There are many reasons why folks missed this major change in the fortunes of a nation. Economics is poorly covered by the mainstream media. Economics is a subject shot through with specialized jargon. The 1% who actually benefitted by these economic changes controlled many of the communications channels so many of the greatest disasters were presented as a necessary improvement. Etc.
Thanks to all who have already commented.
A blueprint for a dump
One of the things that always fascinates me is talking to folks, say, 35 years old and realizing that the USA that I grew up in doesn't even exist as a possibility for them. It hasn't existed at any time during their lives and since the teaching of contemporary history is virtually non-existent in the country, the ONLY possible way that USA could exist in a 35 yo mind is if they got very lucky and read some good books.
My father was poor as only a small-town preacher can be. During much of my childhood, he made $300 a month. There were six of us. We did get to live in a parsonage so housing was free but there wasn't much left over in any month and it was always welcome when a farmer from church slipped some fresh food into the car. But this was not poor by any stretch of the international definition of poor. We children went to well-lit, well-heated mostly new schools that had music, art, and science departments. Our house had central heating and indoor plumbing. We had a telephone. Even though we didn't get television until I was a high-school sophomore, we had radio and a record player. My oldest sister took music lessons on the piano, flute, double bass, and pipe organ becoming proficient in all of them.
When it came time to go to college, I had a big land-grant university waiting for me that charged $125 in tuition and $300 for a dorm room each quarter. Jobs within walking distance of campus paid at least $2.00 an hour and because I knew how to build houses, I could get $4.00 an hour working construction during the summer. Do the math. It was a lot of work but it was possible to self-finance a university education.
And about those jobs. In the fall of 1969, I got a part-time job delivering critical care medical equipment. In the spring of 1970, I got into a hassle with my draft board and would up dropping out of school (long story). In three month of working full time at the medical delivery service, I was able to save up enough money so I could spend the whole summer hitchhiking through Europe—one of my most profoundly significant life experiences and one only the children of the truly wealthy can afford now.
The other astonishing memory was of a house I helped build the summer I graduated from high school. It was a modest affair for the times—three bedrooms, a full bath, kitchen, dining room, living room, central heating, a full basement, and a two-car garage. It would cost the new homeowner $18,400 ready to move in. Here was the interesting part—the guy we were building it for worked on the line at the local shoe factory doing things like pulling lasts and stitching soles. Sometimes he would come by after his shift to watch us build his house. He always looked very tired. I am sure he earned every cent he made at that factory twice over but he was getting a brand-new house that was literally beyond the imagination of some teenaged girl toiling endless hours making shoes for Nike in Indonesia these days.
Today these things seem to me like a fantasy and I lived through them. I grew up in a nation that went to the moon just because we could do it. I was there when the Interstate highway system was new. I remember when the Boeing 727 brought the jet age to small airports and dozens of other aviation triumphs that culminated with the 747 in 1969—still considered the best subsonic transportation plane ever designed. The optimism was so heady, my high school graduation speaker (1967) promised our class that we would be the last humans to walk solely upon planet earth.
Well obviously, that USA doesn't exist any longer and so I have decided, as a new year's project, to explain as best I can the economic, social, political, and cultural changes that destroyed the country of my childhood. None of this is new. All of the events I will describe happened in public. In fact, the only reason this isn't common knowledge is because contemporary history is not taught. I am calling this tale of extended disaster "a blueprint for a dump."
Did economics once work better?
Of all the wrong-wing gibberish, the most annoying is the claim that we Progressives are just dreamers who don't have a track record to run on. Wrong. We have a track record that is the envy of any political movement ever. When it comes to economics, WE are the grown-ups in the room.
In the days to come, I intend to explain how a system that produced significant prosperity was destroyed and the events that destroyed it. This is a pretty big project so today, I post an introduction that outlines the basic historical contours. We will get to the specifics soon enough—starting tomorrow when I intend to discuss the decision to allow free-floating currency exchange rates and the impact of domestic Peak Oil in USA
The foundations are laid for the Great Decline
The Great Prosperity following World War II was product of many forces but was based on the material wealth churned out by the amazing productivity of the American Industrial System. As late as 1962, USA made more things than the rest of the planet combined. As a result, we were a creditor nation and had a massive trade surplus.
But the 1960s saw an explosion of overseas expenses—most notably for wars of imperial aggression. Yup, Vietnam. (I have a friend who believes the decline of USA was the direct result of the "bad karma" we earned invading Vietnam. He has a point.) As the trade balance tipped into negative territory, something very important happened to the real economy. In 1970, domestic oil production peaked. After that, the oil bill would contribute ever larger amounts to the trade deficit.
