As young, foolish, unemployed Americans Occupy Wall Street, liberals in the media have predictably cheered the protests.
Some, like schlockumentarian Michael Moore, participated in the goings on, telling the crowd last week that the folks inside the buildings surrounding them were solely responsible for the nation’s economic woes (video follows with transcript and extensive commentary):
MICHAEL MOORE: And they know what’s coming on Wall Street, because it’s not just the hundreds or thousands that have come down here to Liberty Square – Plaza. It is millions of Americans who have suffered as a result of the decisions made by the people in these buildings.
So, I know you’re in the process of coming up with your demands. If you would allow me to state my own personal two cents. I want to see a perp-walk. I want to see the people responsible for destroying the lives of millions of people in handcuffs and lead away and brought to justice immediately. That’s number one.
Although this populist message rings true with folks on the left and their media minions, it lacks any knowledge of economics, the financial markets, or recent history.
If we hearken back just three years ago to when our nation was seemingly in the midst of a total financial meltdown, the feeling by those concerned on both sides of the aisle was that the most important immediate solution was to shore up the remaining banks, brokerage firms, and insurance companies.
Because whether you like it or not, our entire capitalist system is based around such financial institutions. If they collapse, everyone can kiss their assets goodbye along with their livelihoods.
It was indeed such a financial industry implosion in the ’30s that led to the Great Depression, and memories of this encouraged the Bush administration along with strong bipartisan majorities in both chambers of Congress to enact the Emergency Economic Stabilization Act of 2008 which concurrently created the Troubled Asset Relief Program to purchase failing bank assets.
Although the Left – conspicuously along with the current White House resident – love to demonize Wall Street, they forget how many Democrats – conspicuously along with the current White House resident - voted for this bill.
In the Senate, this numbered 39. As the final vote was 74 to 25, this was a Democrat-supported bill with more voting for it than against it.
These included the current White House resident, the current Vice President, the current Secretary of State, and the current Senate Majority leader.
The situation was even starker in the House where far more Democrats supported the legislation than Republicans including Obama’s eventual chief of staff and the current minority leader.
Maybe the Occupy Wall Streeters should reconsider their support for Obama and the Democrats as without them EES and TARP wouldn’t have passed and many of the financial institutions these folks find so offensive wouldn’t exist today.
Of course, this likely ascribes a far greater amount of knowledge, intellect, and logic to this group than is warranted.
That said, irrespective of one’s Libertarian inclinations – and mine, for that matter! – EES and TARP were a huge success, as the financial industry did not completely collapse, and the balance sheets of most of these companies look far better today than they did three years ago.
Also of note was that since many of the financial institutions receiving TARP funds have paid them back, the Congressional Budget Office now estimates the total cost as only $25 billion.
I realize this ignores the aforementioned Libertarian argument, and the possibility that we might have in the long run been better served by allowing some of these companies to fail so that the remaining ones would manage their operations better in the future.
Also to be considered is that a completely impartial assessment of this period might conclude that we were nowhere near as close to a total collapse as was advertised, and that allowing things to run their course with no government intervention whatsoever might have been the better play.
But that’s a debate for another time, for far more important right now are the coming elections and how the Left and their media minions are going to use the populist rage directed at Wall Street to make people ignore the role the current president and his Party played in accommodating the very financial institutions now taking heat as well as today’s poor economic conditions.
With almost three quarters of the country believing the nation is on the wrong track, a 9.1 percent unemployment rate, and a double dip recession looming, it’s going to take a lot of factually deficient propaganda to convince 50.1 percent of the nation – give or take as a result of the electoral college – to believe it’s actually in their best interest to stay the course.
Assuming today’s news media were in the business of disseminating the truth, the vast majority of the Occupy Wall Streeters capable of both reading and comprehending what they read would come to the conclusion that Obama and the Democrats were responsible for preserving that which they currently find abhorrent and therefore might out of loyalty realize they were hypocritically protesting what their Party sustained and, as a result, they should put down their posters and head to the nearest shower.
The most intelligent among these would conclude that they were no longer politically aligned with this White House or the current iteration of Democrats, but that might be asking way too much.
What also might dawn on some of these folks if they knew the recent history of the financial crisis was just how much worse things could be for them and the nation if the very institutions they’re trying to bring down today were let to fall on their own three years ago, for when the president says that he averted a depression, he’s possibly right, but not for the reasons he claims when in front of a teleprompter.
