe, because of Germany’s worries that these policies would lead to inflation, had no way to extend credit to struggling nations or to raise money through the sale of bonds, which would have allowed the ECB to provide debt relief or to invest in public services.

The political result was the same on both sides of the Atlantic—declining prospects for ordinary people, animus toward elites, and the rise of ultra-nationalism. In the US, there is at least a left-wing opposition in waiting, with a coherent explanation for what went wrong and a progressive alternative to Trumpism. Progressives have been gaining influence in the Democratic Party, and it’s possible that a neo-Rooseveltian left that supports financial regulation, public investment, and redistribution will come to power in 2020.

Not so in Europe. Parties such as the German Social Democratic Party, the British Labour Party, and the French Socialists disgraced themselves as co-sponsors of the neoliberal formula that brought down the economy. The European left today is weaker than at any time since World War II. As of November 2018, there is just one EU member nation with a left-wing government and a working majority in the national parliament—Portugal—and it is a tricky three-party coalition. In Greece, the radical left-wing party Syriza ostensibly leads the governing coalition, but its sovereignty has been crushed by Athens’s minders in Brussels; today Syriza’s policies are indistinguishable from those of the center-right. In nation after nation, the main opposition to the party of Davos is neofascism.

[Source]

Comments?



 
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PureX

Veteran Member
Unfortunately, there is no way of making these facts known to the American people, or to the people of Europe. The facts are there, and available, but they are floating in a sea of lies and misinformation sponsored by the wealthy elites that now own and control a vast array of media production. Such that people can now simply pick and choose what they want to believe from among the many depictions of reality being offered to them. And it's in this rising tide of lies and misinformation that the nationalistic seeds of blame, animosity, and violence find their purchase, and sustenance.
 
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Secret Chief

nirvana is samsara
Naively I believe there is a genuine left wing alternative available now in the UK, but we may yet have to suffer 4+ years of neoliberal policies from the incumbant tories. We also have the coming nightmare of brexit. All but the rich will be affected but how many will be willingly led by the nose to the scapegoats?

In the meantime we can all enjoy an excellent film explaining the 2008 crash >

 

icehorse

......unaffiliated...... anti-dogmatist
Premium Member
Oligarchs and Plutocrats have been undermining our economy - off and on - for decades. FDR was able to undo much of their corruption, and through the Eisenhower administration the middle class was truly flourishing, unions were strong, our infrastructure was sound and expanding and so on. But the Os and Ps were chipping away at this progress and I'd say that they got their biggest boost from Reagan. Wealth and income inequality since Reagan has grown substantially. I would say that Obama inherited a mess, and had few options when helping the country recover from 2008. (Which BTW seems more like 12 years ago, not 20 years ago as the OP suggests?)

But really, I think "we the people" need to rise above partisanship here. My opinion is that virtually all of our leaders in DC have been severely corrupted by the Os and Ps. Our real fight (we the people), shouldn't be Dems against the GOP, it should be against ALL of our so-called "leaders" who are selling us out to the Os and Ps.
 

Sunstone

De Diablo Del Fora
Premium Member
In the meantime we can all enjoy an excellent film explaining the 2008 crash >


The first time I watched The Big Short was with one of my brothers on Christmas eve the year it came out. He happened to know a couple of the people depicted in the movie, and it was fun and informative afterwards to hear his take on it. Excellent movie! I'd recommend it to anyone.
 

Revoltingest

Pragmatic Libertarian
Premium Member
In the meantime we can all enjoy an excellent film explaining the 2008 crash >

It was a fun movie, but it explored only a tiny aspect of the recession's origins.
Many other factors created a perfect storm of instability.
=== Warning! This will be long, tedious, & contentious. ===
=== So it'll be divided into 2 posts. ===

The trigger:
9/11 wasn't the underlying cause, but it set things in motion for economaic collapse.
I saw something different.

First, a fluid mechanics analogy....
Consider a pipe system with fast flow, small diameters, & smooth innards.
It has low resistance & laminar flow. Tap one of the pipes with a hammer,
Now there's turbulence, high resistance, & ruined system performance.
It'll remain that way til the system is re-started.

What's the problem? The tap or the system design?
Design, of course.
It should've been designed to perform well even with an infinite number of
monkeys typing tapping away with hammers. A system is "hardened" if it's
designed to endure all the vicissitudes possibly inflicted upon it.

Our country wasn't hardened against the watershed event of a major domestic attack.
Some shortcomings....
- We were emotionally unprepared for the firey losses.
This led to ill considered reactions & over-reactions.
- We were financially unprepared for any economic hiccup,
eg, too many had borrowed to the hilt, & had no rainy day reserves.
- We hadn't paid much attention to domestic security, despite warnings,
eg, airlines had inadequate security to prevent takeover of planes.

