The Shock and Awe of a Second Financial Meltdown

What happened to trying to unravel last fall's financial meltdown, for that matter what happened to the meltdown altogether? The stock market is back to almost pre-meltdown levels. The bonuses continue to be spread around the boardrooms. The high-end restaurants have filled back up to bursting here in LA and in NY. The media's excited about the economy again. Where did it all go right?

And why do I have this nasty feeling that on the right, the big boys are happier than ever -- not just because trillions of untraceable dollars from the US Treasury have come their way, but that perhaps this was exactly where they were hoping Obama and the Democrats would be about now -- no reforms, no meddling in the existing structure except a few articulate words and the memory fast fading of who caused that last meltdown, namely eight years of Bush, Cheney and those big boys on the right (not to mention a peppering of the Clintons, Daddy Bush with Granddaddy Reagan handsomely bringing up the rear).

But what happens if a second meltdown hits? What if those boys with all those trillions go short in the market, pull enough of their money out to leave the rest of us holding the bag? Then won't Obama and his Democrat's take the full hit? Won't the right wing boys walk away clean this time, not to mention lugging a windfall from all that short selling, plus all that untraceable taxpayer's cash?

"Survival of the fittest." Although many on the right claim not to believe in Darwin, I don't buy it. Isn't "survival of the fittest" the driving mantra of capitalism? Or maybe it's better to trace it back to Calvinism -- the concept that those who were to go to heaven were proving it by getting rich in this material world. Either way the screwing of the "little guy" while you become as rich as Midas has been the American Way from the very start so why shouldn't it be playing out now?

And what about that quote "to get government down to the size where we can drown it in a bathtub"? Do we really believe those guys have gone away -- the Karl Roves, the Cheneys, the Norquists and so on? Our government's treasury is being drained at an unimaginable rate. War rumbles on in the Middle East unabated with Afghanistan now desperately in need of more troops. Now...imagine a second meltdown, say, around the midterm elections or, perhaps even better, a year or so before the next Presidential Election.

I want to be wrong -- very, very wrong. But I remember Bush's brutal and conniving eight years. I remember that awful couple of weeks when he and his people stole that first Presidential Election in 2000 with the help of a tragically immoral Supreme Court and a simpering Al Gore. I remember 9/11 and that nasty second election victory focusing on Ohio, not to mention torture and Iraq.

Today I watch the calculated stoking of rage around the health care debate. I watch the lies and spin from the shadows of the right wing and it gives me serious pause.

I don't want to be unprepared for the kind of end game that could well be executed by the people who brought us shock and awe. I don't ever want to be shocked or awed again, which is why thinking the worst today seems to me so important for what may well come our way tomorrow.

 

 

Follow Stephen Gyllenhaal on Twitter: www.twitter.com/stephgyllenhaal

Comments

[leduck]

welll..., steve.......
have you heard of PEAK OIL
you're right..., there will be another melt down

[bramapanzer]

Oh boy... http://www.the7thfire.com/Politics%20and%20History/peak_oil/peak_oil_is_a_known_fraud.htm

There are much, much, MUCH, more pressing issues than peak oil.

[ILibertine]

Correct as it is to devote criticism to financiers, we should recognize that we have a legislative system that is every bit as corrupt as the financial system and that is the root of the problems. Rather than demonize the financiers, we should be focusing this rage primarily upon the representatives and senators who are milking the system for personal gain and enabling virtually all of the travesties that have transpired: laissez-faire regulation, usury credit, liberal mortgage criteria, failure to protect American workers by tariffs to offset the lure of cheap foreign labor, a skewed tax system, mismanaged war and mismanaged FED; amidst conduct as a group of spoiled children endlessly haggling over their sacred party lines while the wider population clings to the slippery surface of their steadily declining real income.

It would be naive to believe congress will engage in self-introspection. Congress has failed in its duty to "the people" as a commonwealth; all the while exceeding their own expectations toward blatant, self-serving corruption in tandem with the oligarchy (as the author suggests) that is openly defensive of its elevated, privileged status. Only through tearing apart this collusion can there be much hope for the peons who have most of the votes. I am not sure how that will transpire, or if it will transpire, but I am certain that if the course we have maintained continues unabated, significant national decline will exponentially follow, and that is not unique in history.

[lobo1023]

Steve, right on, especially the Calvin line. As someone who used to be an "evangelical" I am appaled at the number of so-called Christians who follow the teachings of spiritual-­capitalist­s like Calvin (and modern day Glenn Beck) rather than the teachings of Christ who advocated giving, sharing and forsaking wealth. We need a new word for that big segment of "religious" people, for using the word "Christian" is a misnomer.

