First come first served
"The provision of the Constitution giving the war making power to Congress was dictated . . . by the following reasons: kings had always been involving and impoverishing their people in wars, pretending generally, if not always, that the good of the people was the object. This our convention understood to be the most oppressive of all kingly oppressions, and they resolved to so frame the Constitution that no one man should hold the power of bringing this oppression upon us." -- Abraham Lincoln
The Commons is a weblog for concerned citizens of southeast Iowa and their friends around the world. It was created to encourage grassroots networking and to share information and ideas which have either been suppressed or drowned out in the mainstream media.
"But if the cause be not good, the king himself hath a heavy reckoning to make, when all those legs and arms and heads, chopped off in battle, shall join together at the latter day and cry all 'We died at such a place;' some swearing, some crying for a surgeon, some upon their wives left poor behind them, some upon the debts they owe, some upon their children rawly left. I am afeard there are few die well that die in a battle; for how can they charitably dispose of any thing, when blood is their argument? Now, if these men do not die well, it will be a black matter for the king that led them to it; whom to disobey were against all proportion of subjection." (Henry V, Act V, Scene 4)
|The Third Depression |
By A. Scott Piraino OpEdNews.com May 31, 2003
As of this writing our stock markets have stabilized after plummeting from their all time highs in the spring of 2000. The Dow Jones average is down nearly one third, while the tech-heavy NASDAQ has been decimated, losing over two thirds of its value. Seven trillion dollars in investors wealth has vanished with the market's decline.
Unfortunately, there are historical precedents for our trembling stock markets, and if history repeats itself we could be in serious trouble. In the Gilded Age of the 1890's, and the Roaring 1920's, improvements in technology and industry fueled rapid economic expansions. Capitalism was revered as the new engine of progress, while onerous government regulations were seen as an impediment to growth.
These were days of "laissez faire" economics and unscrupulous robber barons. Sound familiar? Many investors believed these economic booms would last forever, but speculative bubbles formed as exuberance bid up share prices. Inevitably the day came when prices fell, and the markets collapsed.
The Gilded Age ended with a monetary crisis in the first decade of the twentieth century. Incoming President Teddy Roosevelt was forced to borrow money from wealthy elites to finance the government. The Roaring Twenties ended in a more spectacular fashion, a stock market crash in 1929 ushered in the Great Depression.
After the economic crises following the Gilded Age and Roaring Twenties, there was a backlash against the excesses of capitalism. Teddy Roosevelt reined in monopolies, and passed the first income tax into law. During the Great Depression, Franklin D. Roosevelt raised taxes on the wealthy to finance his New Deal legislation.
The 1990's has followed the same pattern as earlier booms in US history, and the end result has been the same. First investor's overconfidence inflated stock prices, now a stubborn recession and a slew of accounting scandals has deflated stock prices. Unfortunately, now that the boom has become a bust, we don't have a Roosevelt in office to champion the majority against business interests.
President Bush offers no real reform. True his administration passed legislation to curb corporate fraud, but only as a slap on the wrist. Those same corporate interests did pay him to run for office, after all. The President supports more tax cuts for our wealthiest citizens, and more free trade agreements. The same policies that have created huge budget and trade deficits over the last twenty years.
Debt is the fundamental difference between this stock bubble and the market collapses of the past. Our national debt has climbed to over six trillion dollars, US households are in hock for another eight trillion. Yearly interest payments on our national debt cost us 275 billion last year, and thanks to Bush's tax cuts, the debt is growing again. We must also account for the nearly 400 billion dollars we export every year to finance our trade deficits.
Interest rates on our national debt are low because bondholders are still confident in our ability to make payments. The US dollar has not collapsed only because foreign nations believe we can still afford our appetite for imported goods. As our economy falters and our deficits continue to rise, the market could lose faith in our ability to finance our deficits.
That would cause a wave of selling. In past crises, investors and savers rushed to withdraw their assets from financial institutions, creating a panic. Borrowers defaulted on their debts, depositors lost their savings, and creditors lost their shirts. For the managers of today's global economy, this is unthinkable.
The solution is to guarantee the banking system with public money. Bailing out capitalism costs less than the depressions and bank runs of the past, but only by making taxpayers cover the losses of speculators. Since 1990 we have bailed out our own Savings and Loans, the Mexican peso, Pacific Rim banks, Russia's bond market, and most recently Brazil.
The seven trillion dollar hole in our financial system has already wiped out mutual funds, pensions, and millions of Americans life savings. So far banking and other key economic sectors have weathered the stock market meltdown, but it could easily get worse. In the event of a financial panic, our economic house of cards would collapse very quickly. The implosion of Enron has heralded a wave of corporate bankruptcies and accounting scandals that have roiled financial markets worldwide. The billions of dollars these corporations these corporations were supposed to be worth simply vanished. In truth, that wealth never really existed in the first place.
Depressions are created when money disappears. People suddenly become poorer, and they spend less money. With less demand for goods and services, prices fall and production declines. This causes a downward spiral of unemployment and falling incomes. Our country has endured deflationary periods after numerous boom and bust cycles, most notably during the Great Depression. Many economists, including Alan Greenspan, fear the US is now entering a deflationary period. US wholesale prices took their biggest plunge on record in April of this year, the Producer Price Index dropped by 1.9 percent. The Federal Reserve has expended its last bullet, cutting interest rates for the twelfth time in an attempt to stimulate the US economy. The Fed Funds rate now stands at 1.25 percent, the lowest in 41 years, yet our economy remains mired in recession. Mr. Greenspan tries to sound optimistic while addressing congress, but he has admitted that, what we do have is a very large degree of uncertainty.
Whether this stock market bubble deflates or bursts, we will not escape the effects of seven trillion dollars simply vanishing into thin air. We have a right to be angry over the economic consequences, but no right to be surprised. It's happened before.My name is A. Scott Piraino email@example.com http://www.xanga.com/ThePopulist and I am a populist. It is a very simple ideology really. No matter what the issue, if the majority benefits it is good, if the majority will be hurt, then it is wrong. In our country today right-wing politicians are distributing wealth from everyone else to themselves. Left-wing social engineers are enforcing their politically correct agenda on us, and using our tax dollars to do it. My columns address political, economic, and military affairs that affect us all. Since the real world is more complex than Republicans versus Democrats or Left versus Right, so are my columns. It is true that there are two sides to every issue. But when those issues affect people the only choice is between right and wrong. I think I'm right.