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By Mark Crane  Motormanmark.com

CLICK HERE to see my latest blog on the economy.

In 1980, voters elected a Republican president, Ronald Reagan, who began “deregulating” everything, which means he just stopped government from watching out for bad things private citizens and companies do—or just defunding government agencies so much that they don’t have the staff to carry out their role. The effect, he hoped, was to destroy a bloated bureaucracy that stood in the way of innovation.

In addition, despite having to wrestle with a Democratic Congress, Reagan succeeded in severely cutting the taxes of the wealthy, and he, counter-intuitively, ramped up government spending as had never been seen. The national debt (how much we owe to other countries) tripled during Reagan’s years, rocketing up to almost three trillion dollars when it had never reached a trillion any time in history before Reagan. This caused a boom, the type of boom you see in the expenses of a very irresponsible person with their first credit card. Deficits (us spending more than we are taking in) were completely out of control.

The profits rich people scored were so great that they adopted Reagan’s reckless economics as a theory of government, and so a graph of the federal debt looks like a hockey stick, shooting up and never falling back, from 1980 (Reagan) to the current day, where the federal debt is about 11 trillion bucks.

You see, corporations got to open the real, great, big, shiny presents under the tree starting in 2000, when the very worst president and worst vice president ever were elected to office.

US voters elected Bush-Cheney and a Republican Congress—which is ridiculous, because the Congress and Executive (president) are supposed to stop one another from going overboard. When you elect the same party to both, you want drastic change. This is what Bush-Cheney provided.

The Bush-Cheney theory was to destroy government—to just make every agency of government work so poorly that all the country’s powerful & rich people could come in and take every last bit of value, so that it would be a very long time indeed before anyone could build up a government with enough resources to fund the kind of regulatory might we exercised during the 70’s or, say, to agree to pay for the health care of its citizens.

And, sure enough, they robbed us blind. During Bush-Cheney, the difference between rich and poor grew faster than ever before. The government sold off record numbers of assets and tried at a feverish rate to “privatize”—to liquidate (sell off) well-functioning government agencies and give their contracts over to private companies. Bush-Cheney were enormously successful, only meeting failure when they overreached with the gall to try to convince the US people that it was in their best interests to replace their social security savings with shares in the stock market.

We were idiots enough to elect Bush-Cheney, but we can boast that we weren’t idiots enough to buy that bridge.

Meanwhile Democratic politicians had given up the fight. Most accepted this new national order, and, hell, it was becoming so expensive to run for office you had to be in the pocket of private industry to get elected, anyhow, so the Democrats stood together in cowardice—the worst sin of a politician: to fail to tell the people when they are wrong.

In the midst of Bush-Cheney there was a total loss of control of financial industries, which is not particularly surprising, and I’ll tell you why:

Economics is a farcical science. It is a science the way fantasy baseball is a science. It wouldn’t seem so to observe all these very serious people on TV talking about stocks and investments, but they actually are all talking a load of crap. Not one of them is even slightly capable of making a real prediction that can be demonstrated not to be luck. Their successes are either the result of information that was not known to others, or reasonable guesswork. How they got through the past two months of obvious utter failure and are somehow still running the show is due merely to the fact that US citizens are too insecure and too narrow-minded for it to be possible for an honest politician (I tried to think of an example but failed,) to succeed by saying “The entire economic system of the world is built on a fallacy that growth can be never-ending. We must stop growing immediately and rather learn to live in harmony with the Earth and with one another, and we must organize the whole world to work together under one government.”

Anyway.

Just remember: no one understands squat about the economy.

So, starting with the Republican Congress and simp of a Dem, Bill Clinton, 5 years before Bush-Cheney, and reaching a fever-pitch at the height of Bush-Cheney, with no regulation of the financial sector, virtually anyone could get a credit card; anyone could get a mortgage. It is a conservative estimate that half of these “subprime” loans are not capable of being paid. And do not let anyone tell you it was mainly poor people–55% of subprime loans were to people getting cash loans, using homes they already owned or were paying off as collateral (“second mortgages”.) And another 10-25% of these loans were to speculators who buy and sell properties to make a quick profit.