Our unpreparedness, ie, the lack of system hardening, was a problem
spanning many administrations & decades. I blame no person or party.
 

Valjean

Veteran Member
Premium Member
Nothing surprising here. Organized money and power in the US has been has been clawing its way back to dominance ever since FDR. After the neoliberal Reagan Revolution of the '80s there was little further democratic impediment to big business taking the reins of power from the people.

Power to the Plutocrats!
 

Secret Chief

nirvana is samsara
The first time I watched The Big Short was with one of my brothers on Christmas eve the year it came out. He happened to know a couple of the people depicted in the movie, and it was fun and informative afterwards to hear his take on it. Excellent movie! I'd recommend it to anyone.
Who did he know?
 

atanu

Member
Premium Member
PLEASE NOTE: This is a discussion thread, not a debate thread. State your views. Provide your reasons for them. Ask respectful questions of other posters. Discuss your views with them. Even compare and contrast your views with other positions purely for the sake of clarification. BUT DO NOT ATTEMPT TO PROVE OTHER POSITIONS FALSE OR WRONG! Moreover, please report to the Mods any posts that engage in debate, or attempt to.​


Twelve years ago, the Great Recession of 2008 -- and especially the political response to it -- went far towards destining us to live in the world we have today. The fact that today ordinary people in most nations around the world are experiencing declining prospects for their future (fewer well-paying jobs, lower standards of living, stagnant wages, etc.), can by and large be traced straight back to how the leaders in power during the Great Recession and immediately afterwards handled the Recession.

The facts that Donald Trump rose to power in the United States, that Europe's leftist parties are almost everywhere suffering defeats, and that neofascism is on the rise worldwide -- from India to Brazil and from Brazil to Hungary -- are largely attributable to how such people as Barack Obama dealt with the Great Recession twenty years ago. Mr. Obama was and is a remarkably good man, but he put his faith and confidence in the wrong economic policies -- as did leader after leader around the world.

Here is a relatively short excerpt from a New York Review of Books article that is very much relevant today:



[Source]

Comments?

I think this article may be relevant to the discussion.

Chomsky: Ventilator Shortage Exposes the Cruelty of Neoliberal Capitalism
 

Revoltingest

Pragmatic Libertarian
Premium Member
Part 2 of my tirade

Back in 2001, long before the recession officially started.....
Immediately after 9/11, I watched my commercial tenants & many other businesses
began contracting. Those depending upon venture capital lost that source, & closed.
I saw vacancy rates increase, business incomes drop, employees lose jobs or see
reductions in pay & hours. The recession wasn't upon us, but these were leading
indicators.

As income fell for those with debt, we got in trouble with both business & home loans.
Government policy exacerbated this turn of events.
Over many decades, it created the real estate bubble by incentivizing treating home
ownership as a hedge against inflation, a tax reduction mechanism, & a nest egg.
It made sense to borrow as much as possible to buy the spendiest home possible.
That yielded the greatest financial return....if all went as planned.
How?
- Regulatory requirements to make highly leveraged loans,
eg, Community Reinvestment Act.
- Federal bank auditor requirements to make such loans.
- Banning red lining.
- Heavy tax subsidies for home ownership.
- Government run lenders (Fannie Mae, Freddie Mac) enabling
zero equity home ownership.
- Institutionalized inflation (currency devaluation due to expanding
the money supply faster than the economy), which made homes a
speculative hedge against inflation.

When homeowners began to fail,lenders like Countrywide (the canary
in the coal mine) became insolvent. Unlike the scenario in the movie,
these problems were also because of regulation, not just inadequate
regulation.
Moreover, when homes became underwater (debt > value), the fed
(Fannie Mae & Freddie Mac, the largest residential lenders in the world)
refused to allow them to renegotiate their loans, instead sending many
into foreclosure.
Government reacted by bailing out most of the lenders instead of the
borrowers. I'd have preferred helping the latter, which would still
benefit the former. It would help more people more effectively.

Commercial loans suffer federal meddling too....
The fed required commercial lenders to foreclose on loans which were
troubled, instead of working with borrowers, eg, Citizens Bank, RBS.
This made loans with some possibility of default become 100%
probability of default. All to what end? I haven't figured that out.


I'm not trying to make anyone be wrong.
This is just my perspective.
I was (am still) both a lender & a borrower.
I invest in & manage real estate & development.
I knew bankers, & dealt with many banks, eg, Citizens, RBS, TCF,
United Bank & Trust, Chase.
Btw, the worst lender I ever encountered was RBS (Royal Bank Of
Scotland), which is owned (over 80%) by the British government.
Nasty people they are.
 
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Revoltingest

Pragmatic Libertarian
Premium Member
Sorry for the cattiness...symptom of excessive quarantine, you know....
You damn hippies....so sanctimonious.

