Friday, September 19, 2008

The Economy, Stupid

The ailing US and Global economy has been an interest of mine for about ten years. Suddenly, everyone has this deer-in-the-headlights look on their face as they struggle to comprehend the grim sounding jargon spewing from talking-heads on the 24-hour news networks.

Now, I should be clear that I'm no math whiz or economics major, so if I can understand some of the basic principles at work here, anyone can.

First I think we can agree on some familiar colloquial gems: 1) That power corrupts and 2) That money is power.

So let's think of money as a bag of Halloween candy, and financial institutions as small children.

If no one is supervising a child with a giant bag of candy, what's the logical outcome? He's going to stuff himself with candy until he pukes, right?

This happened once before in our history; stock prices were over-inflated and banks were extending too much credit. Although these weren't the only reasons for The Wall Street Crash of 1929 and The Great Depression that followed, which were decades in the making, the important point is that there was little or no government oversight of financial institutions, and they gorged themselves on candy until their gluttonous waste was spontaneously purged all over the American economy.

In order to rebuild our country and ensure that such a chain of events was never repeated, FDR helped broker the Bretton Woods Agreements, which instituted domestic and global financial rules, and set up government oversight of financial institutions.

To put it simply, instead of trusting the child to regulate his own intake of candy, the government keeps a close eye on him and makes him account for everything in his bag. This is called REGULATION.

Okay, now here's the important part; over the last 30 years, the government has been involved in a systematic DE-REGULATION of our financial system. This deregulation led to things like gambling in the stock market and predatory lending practices. Gambling in the stock market led to inflated stock values, and predatory lending helped contribute to inflated home values since no price for a house seemed unreasonable as long as everyone could get financed.

With the upcoming Presidential elections, I am obligated to point out that McCain has been a driving force for deregulation for almost all of the 30 years that it's been happening.

For far too long, our legislators have operated under the Adam Smith principle of the Free Market: that corporations and financial institutions will do what's right, without oversight, because in the long run, doing what's right will bring them more success.

But this notion fails to take human nature into account. For instance, it's a fact that if a child eats a little of his candy at a time, his candy will last a lot longer and he'll get more enjoyment out of it in the long run. But even if the child is fully aware of this fact, he's still more likely to eat too much candy if no one is watching.

Republicans in particular like to present us with the notion that if corporations and financial institutions are allowed to make money without government restrictions and supervision, they will make a lot more money, and all that profit will naturally trickle down to the rest of us. That's the equivalent of saying that if you allow a child to fill his bag by snatching candy from smaller kids, he'll eventually have plenty to share with everyone!

The obvious action we can take immediately is to get Obama into the White House. He's going to need to invest unprecedented amounts of money into building our infrastructure, which only a Democrat (Like FDR) would be willing to do.

Why invest in infrastructure when we're already in debt?

1) Roads, buildings, train tracks and schools have actual value, as opposed to the subjective value of stocks or even money.

2) Building stuff puts people to work.

3) Putting people to work gives them confidence in themselves and their country, and when they get their paycheck, they'll go buy stuff, which will drive our economy back to where it needs to be.

See, when Republicans scare people with talk of "Big Government," they're talking about the kind of government that regulates corporations and protects the average citizen and small business owner. One example of this strategy is when they talk of universal healthcare: "Do you want a government bureaucracy standing between you and your doctor?" You mean in place of the corporate insurance bureaucracy that's standing between me and my doctor right now?? Why, yes, I do.

So, in conclusion, if everyone in this country votes according to their actual financial interests this November, then Obama should win 95% of the vote and McCain should win 5%.

Of course, that prediction is not taking human nature into account.