Absolutely nothing fiscally that happened after January 20, 2009, had any significant, lasting economic benefit to the nation, but his “Yea” vote for EES and TARP when he was still a senator, along with 38 of his fellow Democrats, could be viewed by history as the reason the last recession wasn’t far more serious.
Only time will tell.
As for the economics of the debate, one has to first understand that if Wall Street can cause a recession, it can also cause an expansion. To a very large extent, the last two economic recoveries were Wall Street creations.
What would the ’90s have been without the tech bubble? Ditto the ’00s without bubbles in real estate, credit, and commodities?
To be sure, nobody minds these false economies – including people now trying to Occupy Wall Street – when the good times are rolling.
But as soon as the bubble bursts, everyone points fingers at those responsible for most of the air until the next bubble comes around to make people forget about the last one.
What most people don’t realize is the real reason for our current economic woes isn’t that the last bubble burst. It’s that another one has yet to materialize to make us not mind as much.
Consider what happened after the tech bubble burst in 2000.
A recession began in March 2001 that, believe it or not, was over by September 2001.
As a result of some extremely aggressive pieces of financial deregulation at the end of the Clinton administration – the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 – real estate was already beginning to explode around the nation.
As stocks plummeted, a lot of the money moved into housing. As the completely unregulated credit default swaps and collateralized debt obligations allowed financial institutions to lend with extraordinary leverage to largely unqualified borrowers with what they foolishly believed was total impunity, a real estate and credit bubble quickly replaced the tech bubble.
Of conceivably equal import was the coincident bull market in commodities which also padded the balance sheets of many of these financial institutions allowing for even more lending and speculation.
What has been largely ignored in all the finger-pointing at Wall Street and former president Bush is that if the real estate, credit, and commodities bubbles hadn’t saved the economy in the previous decade, things could be far worse today with Clinton possibly getting all the blame.
Consider that from Bush’s inauguration to the beginning of this recession in December 2007, roughly 4 million jobs were created. Of these, almost half came from the construction, financial services, and real estate industries.
Frankly, there would have been no economic recovery whatsoever in the previous decade without what Wall Street created, and if these folks would have been able to produce another bubble as expeditiously as they did the last time one burst, the only people trying to Occupy Wall Street today would be doing so with either money or resumes.
So what makes this time different?
Without question, this has been more of a global bust than just an American one. Continued problems in Europe are negatively impacting us and the rest of the world.
Quite simply, there are a number of factors around the globe that are reducing the available pool of capital that could produce a bubble with lasting economic benefit.
Right here in America, we have increased our outstanding federal debt by $4.2 trillion in the last three years. That’s money that could have been financing a bubble.
With all the fear around the world, investors have largely been looking for the safe haven of our treasuries along with precious metals like gold and silver. Unlike stocks and real estate, such investments have little employment creating ancillary benefits.
Compounding this is by far the least Wall Street friendly president since Jimmy Carter. Between the increase in banking regulations, a costly healthcare bill, almost incessant demonization, and perpetual threats of higher taxation, the people in this nation with real capital are hardly encouraged to take big risks.
As such, what the folks currently trying to Occupy Wall Street don’t understand is that their best chance of obtaining the job of their dreams will someday come likely directly or indirectly as a result of someone residing in the buildings above their protests.
The current White House resident, who like them sees the people in those towers as the enemy except for when he's fundraising, hasn’t a clue how to bring about a lasting recovery that includes meaningful job creation.
Equally important, neither does Michael Moore or any of the other members of the liberal media they worship.
Hopefully someday they’ll figure it out, for if not, many of these young people are destined to live very unproductive, unhappy lives continually blaming everyone with more money than them for all their problems.
Wouldn’t it be nice if the Left and their media minions weren’t encouraging such thinking?
As a final thought, readers should not conclude that I am advocating asset bubbles. Unfortunately, due to a variety of demographic, structural, sociological, and entitlement issues far too numerous and complicated to address in this piece, it seems America has needed such phony monetary expansion in recent decades to really get the economy going.
Can we grow without one?
Given the experience of at least the previous two decades, it seems highly unlikely without some extraordinary technological or industrial advancement that radically changes the country like the steam engine, the automobile, or the assembly line.
Barring that, our only way out of the current malaise is another bubble, and that's certainly not going to happen if we raise taxes on millionaires and billionaires.