I'm back in the saddle again with short posts that people actually read.
 
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PureX

Veteran Member
The capitalists love to blame it all on the government, because that way they can hide from their own responsibility. But the fact is that for many decades, now, our government has been totally controlled by the wealthy capitalists that pay for their political campaigns, for their political perks, for their family member's do-nothing, high paying jobs, and their big-dollar speaking tours once they retire from "public service". All forms of legalized bribery that ensure that they act on behalf of those paying them the bribes, instead of on behalf of the people they are supposed to be representing.

So all this whining and complaining about how the government regulates the wrong things, or regulates too much, or regulates too little, is just blowing smoke up our butts. Because the goverment regulates whatever those bribe-payers tell them to regulate. And they deregulate whatever those bribe-payers tell them to de-regulate. The crash in '08 was caused by the systematic bribery of our legislators by big investment conglomerates to remove the laws placed in effect after the crash of '29 and the subsequent great depression. Namely, the big banks bribed the legislature to eliminate the Glass-Stegall Act that was put in place to stop banks from becoming investment speculators with other people's money. And once they got that impediment removed, they went wild creating and packaging "loan products" in every confusing and dishonest way possible to exploit and gouge anyone and everyone for huge profits, including other banks and their own clients. They basically generated an elaborate pyramid scheme of bundled loans that created an illusion of value that they didn't actually have. An illusion that could be cashed in on so long as more 'suckers' could be found to buy them, looking to then cash in for themselves.

So we can blame the government all we want to, and surely it is partly to blame. But the real culprits are criminal-minded capitalist investors who successfully bribed our government representatives to let them cheat the system, and thereby steal as much money from it (and from all of us, ultimately) as they could get away with. And even when it all blew up, our bribed up politicians bailed them out, and prosecuted NONE OF THEM for what they'd done. And yet WE KEEP ELECTING AND RE-ELECTING THESE CORRUPT POLITICIANS because we are ignorant, stupid, selfish, greedy, bigots that would rather blame each other, and elect known criminals, than admit to and take responsibility for our own complicity in the disastrous mess all this bribery and corruption has caused.
 

sun rise

The world is on fire
Premium Member
The short term people have been discussing in this thread is real and relevant. And part of the OP.

I'm going to take a different view and try to fit the OP timeframe into a longer term perspective.

Personally I've been thinking longer term a bit as in centuries not decades. The current system of capitalism has been flourishing more or less for centuries with periods of prosperity and periods of panic/recession/depression.

The major recent competitor was I would call state ownership of the means of production. We learned through that experiment that command and control economies don't work. They're too rigid and inflexible.

We've seen that capitalism works when something new is developed and we have a lot of competitors enter a field all producing something better. Personal computers and cellphones are classic examples.

But over time, the market matures, consolidation happens and the industries grow sclerotic and oligarchs and plutocrats emerge to dominate and control. The big companies become bureaucratic and increasingly rigid.

I personally experienced this rigidity where a production change required a long form to be filled out and nitpicked by form checkers in India. Then when the form as correct, it was reviewed by senior middle management who had no idea about the implications of the change nor the risk. So we had to do a song & dance to simplify the request to meaningless bullet points on one page for them.

Looping back to the OP, I see how the OP thesis is part of this picture. The policies that have been put in place don't really change the long term trend but merely prop it up. The analogy I'd use is a drug addict getting another dose of drug to keep withdrawal symptoms away.
 

icehorse

......unaffiliated...... anti-dogmatist
Premium Member
But over time, the market matures, consolidation happens and the industries grow sclerotic and oligarchs and plutocrats emerge to dominate and control. The big companies become bureaucratic and increasingly rigid.

I think a common mistake is to try to find economic systems that don't require monitoring and tweaking. Economic systems are like all other complex, man-made machines... they need monitoring and tweaking :)

So I think it's fair to say things like "left unchecked, system X heads in direction Y", but that shouldn't really be considered an argument against system X, because once again, we should be monitoring and tweaking WHATEVER economic system we implement.
 

Revoltingest

Pragmatic Libertarian
Premium Member
I think a common mistake is to try to find economic systems that don't require monitoring and tweaking. Economic systems are like all other complex, man-made machines... they need monitoring and tweaking :)
The big difference in economic philosophies appears to be the extent
to which the players tweaking it vs central command doing it. The
best mix....finding that is where the fighting happens.
 

icehorse

......unaffiliated...... anti-dogmatist
Premium Member
The big difference in economic philosophies appears to be the extent
to which the players tweaking it vs central command doing it. The
best mix....finding that is where the fighting happens.

It seems pretty clear to me that the players cannot do a good job of it. But that still leaves a LOT of variation in how invasive "central command" can be / needs to be. I don't think "central command" was all that invasive in the 50s.
 
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