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Meltdown
Economist James Galbraith shows how conservatives engineered financial free-fall
AS LIFE as we know it seemed to be ending—bailouts pushing $1 trillion on Wall Street, the stock market plunging, credit markets seized up around the world, with banks even refusing to lend to each other, never mind lending to their customers—James Galbraith and I talked. In his recent book, The Predator State, James Galbraith does what his famous father, John Kenneth Galbraith, never did: he makes a moral case. He argues that our country has been hijacked by the neoconservatives of the Bush administration. The "ideals" extolled by those neoconservatives—free trade, monetarism, balanced budgets, deregulation, privatization—are nothing more than a bunch of bull, says Galbraith. Moreover, he says, their true agenda was always greed. Taken together, these "ideals" came to represent a worldview whose basic principle was largely unchallenged by liberals. And what was that basic principle? Socialism—socialism for the rich.
During the last decade, the United States has become a nation of predators vs. the rest of us. As Galbraith explains it, neoconservatives in Washington and on Wall Street have conspired to steal elections and occupy the most powerful political and financial institutions in the land so that they might abuse that power. How does it work? When times are good, extol the virtues of privatization. Then reward politicians for betraying the public trust. Finally, let the robber barons rob the country blind. When times are bad, extol the virtues of socialism. Say you're asking for bailouts not for yourself but for the greater good. Nationalize whole industries, like the financial sector, whatever the cost.
Here's a quick economics lesson from Galbraith: Wall Street reinvented itself after the Glass-Steagall Act (which instituted banking controls in the Depression) was repealed in 1999. Then-Sen. Phil Gramm proceeded to deregulate every damn market you can think of: stocks, bonds, commodities, etc. Every form of debt was also "securitized" in exotic financial instruments like CMOs, CDOs and SIVs (like many military acronyms, these acronyms are innocent-sounding names for things that are harmful). Eventually, a newfangled market called swaps and derivatives was ushered in, a market that has a notional value in the hundreds of trillions of dollars—a market as esoteric as it is unregulated. Think of it as make-believe money that made very real people really, really rich. Printing this make-believe money on Wall Street was a new species of bankers called "prime brokers."
Things were good until last summer, when Bear Stearns went bust.
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Economist James Galbraith shows how conservatives engineered financial free-fall
AS LIFE as we know it seemed to be ending—bailouts pushing $1 trillion on Wall Street, the stock market plunging, credit markets seized up around the world, with banks even refusing to lend to each other, never mind lending to their customers—James Galbraith and I talked. In his recent book, The Predator State, James Galbraith does what his famous father, John Kenneth Galbraith, never did: he makes a moral case. He argues that our country has been hijacked by the neoconservatives of the Bush administration. The "ideals" extolled by those neoconservatives—free trade, monetarism, balanced budgets, deregulation, privatization—are nothing more than a bunch of bull, says Galbraith. Moreover, he says, their true agenda was always greed. Taken together, these "ideals" came to represent a worldview whose basic principle was largely unchallenged by liberals. And what was that basic principle? Socialism—socialism for the rich.
During the last decade, the United States has become a nation of predators vs. the rest of us. As Galbraith explains it, neoconservatives in Washington and on Wall Street have conspired to steal elections and occupy the most powerful political and financial institutions in the land so that they might abuse that power. How does it work? When times are good, extol the virtues of privatization. Then reward politicians for betraying the public trust. Finally, let the robber barons rob the country blind. When times are bad, extol the virtues of socialism. Say you're asking for bailouts not for yourself but for the greater good. Nationalize whole industries, like the financial sector, whatever the cost.
Here's a quick economics lesson from Galbraith: Wall Street reinvented itself after the Glass-Steagall Act (which instituted banking controls in the Depression) was repealed in 1999. Then-Sen. Phil Gramm proceeded to deregulate every damn market you can think of: stocks, bonds, commodities, etc. Every form of debt was also "securitized" in exotic financial instruments like CMOs, CDOs and SIVs (like many military acronyms, these acronyms are innocent-sounding names for things that are harmful). Eventually, a newfangled market called swaps and derivatives was ushered in, a market that has a notional value in the hundreds of trillions of dollars—a market as esoteric as it is unregulated. Think of it as make-believe money that made very real people really, really rich. Printing this make-believe money on Wall Street was a new species of bankers called "prime brokers."
Things were good until last summer, when Bear Stearns went bust.
.
.
.
.