The logical thing to do would have been to stop our spectacularly unpopular wars and go home to retool the economy to run on something other than oil. But since that did not happen, the trade imbalance would soon trigger events in the financial markets.
By 1971, the agreement that USA gold would be the ultimate backer of the global monetary system was taking on water. The French, who knew something about the costs of making war in Indochina, decided to convert their dollar holdings into gold—and they had enough of those holdings to drain Fort Knox—and then some. So Nixon did the only thing he could do, he closed the Gold Window. For the first time in history, gold had nothing to do with monetary policy. And while this was good news for all of us who detest the Gold Standard and all the misery it brings, the idea of free-floating exchange rates was NOT an improvement. After 1971, there were few barriers to open speculative attacks on a nation's currency—a fact that has led to one economic calamity after another.
Now it took awhile for either of these events to show their ugly consequences. In the case oil production, the peak was only fully understood some years after the fact. It could be argued that it wasn't until the Arab Oil Embargo of 1973 that the idea of Peak USA Oil was known outside a small circle of oil men—and most of them didn't really believe it. As for the end of the gold experiment, that news was greeted by much wailing by the "sound money" boys but in fact, the real opportunities for plunder opened up by floating currencies weren't grasped until the 1980s.
But the Progressive revolution in economics was over. An economy built on cheap oil was going to be very difficult to defend anyway and floating currencies meant there were just fewer defenses against the financial pirates who were waiting for their main chance.
Here is Richard Nixon announcing the end of the redemption of dollars for gold. This is a remarkable YouTube—not the least because the comments show that most modern folks think the big sin was abandoning the gold standard. (sigh)
The new reality
Peak Oil presented the USA model of prosperity with a VERY unwelcome dilemma. In any era where energy supplies are rising and prices are falling, big sprawling projects are possible. Interstate highway system—no problem. Urban sprawl—no problem. A two-ton car for every adult in the land—a goal to be cherished. But when energy prices rise, making big heavy things for a living becomes risky indeed. Anything that was called a "heavy" industry had encountered a major roadblock.
So while major industries like steelmaking staggered under the new reality, the enterprises that made the small and light thrived—most especially those associated with the computer industry. The daily output of an automobile factory required trains to haul away—the daily output of a microchip factory could probably be packed in a van. And then there was software—a vital requirement for computers that was actually weightless.
In short, there was a real economy reason why the steel mills of Reading Pennsylvania were shut down and left to rust while companies like Microsoft became the darlings of the financial press. But these changes were about to be accelerated by that ultimate in weightless enterprise—financial "services."
So what? you say. Out with the old—in with the new. Creative Destruction is a good thing according to various economic gurus and replacing steel mills with traders in the various manifestations of weightless electronic money is probably an environmental benefit. What's not to love? Well two things actually.
- Just because there was a more reliable way to make money in the weightless enterprises, nothing had eliminated the need for doing heavy things like growing food and shipping it to cities or manufacturing vehicles to get all those people in sprawled out burbs to work.
- Even though financial 'services' might be clean and weightless, they are also pointless unless they can extract wealth from the heavyweight industries. The whole point of lending is to provide 'services' that are worth but a tiny fraction of what is charged. Unfortunately, most of the money spent on finance in this new era became nothing more than another drag on industries already struggling to cope with a new energy environment.
In addition to the very real economic reasons for avoiding debt service, there is a long-standing cultural bias against lending. All the major religions on earth contain teachings against lenders extracting too much wealth from borrowers. So minds would have to be changed. People would have to be convinced that betting on some currency spread was actually more important than how food was grown or how farmers prospered. The economics of moneychanging would have rule economic discourse again. There would have to be a pushback against the Progressive ideas that had come to dominate the economics profession.
Why ideas are important!
One of the most annoying things about a religious upbringing is that you get to meet people who live to split hairs over the most trivial subjects imaginable. Calling such people "unpleasant" is about a charitable as I get. But knowing how passionate people can get over ideas has proved to be a valuable bit of insight over the years. It is especially useful when it comes to describing economics because ideas are the only currency a practicing economist has. Of course, no one will ever top Keynes' classic observation.