[sonoffestus]

We don't need a new word. Use the old word......­.......STU­PID..... people. You could use IGNORANT however this implies that they can be educated and learn, but this is doubtful.

[enochsmoky]

Stephen, you state that the "big boys on the right are happier than ever." In the last election cycle, the Democrats received about 70% of the contributions from the Wall St. pirates. The Wall St. big boys running Freddie Mac and Fannie Mae own the Democrats and their failure was the main cause of the whole meltdown. If you recall, the biggest objections to the bailout came from the conservative side of the political sprectrum. Those greedy bastards need to take losses sometimes.

[themodernleader]

Thinking and writing in terms of right vs left, conservative vs liberal, reactionary vs radical has no relevance when people who claim to be on all levels of the political spectrum are similiarly alarmed at direction of the American democracy. Americans of all description are shaken by the actions of the Federal Reserve in obligating our government upwards of 23 trillion dollars. Americans at all points on the political spectrum are alarmed at the unaccountable bail out of criminality while neglecting our own manufacturing, technology and jobs creation. We are all chagrined at the unemployed millions who have been cast to the side in favor of the interests of the financial institution. On all points of the political spectrum we are all Americans of allegiance to the Constitution that directs our dealings with one another.
We must recognize that we are in a life or death strugggle with emerging oligarchy. The isssue is the many vs the few, the powerless vs concentrated wealth, the power of the people vs the the rule of inherited wealth. Americans of all political persuasions, east and west, north and south and the middle must unite in common cause against those forces that wish to undermine our economy and political system for their own selfish ends. The question remains: Are we up to the task? Or will we go the way of all democracies who forgot their heritage and forsaked their present obligations and ignored their responsibility to their children and grandchildren?

[xilduq]

RE RE VOLT VOLT

[ILibertine]

Very insightful. You're so correct: we're being marginalized through the constant socialism, liberal, conservative, Democrat or Republican dogmas that effectually disempower voters.

There's always been an oligarchy; its influence held in check by prevailing political winds. Present winds seem to bear a particularly foul odor of confluence between the aspirations of the oligarchy and the aspirations of the political elite. From Reganism and NAFTA forward, it has been wholesale dismantling of working class well-being without counterveiling insurances.

I don't have much faith in our collective ability to change course intellectually. I'm afraid history teaches these things happen as a result of huge frustrations gone violent at some point in time. It seems to me the apparatus has been put in place (through lack of appropriate action) for severe economic convulsions resulting from lack of real income, inflation, energy shocks and resentment.

Or perhaps the system, slow as it seems, will come around to addressing some fundamental matters for its own preservation - as with FDR's administration. I don't see the forceful personality at its helm to do so, right now, however. We shall see.

[watchTVgetSTUPID]

The world's financial centers will shift from London and New York to Asia where corrupt white collar criminals are executed and their organs are sold on the market. Beijing, Shanghai, Shenzhen, and Hong Kong will all surpass in stature the corrupted financial houses that manipulate everything through their control of the government.

The Depression will not end before the US dollar collapses, bringing down the real power brokers running the FED. Jobless Recovery is an oxymoron.

[bramapanzer]

Indeed, the only thing I would possible call a "jobless recovery" was a short period in 1930 when the stock market bounced back yet unemployment skyrocketed. I believe that was harbinger of the Great Depression.

[CologneCitizen]

Americans voted for Obama because they felt he is somehow the last straw in a field of corruption and Republicans lies. But Yes We Can has changed to Yes We Plan. Why he is so reluctant in installing financial control over money markets as some European leaders like Merkle and Sarkozy suggest ? Americans need not to fear the USA will turn into some kind of Europe. This will never happen and why should it ?

We just don't understand what is wrong in getting some grip on the source that caused the problem, in America and worldwide. Unless the normal people are not relevant anyway and are only good to work their butts of and shut up otherwise.

[getsmart85]

Unfortunately, we ended up with a president who is mostly sizzle. A man who thinks an eloquent speech will change the minds of criminals who exploit the weak. Some say the US will become like Europe where people are satisfied with less. Others say we will end up like Mexico where the ultra rich live behind gated compounds and surround themselves with body guards while 99% of the population struggles from day to day. Without a determined and fearless president, the latter is more likely. The casino has re-opened with gusto and the dealers are encouraging players to double down. Obama is standing outside preaching the ptifalls of gambling. He needs to shut down the casino.

[vippy]

Exactly what doesn't Europe have that we have? Europeans have better wages, better benefits,
travel the world, while here most get only one week and then they would rather be paid for the week than take it for they need the money worse. I would love to be back in Europe, seems like the USA is running 50 years behind times.

[CologneCitizen]

You are exactly right. America is a great place without a doubt. But everything is controlled by corporate greed and financial interests. I have spent quite some time in the USA in the last 35 years and I do like the country. But I wish they would start to grow up and realize they are not # 1 in most issues regarding a modern and civilized society.

