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Okay, is it just me, or are we seeing a pattern here.
In the roaring twenties, thanks in part to the industrial revolution, the average person sank money into the booming stock market. Stocks rose without end, forming a giant bubble economy. This resulted in an unprecedented investing fever, further inflating the economy, making the stock market into a means unto itself. When the stock market became the end, the infrastructure that supported it was cannibalized to further feed the stock market. And John Q public did the same, following the example. They mortgage their homes, took out loans, all to sink more money in the stock market.
And then the party came to an end. But contrary to myth, the end did not come with the stock market crash. The Markets were having problems long before then, and the technicals foretold of weakness before that. The crash was only the point of epiphany for the general public that the market was based on a giant bubble, which had already collapsed at that point.
A decade passed, and the economy continued to languish in ruins. Simply re-investing in the market failed to stimulate any thing. It wasn't until the new deal, that began to shift the "investments" from "re-marketization" into public works and infrastructure, rebuilding the consumer base, literally from scratch.
Also contrary to myth, the war did not rebuild the economy. Wars in fact consume economies, not build them. Many a mighty nation, including Rome herself, were victorious in many champagnes, only to collapse because of this stress.
We now know it was the post war programs, and the many veterans benefits that continued the economic reconstruction started by the new deal. Solders returning home were given student loans, not only educating them for the future, but also softening the blow to unemployment. Cheap home loans meant returning soldiers could afford to buy homes for new families, creating demand for homes, and creating jobs. The baby boom created additional demand. But also high paying jobs aloud one bred winner to support a full family, and feed this new demand with sufficient consumer buying power.
It reached its peed in the McKarshty area, where conservatives took on "the communists" and set to work undoing the New Deal. One by one, the safe grads build into the economy, banking, and in business were removed. But ironically, Regonomics failed to see the boom Republicans foresaw. Perhaps because the Republicans insisted on raiding the treasury at every opportunity. The money needed for marketization was hard to come buy when the government T-bill kept soaking up all the capital.
When Clinton came and balanced the budget, without restoring the checks of the new deal, this was the act of freeing the same genie that was imprisoned by the new deal. The markets exploded, resulting in what was dubbed the "wealth effect," bringing us full circle. All though the law no longer allowed people to take out loans to invest in the markets. They found other was around this. Credit cards, and sicuritization.
Then the bubbles started to collapse. First it was the Dot.com, then world com, Enron, communications, the IT industries. The economic policy became a giant bubble shell game. Keep moving the eggs into the ballooning basket, and away from the disintegrating basket. Not to mention any other number of clandestine operations to manipulate the market. The infamous plunge protection team. But this is nothing that a good war can't fix right?
But the nature of the true economic problems has yet to sink into the general public. Many still believe that the market works like clock work. That it will continue to rise "on average" (something my dad said to justify his recent losses). But just like before, infrastructure is being cannibalized to be thrown into the markets. Whole industries are moved over seas, and the economy begins to bleed to death as consumer buying power rapidly erodes.
All though more knowable economic voices do not seem to think so. The tea leaves as I read them clearly have another massive market crash on the horizon. As economic reality drags the market down, market manipulation continues to drive it up.
Spending on the war in Afghanistan and Iraq are no different from other wars, representing fiscal black holes into which capital is poured into, never to be seen again, yet still providing that "one time" bump to economic numbers and profit margents to certain companies. But only so long as there is a war to spend on. So the quagmire that is Iraq, to the tune of 86 billion, seems to do quite nicely in this area. There is also the massive tax cuts, also pouring more money into the markets as the wealthy look for new places to park their fortunes. But how long can these upward forces on the market be maintained? A few months? A year? It's like a poorly built dam. As the water collects on the far side, the towns folk scramble to bring up trees to reinforce the dam. Eventually however, they run out of trees, while the water pressure continues to build.
Clearly, we have a little further to go before we can start talking about rebuilding the economy. If history repeats itself, than we still have one major market crash and about ten years of languishing economies to go. It may take this long for all the good little patriots out there to come to grips with the truth.
But that is too loops of the same cycle, with both lasting about 40 years. Will we see history repeat itself yet again in 2040? And then again in 2080? Their has been some argument over the over all weakness of capitalism in general, leading to some support to this. Or is it possible to brake the cycle, by embracing a truly enlightened economic thinking, one built on observed natural economics, and a careful set of checks and balances? But how can this exist at the same time as suply side "mythology" and an almost raciest attitude against "socialists" and taxation?
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