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. (Ch. 24 "Concluding Notes" pg.383. more quotes)Milton Friedman was a general in the new war of ideas. He had been preaching about the evils of the New Deal for most of his adult life and in 1963 published his magnum opus on monetary theory entitled A Monetary History of the United States, 1867–1960. In 1970, I had a distinguished economics professor describe Friedman as an "ignorant crank." John Kenneth Galbraith famously remarked "Milton Friedman’s misfortune is that his economic policies have been tried." Which was true enough. Unfortunately for the likes of Galbraith, being wrong never harmed anyone's reputation when the crackpot ideology is in the service of the moneychangers.
In 1973, Milton Friedman's "brilliance" is taken on a road tour into Chile courtesy of a CIA-engineered coup . Friedman's ideas would be implemented by folks willing to torture their political opponents to death. Under such circumstances, the fact that Friedman's theories were demonstrably insane didn't matter all that much.
Having impressed the world with his economic theories put in place at the end of a gun, Milton Friedman would win the Nobel Prize in economics (1976). The economics prize is in itself a fraud. Even though they give out the prize on the same night as the real Nobel Prizes, it has only been around since 1968 and is award by the Swedish Central Bank (riksbank). It is a little known fact that Sweden has had a central bank for longer than the Bank of England has existed. These guys have been around for a very long time. In a Girl with a Dragon Tattoo, we see a fictionalized account of what the Swedish right wing might have been up to during their years in the wilderness during the 60 year period when the Social Democrats came to dominate political life. But nothing in fiction has been as diabolically clever as a central bank getting to decide what is praiseworthy in economic thought. And Friedman was far from the only crackpot awarded the Riksbank Prize The 1997 winners (who won for some elegant math that purported to be able to accurately price derivatives) founded a hedge fund named Long Term Capital Management that was so inept, it triggered major finacial crises.
By 1980, Friedman's message that "regulations and collective decision-making was responsible for all our ills and that economic decisions should rest solely in the hands of the moneychangers" got him a 10-part series on PBS called Free to Choose. Friedman may have been an ignorant crackpot but he was now an ignorant crackpot with a 10 part series on the supposedly "liberal" PBS. (An interesting footnote to the career of one Milton Friedman. He lived to be a very old man and in his dotage, essentially recanted his major theories. Too bad he could not have done so in 1973.)
During the 1980s, there was spectacular growth in well-funded right-wing think tanks. Perhaps the most important was the Democratic Leadership Council formed in 1985. A guy named Al Frum came up with the idea that he could hit up Wall Street for big contributions and then fund Democratic candidates willing to sell out the economic principles of the New Deal.
Perhaps the biggest victory in the war against Progressive economics came when a right-wing Ayn Rand crackpot named Alan Greenspan became head of the Fed. He would serve from 1987 to 2006. Not surprisingly, the Fed becomes a neoliberal madhouse. This is especially important because anyone who would have a career in economics had to serve a hitch with the Fed.
Once the economics profession was totally on board with the economics of the moneychangers, the next act was to eliminate all dissenting opinion from public discussion. There were many elements of this ideological hegemony but none so important as the 1996 Telecommunications Act. It accomplished a lot of things like legalizing monopolies but the practical side effect was that it made lying legal and fact-checking optional. Not surprisingly, it essentially undid the New Deal-era Communications Act of 1934.
So did the neoliberal economists win the war of ideas? Absolutely! Totally! In a clip at the following link, Bill Black claims there are but four schools left in USA that still teach the economics of the folks who brought this country its greatest prosperity—the prosperity that has been systematically looted and destroyed since 1973.
Bad theory becomes law
The whole point of changing the teaching of economics was to make it acceptable to trash the regulations that had been put in place during the New Deal to prevent another Great Depression. And as would become readily apparent, these regulations had been put in place to address real needs. Well written and administered regulations lead to more scientifically advanced and prosperous societies because regulations protect and permit honest entrepreneurs to thrive. The more complex the society, the more of these honest people it takes to keep all the parts working. Take away the rules and the cheaters will drive out the honest operators. The only historical outcome of "deregulation" is a rise in corruption of all forms and a destruction of industrial potential. Pretty much describes the past 35 years, huh?
Deregulation in all its forms has been an ongoing project. There are literally countless examples. This is just my list. I have also created a separate category for the decriminalization of usury because this involved special levels of cultural warfare.
1978 Airline Deregulation Act. Deregulating the airlines was in some ways low-hanging fruit. Importantly, airlines would still be tightly regulated on safety issues—it was the rate structures that would be deregulated. And the rate structures WERE in need of restructuring. Even so, the New Deal economists claimed that airlines had special requirements that suggested that economically, they should be treated as a regulated utility. So this was a good test case.