The CEO’s running the companies didn’t care that their companies were making bad loans—they would just turn around, bundle the loans and sell the loans to investors who sometimes knew no better, and other times planned to resell the bundles for profit before they started smelling sour. And, to make things more complicated, they took out insurance on these bundles, too, so that even if they failed, they were covered. The insurance was sold by huge corporations, like AIG, the stockholders and executive boards of which knew full well the federal government could never allow to fail.

So the corporations were allowed to grow too large, as they remain still.

And the CEO’s were making incredible profits. How would you like a half-billion dollars for 8-years work? Think you could retire on that??

As a result of all these phony loans, what happened? All across the country, and even across the world, home values started to inflate, like a great big soap bubble. People who owed virtually their whole mortgage found they could take out another mortgage and get a big bag of cash from the bank because their home was increasing in value so quickly. And when they’d found all the people willing to sign off on those loans, these financial service companies started making loans based on the continuation of the trend. You buy a house, you get a second mortgage, then, you get a third mortgage because not only is your house worth more, but we’re willing to bet with you that it’s going to be worth more yet next year!

All those financial services/mortgage brokerage companies and all those credit card companies raked in the dough. Their managers had enormous salaries. Real estate developers and sellers made another bundle, all that money coming from credit given by investors who trusted the system, knowing the loans were too big a part of the economy to ever fall through.

It could be opined that without the profits the US scored during this period, we would’ve fallen into a depression just after 9/11. In the past 5 years, 40% of our nation’s income has come from the financial services industry, the word “industry” used in that way being such a revealing marker of how our economy has degenerated from the days we actually sold cars and trucks and shirts and pants to the world. It could be said this period where we took cash from investors and the government to create an “industry” that produced nothing, was our first great stimulus package. Only, it was funded not by federal debt so directly. With the financial industry leeching as middle-man, this first stimulus was funded on both ends of the process–by the home purchaser seeking the cash, and by investors, 401K’s, and the government, providing the cash.

Sooo, the chickens eventually came home to roost and all those bad loans started going belly-up, but not before a huge bubble had built up—a bubble so enormous that the average house in the desert of Tempe, Arizona was worth a quarter of a million dollars.

So now we have an economy that should fail. Real estate is way overpriced, and a massive portion of existing mortgages are troubled or doomed. What would you do if you owed 250 thousand on a house worth 180?

And we have a country full of state and local governments about to go broke because falling home values mean less property tax revenues.

So what does the government do? They say, in essence, we are going to pay to keep this bubble inflated, which, mind you, doesn’t take a puff, as they’d have you believe, but a steady flow. And it does nothing but delay the inevitable.

Already approved payments by the US government to private hands: 840 billion for mortgage-related assets, 85 billion for AIG, 200 billion for Freddie & Fannie, 300 billion in FHA insurance for loans, 29 billion for Bear Stearns, 50-160 billion for savings & loan costs estimated… there’s more–it all comes to about 2 trillion bucks so far.

And who is paying the trillions of dollars it will take to stave off calamity??

The media lies to you. They tell you it is the taxpayer.

Hell, no. Someone stop them from saying this will be paid for by the taxpayer.  No one is saying we should raise taxes to pay for this.  This will be paid for by national debt.  We are paying for private financial corporate debt with national debt–money borrowed from China.

If the politicians had to actually pay for this, they would never advocate it. In fact, they are intent on cutting taxes, or leaving them at the deplorably irresponsibly low level where they currently stand.

This is further robbery of future generations. This is the Reagan doctrine, it is the Clinton doctrine, it is the Bush doctrine. Utter stupidity.

Can this be put on a public referendum??

Answer: No.  Who’d vote for it other than the politicians?

David Brooks had a column in the Times saying we should “shore up” the economy, calling opponents to the $840 billion bail-out “nihilists.” …An interesting word to choose, a word that shows Brooks knows this is a deadly limb we’ve ventured onto. He doesn’t say people who don’t think the bail-out will succeed are faithless (one of his favorite words,) but “nihilists,” which denotes complete destruction of existing political and/or social institutions. He knows we are so close to the breaking point. He is secretly faithless.

All right, Dave, now that you and your buds got your big fat Congressional bill full of money. Just do one thing for me, okay?

PAY FOR IT.

