Truth is, the world has just been through a century of war that was fought over capitalism. That century of wars was not fought for or against capitalism; it was fought over which socialist system was best to replace capitalism, as unbridled capitalism was by then so widely reviled as inhumane that no nation even advocated it as a socioeconomic system.
What might have turned the world so vehemently against capitalism was that it appeared to be the ghost of authoritarian monarchy. It was a monarchy of money that had begun filling the autocratic void left when the world outgrew monarchy. After all, money and power were the practical definition of monarchy and the divine right of kings was just a thin window dressing.
At the turn of the 20th century, back when Democrats were for states' rights and Republicans were for a strong federal government, both sides of the political equation abhorred the power of money to corrupt government. The Sherman Antitrust Act was passed in 1890. Teddy Roosevelt enforced it. But money and power still accrued to the world's new plutocratic class of businessmen whose vast wealth defied efforts to blunt their influence. Understanding of the power of money in politics was in its infancy in 1900 and was like trying to dam a river with a broom.
It took a watershed of new socioeconomic thinking at the level of government to provide the intellectual tools to both recognize and deal with the problems that unbridled capitalism and the concentration of government rivaling wealth could bring. No current advocate of free market capitalism knows of what they speak as no living person has ever seen it in action. Free market capitalism has not been economic policy in the world for 70 of the last 80 years. We have all been lulled by the effectiveness of obscure but surgically precise legal protections wrought of the hardest economic times this country has ever faced. Those hard times were made hard by and for the pleasure of plutocratic levels of wealth. Those protections between us and predation on us by the wealthy were overturned by the GOP and Third Way politicians in 1999 -2000.
The result has been a return to the economic boom and bust cycles that preceded economic regulations put in place in 1933, punctuated by this Great Recession. For nearly 80 years this country's cycles of expansion and recession had been moderated by banking and commodities regulation. It was very, very effective. The frequency of recessions was cut in half and the depth of deflation during recession was cut by orders of magnitude.
This chart from Bureau of Labor and Statistics data shows periods of inflation (expansion) and deflation (recession/contraction) in the U.S. economy since 1870. (Unfortunately the author fails to recognize that the effect he has charted is not entirely a result of FDR banning the private ownership of gold bullion, but it's still a great chart.) The New Deal finance reforms beginning 1933 can clearly be seen to have been coincident with positive changes in the economic cycle. Positive unless you prefer double-digit inflation one year and double-digit deflation the next. Personally, that kind of fluctuation in my asset valuations makes me nervous and irritable.
FDR won WWII militarily and won the hearts and minds of the world with his economic policy. That economic policy was for government to curb the most greedy and risky impulses of Wall Street and master of the universe wannabe twits in business that can't see that if they cut down all the forests or kill all the buffalos today, there won't be any trees or buffalos to cut down or kill tomorrow. FDR waged war on capitalism while waging war, hot and cold, on the more doctrinaire forms of socialism, communism and fascism. His way is the way the world has been run for your entire lifetime, the most economically stable and prosperous period for any nation in history and setting the economic platform of the Democratic party in stone for 66 years.
FDR's flag of victory and prosperity has been dropped, though. The flag that led us through the world's most costly war and led us out of the Great Depression was dropped by Bill Clinton when he signed the Gramm-Leach-Bliley Act in 1999 which effectively repealed the Glass-Steagall Act of 1933. Clinton then sealed our fate with the Commodities Futures Modernization Act of 2000. Between the two acts, finance was effectively deregulated to form too big to fail banks and to create unregulated over the counter derivatives trading which, together, produced the triggers if not the cause of the Great Recession of 2007-?.
Now, in 2012, Obama is faced with economic and political conditions not faced by any candidate of any party since 1932. No Democratic or Republican candidate for president has run on the express policy of deregulating giant banks and corporations since 1932, because FDR was so completely, surgically, right about how to make capitalism work for the public. And because of that ongoing success, the public seems lulled into believing that no politician who says he will cut Social Security and Medicare in order to give tax breaks and total deregulation to the rich would actually do that in office. No politician for 80 years has ever done that. Right?