The Airline Deregulation Act (Pub.L. 95-504) is a United States federal law signed into law on October 24, 1978. The main purpose of the act was to remove government control over fares, routes and market entry (of new airlines) from commercial aviation. The Civil Aeronautics Board's powers of regulation were to be phased out, eventually allowing passengers to be exposed to market forces in the airline industry. The Act, however, did not remove or diminish the FAA's regulatory powers over all aspects of airline safety. moreMotor Carrier Act of 1980: Deregulating trucking was a bow shot at organized labor. In this case, the Teamsters
The Motor Carrier Regulatory Reform and Modernization Act, more commonly known as the Motor Carrier Act of 1980 (MCA) is a United States federal law which deregulated the trucking industry.Motor carrier deregulation was a part of a sweeping reduction in price controls, entry controls, and collective vendor price setting in United States transportation, begun in 1970-71 with initiatives in the Richard Nixon Administration, carried out through the Gerald Ford and Jimmy Carter Administrations, and continued into the 1980s, collectively seen as a part of deregulation in the United States.
Since the passage of the Interstate Commerce Act of 1887, the federal government had regulated various transportation modes, starting with the railroad industry, and later the trucking and airline industries. Increasing public interest in deregulation led to a series of federal laws beginning in 1976 with the Railroad Revitalization and Regulatory Reform Act. The deregulation of the trucking industry began with the Motor Carrier Act of 1980, which was signed into law by President Carter on July 1, 1980. moreGramm, Leach, Bliley and Commodities Modernization Act: These two pieces of legislation were passed at the end of the Clinton administration and they accomplished the most desired goal of the deregulators—financial deregulation.
The Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. The legislation was signed into law by President Bill Clinton. more
The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured the deregulation of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so that most over-the-counter (OTC) derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA) or as “securities” under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general “safety and soundness” standards. The Commodity Futures Trading Commission's (CFTC) desire to have “Functional regulation” of the market was also rejected. Instead, the CFTC would continue to do “entity-based supervision of OTC derivatives dealers.”  These derivatives, especially the credit default swap, would be at the heart of the financial crisis of 2008 and the subsequent Great Recession. moreUsury
1980 The Depository Institutions Deregulation and Monetary Control Act: This act accomplished many things but its most stunning achievement was it repealed usury limits. Usury laws were so entrenched at the time, some states had them written into their constitutions. To make certain this wildly unpopular bill was passed, the various banking interests launched a major P.R. campaign stressing how unfair it was that depositors couldn't get higher interest rates. But just to make certain everyone got the message, there was a well-coordinated "capital strike" and for much of 1979, lending dried up.
Here is a copy of the speech Jimmy Carter gave at the ceremony where he undid one of the cornerstones of Producer economics—usury laws. To this day, I wonder if he actually believed this horse shit.
Depository Institutions Deregulation and Monetary Control Act of 1980
Remarks on Signing H.R. 4986 Into Law.Of course, once usury had been decriminalized, the Fed's Paul Volcker ran up interest rates to 21% prime. The whole globe staggered. In fact, there are some very good arguments that suggest that large populations world-wide have never really recovered from the 1982 recession that was deliberately triggered for ideological reasons.
March 31, 1980
THE PRESIDENT. This morning we are assembled in the White House to take action which will have far-reaching, beneficial effects on our Nation. Not only will it help to control inflation, but it will also strengthen our financial institutions, our thrift institutions and commercial banks, and in addition to that it will help small savers and address more effectively the relationship of the Federal Reserve System with the banks throughout our Nation.
Let me begin with some commendations. I think Bill Miller deserves a great deal of credit for having pursued this effort, even when the prospects for success were very bleak, first of all as Chairman of the Federal Reserve System, and later of course as Secretary of the Treasury. We have had good support in the Congress from Bill Proxmire, from Henry Reuss, from Fred St Germain, who's here this morning with us. And also, to make it nonpartisan, or bipartisan, I'm particularly grateful that Bill Stanton, Jake Garn, and many others have come this morning to commemorate this historic event. As you can well imagine, in legislation of this breadth and importance, many others played a crucial role, and I'm very grateful to all those who had a part. This is a moment of great gratification to me and, in addition, to the feeling of gratitude to persons that I've just described.
Last spring we began to become more and more concerned about the issues that affected our Nation as inflation was beginning to build up and as the rate of savings in our country was constantly dropping. I recommended to the Congress a landmark financial reform bill, which I will be signing in a few minutes into law. This is not only a significant step in reducing inflation, but it's a major victory for savers, and particularly for small savers. It's a progressive step for stronger financial institutions of all kinds. And it's another step in a long but extremely important move toward deregulation by the Federal Government of the private enterprise system of our country.
