Political Cortex: Brain Food for the Body Politic

The banking downfall took off when former film star Ronald Reagan took up residence in the White House.  The fatal move for the U.S. banking system took place when Reagan replaced Federal Reserve Board Chairman Paul Volcker with Alan Greenspan.

Volcker recognized that financial markets demand close oversight and regulation.

However, Ronald Reagan wanted to replace Volcker with a free market zealot whose thinking coincided with his warped view of less overview and regulation -- none other than Alan Greenspan.

Greenspan oversaw two disastrous financial bubbles, the high tech bubbles in 1000 and 2001.

It is essential that the central bank should maintain stability.  Sadly, this didn't happen with Alan Greenspan at the helm of the U.S. banking system, guided by his tragic free market philosophy.  Greenspan's viewpoint was inspired by cult heroine Ayn Rand.

For one thing, Greenspan should have increased margin requirements (the cash down payment to purchase stock).  The market collapse was inevitable.  In November 1999, Congress repealed the Glass-Steagall Act with the assistance of a $300 million lobbying promotion backed by banks and the nation's biggest financial corporations,.

After the World Trade Agreement, the U.S. manufacturing base was gone with the wind.  It vanished just like the elegant southern life style after the Civil War had gone with the wind.

At one point in our past history the U.S.A. had a lifestyle economic level that was the envy of the world.

That too is gone with the wind.  In an economic study of 30 countries by the Organization for Economic Cooperation and Development, the percentage of individual earnings less than 50% of the population's median income was analyzed.

The poverty level, analyzed this way reveals that the U.S.A. is now ranked only above Mexico and Turkey for poverty out of 30 major nations.

After the U.S. manufacturing base largely disappeared with the signing of the world trade agreements, the U.S. became transformed into a service industry lifestyle.

Jobs flipping hamburgers, working at hotels, laundries, cleaners, restaurants, taxi driving, sales people in department stores and amusement parks replaced much of the former good manufacturing jobs.

By destroying a large percentage of the value of the dollar, exporters' businesses boomed.  The big amusement parks boomed.  Foreign tourist travel at hotels boomed.  The British pound was twice the value of the dollar, the Euro 50% higher.

The real state market boomed.  Foreigners bought condos and homes, driving up prices for U.S. real estate buyers.  However, there was a downside to this real estate boom.

Suddenly U.S. home buyers by the millions used real estate as a substitute for a stock market buy.  Hoping to flip over (buy and sell fast) to cash in on a quick profit, prompted banks to make millions of sub-prime loans, which defaulted, when a glutted real estate market ended the fast flip over buying spree.  Now 2 1/2 million people face foreclosure and 12 million more homes are in shaky circumstances due to job losses.

Operating without careful oversight banks ran out of money, some banks have collapsed completely.  Hastily Bush and Treasury Secretary Paulson got Congress to agree to a $700 billion bailout of banks.

Sadly, restrictions on precisely how this rescue money was to be used and not abused were not put in place.  That being the case, some failed bank executives are using taxpayer bailout money not always for loans as intended but for multi-million dollar bonuses, as they continue to fly about the nation in the luxurious lifestyle of their private jet fleets, which taxpayers will pay for.

Because the U.S. is broke, this luxurious U.S. lifestyle is funded by loans from China, Saudi Arabia and Japan.

97% of the U.S. population in a December 23 CNN Poll said that the U.S. economy is in bad shape, with 10 million unemployed.  With other conclusion could they reach?  Do 3% still live in illusion land?

On December 23, CNN reported an investment adviser whose organization lost $1.5 billion for his clients because of his dealings with financial fraudster Bernard Madoff committed suicide.  It was explained that he was tormented, having to tell his clients their money had vanished in Bernard Madoff's $50 billion Ponzi scheme.

During the 1929 Wall Street market crash, some Wall Street titans leaped out of office windows.

FDR enacted legislation to make certain such an economic collapse never happened again.  When this legislation was removed, history repeated itself.

Gambling in derivatives also helped destroy the U.S. economy.  Joseph E. Stiglitz in the January 2009 Vanity Fair explains:

"Derivatives can be credit-default swaps, certain events happen -- for instance if Bear-Stearns goes bankrupt, or if the dollar soars, these instruments were originally used to help manage risk -- but they can also be used to gamble.  Thus, if you felt confident that the dollar was going to fall -- you could make a big bet accordingly, and if the dollar indeed fell, your profits could soar.  Warren Buffet said derivatives are financial weapons of mass destruction."

If George Bush had recognized these economic weapons of mass destruction and stopped this massive fraud demolishing the U.S. financial system, instead of launching the Iraq War to find non-existent weapons of mass destruction, what a difference his legacy might be today!  

As a result, people worldwide feel he should be facing the World Court in The Hague for the Iraq War venture.