Let’s have a tax on all you rich guys: 25% of this year’s income. There. That’ll do it. Stop borrowing from my children and from the value of our dollar–the value of our nation’s economic future. Fund your own way of life with your own money.

Or, let’s just tax investments, like other countries do.

But you see the David Brooks’s and Bush-Cheneys of the country want everything. They want to keep their own money and keep the disparity they hold over the nation’s and the world’s poor. They want a government unmolested by demands from those poor people, so they want to give them a house and a college education, but they don’t want them to get the wages to pay for it. Credit was the great tool they were to use to carve this dream world into existence.

It’s called indentured servancy, or to be less dramatic, debt peonage.

Now for the great big bastard of a figure I’ve been holding back on for maximum shock value:  These mortgages that cannot be paid back are conservatively estimated to total $31 trillion.

Makes $840 billion look like a piss in the wind, eh? Makes a person wonder if there isn’t some way to get back all that money lost in that first stimulus package I referred to. All those CEO’s and hedge fund managers, all them savvy investors who bought and sold and then bought and sold again. All those real estate developers who were cashed before the bubble burst. All those characters who were offering dirt-low mortgages of the “variable rate” variety, mortgages that cost little, waiting around for a year or two before everybody responsible clears out of the way and then suddenly the fine print has them shooting up, costing more than a loan shark would think to charge.

And, not to seem too nihilistic, but it gets worse. Those days of supporting our nation off the financial industry are over for good. People do not want to loan because we are no longer loan-worthy. 40% of US family income goes to pay housing costs and 20% goes to paying debt (the rest is needed for food and fun and frolic.)

Credit card debt is up more than 50% since 2000 alone.

There is a point at which there is no money to be made taking risks on loaning US citizens money, and that is just where we are. The government can guarantee all the loans it wants, and print all the money it wants but no solution has even begun. There is no collateral (what smarter guys than me call “asset value”) left.

All we have to show for our spending spree is another huge bubble. I call it the junk bubble. It is filled with “Give-Me-a-Wink” Elmo’s and tank-sized, gas-guzzling SUV’s and great big plastic deer for your lawn and hats that say “I’m with stupid” and coffee machines that grind your coffee on a timer and televisions big enough to drop on their backs and play shuffleboard along and talking, motorized treadmills and tons and tons of very tasteless jewelry and 48 quatrillion plastic water bottles, and a sea of other “disposable” creations that never really can be disposed of because they are made of a type of plastic that takes half a billion years to degrade.

And don’t forget that every year that our national debt goes up, so goes our interest payments. It’s just like your credit cards.

Taking its turn after the US and European multi-trillion dollar stimulus and bail-out money-shovelings, China has decided to commit $1.1 trillion (a million millions and one hundred thousand millions) to stimulus over the next two years. Next at bat? Well, it’s back to us again. In January, our new president has promised, he will get another stimulus passed here. It has been speculated that this next one will be a stimulus to stimulate all stimuluses.

Economies, start your salivations!

But, wait–where’s that money coming from?? Yes, China. China, who just took 1.1 trillion for itself, which wasn’t good news for us since the less money China has, the more expensive it is for our debtor “taxes-are-evil” nation to get credit. Dark clouds are brewing.

Now, I have a quiz for you:

What is at the heart of this worldwide economic crisis?

a) The mortgage meltdown?

b) Credit default swaps?

c) The greed of Wall Street?

d) The fact that the world is nearing the end of its capacity for consumption by humans; that food production and shipment has become too expensive to satisfy the needs of the world’s poor (and if you’re not poor, don’t take comfort, because you’re next); that the value of the dwindling resources we are taking from the earth is approaching a tipping point, and the sources of fuel too scarce–that we have digested all our frontiers and polluted our planet to the point where it is turning in on us, making growth, which is necessary to capitalism, biophysically septic; that, due to nationalism, the people of the Earth are apparently incapable of making decisions for the good of the whole world, and are, in fact, forced to make decisions that are rather ramping up the destruction, such as the need of huge nations like India and China to industrialize and use as many fossil fuel resources as quickly as possible to enable each one’s race to expand and claim its share of the worldwide markets, of which there is not enough to go around because everything on earth that can be owned is already owned by the thieves who just bankrupted the world, and I think it is at this point I should end this sentence?