[RomeoMD25]

i voted for Obama, but I have become very disillusioned. He doesn't seem to be able to accomplish anything.
It seems that he will be a very weak one term President. He seems to be more interested in giving speeches and looking good than actually doing anything.

[vippy]

I am holding out until I see the healthcare bill and then I will be done with him. So far, he has
voted for everything and anything we despised under Bush like the Patriot Act, etc. The energy policy is a joke and the credit card revision bill a slap in our face. I see some things being done,
but that may be just a few crumbs here and there.

[DiogenesOfAlaska]

2/2

But let's look at Darwin and the role of government, too.

About Darwin, my only concern is that the poor guy must be suffering due to the failure of his followers to explain to his false disciples that they are, well.... false disciples.

Concerning government, rest assured that the true disciples of Milton Friedman are busy explaining how corporates and banks betrayed their cause. As far as the false disciples are concerned, they won't procreate. Well, at least not in the long run.

Good night, and good luck!

[DiogenesOfAlaska]

1/2

I'm no fan of empty promises, but I do hope to be able to prove you wrong on some counts at least.

How about starting with my convinction that the only thing that's really right in your article is that the problem is Calvinism. Ok. I admit it. That was too easy.

I'm also quite sure that it's not a political problem at all. Now that may be good or bad news, depending on whether you have hopes or not so many hopes in the abilities of political groups to pursue the good. Rest assured that I am glad that it's not a political problem, because even though there are majorities right now, I wouldn't be able to put myself to sleep if my predictions were dependent on what folks do with those majorities.

The point is that the financial sector itself cannot hope to thrive on subsidies. That's simply impossible. Now isn't that the best news ever? I don't know. But it's the reason I sleep well at night.

[TheIndependenceParty]

One of the most tragic lines spoken in history is "Et Tu, Brute?", ... or "You too, Brutus, (My friend)"?

The gravest concern is not so much why the men who took us over the brink of financial ruin are still in control, but who is still allowing it?

If we go over the precipice a second time, there is no parachute at all. The money is spent, ... one out of six workers is laid off, "redundant" as they say in the EU, ... and in that event the Great Depression will resemble a cakewalk.

It is hard to imagine that the financial world is so mad that it would assure its own destruction, like the Ebola virus which kills its host and can not become an epidemic, ... for it has no victims left.

But it looks like that from here.

[DiogenesOfAlaska]

Your point that the biggest threat is a repetition is well taken.

Concerning the gravity of loss that would ensue, I'm not as pessimistic as you are, but I am sure that it is sufficient to serve as a threat to the bankers.

So, in a sense, the only problem left is that the financial sector may NOT manage to do what's in its own best interest.

While I am a very passionate NON-reader of Ayn Rand, I am inclined to judge from those few lines that I did read - before I felt sick and had to go to the bathroom - that this is unlikely.

In more scientific terms: irrationality and failure of neo-classics happens in the real world, because bankers take the real world for a ride. But it doesn't happen within the world of banking, because after all, they really have no other business but to make the neo-classical world happen.

I may be wrong, but I kind of like the idea that I might not be.

[DiogenesOfAlaska]

I would also like to be honest: those bankers who don't know anything better but to make the neo-classical world happen are on a highway to make themselves things of the past.

It's all a matter of speed. Who runs out of steam first.

But there's a future in which the naive bankers are bankrupt and the economy thrives on innovation financed by those who don't know how to spend what they earned while not knowing what they did to others in the process.

And if I am not mistaken, this funny future is what we should wish for.

[Matt Osborne - Huffpost Blogger]

The biggest part of this problem is that there simply wasn't any way to handle the failure of AIG. That bailout has been by far the most expensive part of this disaster, and it's directly attributable to the reality that NO government agency had the knowledge, resources, or authority to treat AIG like a failing bank. That is why the most interesting element of Obama's proposed reforms, to me, is the directive for big financial concerns to keep written instructions on how to shut them down and sell them off.

[DiogenesOfAlaska]

I would love to see legal scholars write a lot about what this innovation (of a written will) did to the longevity of private wealth, with particular emphasis on the potential application to the will of behemoths.

[peterg76]

What part of a second melt-down would be shocking? They aren't exactly hiding it.

[tnkeating]

Steven if you remember, Bush's economy took a dump the last two years of his administration, is it coincidence that happen to be when the democrats controlled both houses of Congress, its always been my assumption that the President can't spend a dime without congress first writting the bill. Bush I might add tried to reform Fannie mae and Freddie mac a total of 6 times, being blocked by Congress each time and ultimately these two were responsible for our economic colapse.