Wednesday, October 15, 2008

Comparing 1929 and 2008

So how is this 2008 economic crises like 1929? The economist John Maynard Keynes said the 1929 meltdown was because income of Americans and Western Europeans was too low to buy the goods and services.During the 1920s government policies favored the rich and attacked the wages of farmers and workers.

Right now the same problem is occurring: the income of Americans is too low to buy goods and services. Former labor secretary Reich said, "Americans have lived beyond their means because their means have declined. It is necessary that their means be restored." Many Americans turned to credit cards and subprime mortgages because they lacked money. Juan Cole says , ’’The average wage of the average worker is lower now than in 1973 and has been lower or flat for the past 35 years. That's the condition of the 300 million or so Americans.” Cole says 300 million have stagnant wages while we have 3 million Superrich who take home 20% of the national income, owning some 45 percent of the privately held wealth in the US.” The Regan-Clinton-Bush neoliberal economic policies have smashed the middle class and working class enriching the 3 million superrich just like the 1920s.

Hoover’s Secretary of the Treasury Andrew Mellon who was a firm believer in cutting taxes, especially on the rich. In the 1920s Mellon kept on advocating and getting tax cuts for the very rich. The rich put their money saved into the bank as they already had far more than they needed.—this excess savings of the rich and unequal income distribution in the 1920s with a small Superirch and a larger struggling masses helped trigger the Great Depression. Bush like Mellon was all about cutting taxes on the superich. Also McCain’s economic plan is all about cutting taxes—that helped cause the Great Depression. He sounds like the reincarnation of Hoover and his Secretary of the Treasury Mellon.

Secretary of the Treasury Mellon in 1930s had a theory of not bailing out banks, but letting the strong banks survive and the weak banks go bankrupt. Go bankrupt they did, so by 1932 there was panic and runs on the bank until late 1932 when FDR was elected and the banking economy completely collapsed. Ben Barncke, the current head of the Federal Reserve Bank, is supposedly a student of the Great Depression, and is critical of Mellon's not trying to save the faiiling banks of 1930-32. The only problem of Bernacke's analysis is that unemployment steadily rose in the time period while wages fell. What as really driving the economny down was falling wages as Americans bought less and less.

Americans by 100 to 1 were against Paulson’s toxic $700 bailout. First, Congresspeople listened to us, rejecting the bailout but then Wall Street and Chamber of Commerce pressure was applied, so Congress reversed itself, approving the bailout. Then stock markets crashed around the world. It seems that Americans consuming on credit cards were the driving force between global economic expansion, particularly in Asia, buying all those goods from China, Japan, Korean, etc etc. So last month when Americans reigned in our spending, those economies in Asian felt pain. Paulson's bailouts do nothing to help Americans get more money from wages so we can buy more goods and services.

Last Friday financier George Sorros on Bill Moyer’s TV show on PBS told the truth about Paulson’s bailout for the first time on mainstream corporate media: Paulson’s bailout is designed to help bank stockholders. By the way, Paulson owns $650 million stock in Goldman Sacks investment bank so Paulson is helping himself and his cronies. Everything Paulson has done is to bailout out bank stockholders, the people who caused the financial crises by demanding ever increasing profits from the banks and who benefited from ever increasing profts from the banks.

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