Obama must fight an inexplicable resurgence of free market capitalism that the world spent a century subduing. He must do so while trying to repair the obvious disaster that free market capitalism has wrought in its just doing what free market capitalism does, create an as many busts as booms treadmill. Obama is at war with what the CEO of JPMorgan should be allowed to do to make money. He's also at war with an ideology that is so poorly understood by its adherents that they think the world has never tried free market capitalism before. We have, and communism follows it. Obama is at war over what kind of capitalism is productive and not destructive in order to save it, just as FDR was.
A friend of mine of Chinese descent once told me that the Chinese are patient. They will try a philosophy for 200 years or so to see if it works. We are coming up to about 140 years of industrial capitalism. Resetting the clock to 1870 will not help capitalism survive the will of the people.
 |
 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
Man when those bubbles burst, there's nothing on earth that can equal it for collateral damage.
Advice #1 - get over the notion that any President is free to do as they please, or powerful enough to do as they want. Without a Congress to work with a President is just a chair warmer. It's designed that way.
Advice #2 - devote a minimum of 100 hours to a Democratic candidate's House or Senate campaign before Oct 15th. If you are not, you're just spitting into the wind.
2) Inflation and deflation are a function of the size of the money supply compared to the GDP, which is entirely the province of the Fed since the lifting of the gold standard. Glass Steagall had noting to do with the money supply.
3) The revision of Glass Steagall had nothing at all to do with the Great Recession, which was caused by the mass default of the government directed and subsidized subprime home mortgage market. Your precious bank regulators at the Fed and HUD created this mess between 1993 and 1997. Banks in a free market NEVER issued subprime home mortgages before this government intervention because they did not want to assume the risk of default.
4) Obama exploited the resulting market crash to enact a series of socialist programs that FDR never would have considered - from the nationalization of GM and Chrysler to the German Zwangswirtshaft socialism of Obama's "clean energy economy" and Obamacare programs.
The issue facing the nation is whether we will continue on the socialist path Obama as started down or get back to the free market prosperity of Reagan and Clinton.
2) Inflation/delfation are not simply a function of the size of the money supply, they are a function of the velocity of money x money supply, or M*V=P*Q. Velocity defines a recession/expansion. Money supply is manipulated to increase or decrease velocity.
3) Fannie/Freddie ended up with about 16% of subprime loans. The rest were bundled and sold by private concerns to private concerns. http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
4) What?
The market prosperty of Reagan was achieved by resorting to tax hikes, so too Clinton. Clinto signed the Act is question at the very end of his term. The results were enjoyed by Bush 43 and Obama.
The idea that the currency whipsawed between 10% deflation and 20% inflation over a dozen times in this period is absurd. The United States had the strongest currency this side of the pound sterling and could borrow at very low interest rates. Indeed, as noted in Walter Russell Mead's superb political and economic history God and Gold, being able to leverage credit this way was a key to Anglo American power.
Finally, even if you accept the chart as given, there is no correlation between recession and either inflation or deflation. Some early recessions experienced both inflation and deflation.
2) The idea that monetary inflation leads to growth was pretty much debunked during the last stagflation and we are gearing up for repeat performance today.
3) McClatchy? The Financial Crisis Inquiry Commission dug up the actual data and Peter Wallison's dissent lays it out starting at page 13, Table 1.
http://www.aei.org/papers/economics/fiscal-policy/dissent-from-the-majority-report-of-the-financial-crisis-inquiry-commission-paper/
I worked mortgages from 1993 until the banks killed that industry and nearly killed the economy of the whole planet. You couldn't be more wrong if you were trying to be wrong on purpose. What risk of default? None of this stuff was done with their own money. By the time that their fancy paper was sliced and diced and put into more tranches than anyone could possibly keep track of (with the credit quality of each of them duly vouched for by the rating agencies), the money at risk was everyting but their own.
Whoever owns this trash bears the risk of default and banks fought tooth and nail against government pressure to make these loans starting in 1993 by the Fed until Fannie and Freddie were compelled by HUD to buy this trash and relieve the lenders of the risk. From that point, the lenders gladly followed the government guidance to create this market.
I break all this down in Chapter 3 of my book Never Allow A Crisis To Go To Waste with several dozen sources.