Sunday, October 19. 2008
Still in Detroit, more often offline than on, deprived of news and media of all sorts. But for some reason the New York Observer arrives in the mail -- a final reminder that newspaper hound Kalman Tillem lived in this house. Andrew Sarris has a review of W., and I was struck by the following quote:
Actually, the plunge has been pretty obviously in the cards for quite some time now. Charles Morris' The Trillion Dollar Meltdown was written about a year ago. Kevin Phillips' Bad Money dates from the same period, but was merely an update of his 2006 American Theocracy. Even those problems were evident long before, with Paul Krugman's 2001 book Fuzzy Math the first alert on W.'s economic trajectory. Few speculative bubbles have ever been more plainly obvious than the recent housing bubble: all you had to do was note how property and rental prices diverged. Rising property values were fueled by cheap interest meant to pump hot air back into a declining stock market. With real wages headed downward, all that free money had to go somewhere unreal. Of course, lack of financial regulation and the great Bushist belief that reality could be forged through mere boldness made matters all that much worse. The details may have been hard to predict, but the general outline was always evident. A good, close look at Alan Greenspan should have sufficed to give it all away.
I've seen several pieces on uncanny similarities between the current financial crisis and the 1930s. But another point has been thus far ignored: the role of naked political ambition in setting up the crisis. There is a precedent: Richard Nixon. Both Nixon and Bush won first terms with precariously thin margins. Both were obsessive politicizers: indeed, it's impossible to think of any other politicians so wrapped up in their reelection prospects. Both wasted huge sums on hapless wars. Both soon ran into economic problems. Both responded with extreme measures, including jawboning the Fed to pump up the economy with low interest rates. Both presided over major devaluations of the US dollar. Nixon used wage/price controls to temporarily cover up the dollar losses, setting the stage for a huge inflationary run for the rest of the decade. We can now look back on Nixon's policies, starting with his ending of the Bretton Woods system, as the point from which real incomes started to decline, and America started returning from New Deal equality back to oligarchy. Bush worked through the post-2001 recession by feeding the rich, first with tax cuts then with cheap unregulated money. The result was a housing bubble combined with massive corruption. Like Nixon's schemes, Bush managed to look just plausible enough to hold together his 2004 campaign, but since then we've witnessed one thread after another unravel. How much damage such short-sighted politics will produce remains to be seen. Even in Nixon's case we've never fully accounted for the results.
Of course, the other thing that Nixon and Bush have in common is the two lowest second term approval polls in history. Even if the details of their manipulations slipped past with little notice, their self-absorbed slime elicited revulsion, especially as the results turned so bitter.
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