If you go back a month before the current financial meltdown began, you will find oil and food futures (stocks sold in oil/food that has yet to be produced) at the top of the list of price volatility. The economic crisis has brought these indexes down, but not because there is suddenly more oil to be had or because people of the world have more food to eat. Oil is cheap because the economy has brought down consumption, and the oil producing nations have yet to decrease supply to bring prices back up. Though, with lower oil prices, food costs less to fertilize (food comes from oil –see this really great article,) process, and transport, food is not affordable to poor nations and probably never will be again.

Question Two: Who deserves scorn for leading us into this mess?

a) Bush-Cheney? An administration purposed on dismantling the federal government, draining all our resources into private hands, and attempting to seize a hubristic fantasy of dominance in world affairs, with the silly dream of our wealth ruling the other 95 % of the world despotically, and our nation similarly ruled by wealthy despots.

b) The greedy CEO’s and the financial services cabal? But the idea of them as “greedy” or as a “cabal” is quite silly, in fact, as they have been openly feeding off the US investors and borrowers and government for the past 25 years, and have been well-esteemed by all who commented on them and their overly complicated dealings, long before all the caterwauling over variable-rate mortgages and shady instruments, which could be seen and, in fact, were seen a long way off, despite the adverse impression given now by press and politicians.

c) The US public! Who prefer television and video games to informed democratic participation; who looove to purr about the curve of their 401K’s; who show no propensity toward cooperating as world citizens since they, frankly, if they do give a damn about one single suffering foreigner anywhere else on earth, do not show any evidence of it, from the genocide they pass over on their way to the sports section to the pre-emptive civilianicide they commit for nationalistic shock-and-awe entertainment and then re-elect even after the lies they should’ve known better than to swallow (if not for their Hitleresque tastiness!) have been exposed.

It is all related. It is all one big bag. I am only trying to call attention to the always-neglected fact that people are a bunch of ignorant chimps. There isn’t a damn thing we are doing well with on this earth, not a thing we have any decent control over. It is only by design that we believe in our way of life, our independence, our capitalism (Bush had the gall to return to Wall Street before his long walk home to Texas, and preach about the glories of capitalism –as if Bush is in a position to instruct anyone about anything but maybe a 2 year-old who needs to learn how to pull his zipper up.)

And, as our new president has the good sense to understand, we cling to our religion. Maybe he also understands the reason we do this is because the ideas of right and wrong, good and evil, (ie: Christian v. Islamist, terrorist v. national soldier) and their attendant concept of magical thinking that there is some divining purpose to the unraveling ribbon of human process (which makes us incapable of having the courage to change course) only seem to us to be stabilizing and all there is that stands between this folly and humbling, completely unpredictable change, but that that change is unavoidable, and exigently necessary.

Now. That said, I must make it clear that there is nothing wrong with being a race of scared, incompetent chimps.

Really. I mean that. The good news is the possibilities there are ahead of us. We have much room for growth. Some day, maybe we’ll look on Al Einstein as we do the first guy who figured out you could actually pass the football, or the guy who realized it wasn’t unthinkable that your flesh would touch an opponent’s flesh on the basketball court.

Surely, we’ll find it jolly that people actually used to ride around in enormous gasoline-powered motorized vehicles all by themselves, then, waited in long lines around thousands of other people doing the same thing, heading in the same direction.

We will not find it jolly but just as inconceivable that esteemed men in positions of leadership once dined sumptuously while, elsewhere in their nations or the world, children and babies starved; that women who prided themselves on their goodwill counted their investment profits while the companies that earned them that moolah supported regimes that raped and murdered mothers their own age just an ocean away; that a whole nation of people (ie: Central African Republic) could live entire generations in hunger and starvation, only wanting for the amount of wealth held by a single individual in a list of thousands of the world’s wealthiest…

But the fact that we believed this vision–that we will some day be living unselfishly, and responsibly as a world family–to be fantasy, rather than seeing our own silly present affectations as fantasy–the fact that we are blind to our own possibilities will surely be the greatest cause for chin-rubbing speculation in the upright humans that will follow us–hopefully that have already been born.