We've already had remarkable success in deregulation in the airline industry, this in financial institutions; we hope that the Congress will soon pass the regulatory reform act and that we can have success in the deregulation of the rail industry, trucking industry, and the communication industry.
As you know, under existing law, which this bill will change, our banks and savings institutions are hampered by a wide range of outdated, unfair, and unworkable regulations. Especially unfair are interest rate ceilings that prohibit small savers from receiving a fair market return on their deposits. It's a serious inequity that favors rich investors over the average savers. Today's legislation will gradually eliminate these ceilings and allow, through competition, higher rates for savers. It provides an orderly transition for institutions to develop new investment powers.
Most significant of all, perhaps, it can help improve our Nation's very low savings rate. Now not much more than 3 percent of earnings go into savings, perhaps the lowest rate in the last 30 years. And of course, this small savings rate has been a major factor in increased inflation. This encouragement of savings is important not only to consumers but also to financial institutions in the breadth of our financial system.
The new law will permit institutions to prevent or to overcome the previous wide cyclical changes and swings and to develop a more stable deposit base. This can help ensure steadier flow of credit for productive uses, especially housing. It can keep down financing costs and, again, help defuse the pressing burden of inflation. more
The early 1980s recession describes the severe global economic recession affecting much of the developed world in the late 1970s and early 1980s. The United States and Japan exited recession relatively early, but high unemployment would continue to affect otherOECD nations through at least 1985. Long term effects of the recession contributed to the Latin American debt crisis, the savings and loan crisis in the United States, and a general adoption of neoliberal economic policies throughout the 1980s and 1990s. more
The 1982 Recession
During his 1980 campaign, Ronald Reagan promised to end the economic and hostage crises that had plagued Jimmy Carter's administration. The hostage crisis was solved for him when, only hours after he was sworn in, Iran's Ayatollah Khomeini released the captive Americans. With one victory under his belt, Reagan dedicated himself to making good on his other promise. The American people trusted him to do so.
In February 1981 Reagan presented the Economic Tax Recovery Act to Congress, calling for massive personal and corporate tax cuts, reductions in government spending, and a balanced budget. The program was based on supply side economics: Tax cuts, the theory went, would allow people either to spend more on goods and services, thus giving the economy a boost, or to invest in businesses, thus leading to economic growth. The economic expansion, supply side theorists argued, would generate enough revenue to cover the shortfall resulting from the initial cut in tax rates.
In an effort to balance the budget, Reagan "propose[d] budget cuts in virtually every department of government." While he cut back social programs, including school-lunch programs and payments for people with disabilities, he refused to touch Social Security and Medicare. He also advocated deregulation of certain industries in an effort to reduce the government's role in the economy, and proposed such a massive military buildup that Pentagon spending would reach $34 million an hour during his administration.
At first some Republicans were skeptical and most Democrats were hostile toward the Recovery Act. To overcome opposition, Reagan lobbied hard in Congress and used his skills as the "Great Communicator" to persuade the country. One after another, Congressmen began to line up behind Reagan’s program. Feeling for Reagan swelled after John Hinckley, Jr.'s, assassination attempt on March 30, 1981. Perhaps his rapid, dramatic recovery was seen as emblematic of what the country could achieve under his leadership. By July 1981, Reagan’s economic program won the support of two-thirds of the American public and was approved by enough Democrats to get it through Congress.
When, in August 1981, Reagan signed his Recovery Act into law at Rancho del Cielo, his Santa Barbara ranch, he promised to find additional cuts to balance the budget, which had a projected deficit of $80 billion -- the largest, to that date, in U.S. history. That fall, the economy took a turn for the worse. To fight inflation, running at a rate of 14 percent per year, the Federal Reserve Board had increased interest rates. Recession was the inevitable result. Blue-collar workers who had largely supported Reagan were hard hit, as many lost their jobs.
The United States was experiencing its worst recession since the Depression, with conditions frighteningly reminiscent of those 50 years earlier. By November 1982, unemployment reached, nine million, the highest rate since the Depression; 17,000 businesses failed, the second highest number since 1933; farmers lost their land; and many sick, elderly, and poor became homeless. more1982 Garn-St. Germain Depository Institutions Act: This one was a honey because it deregulated the savings and loan institutions. When Volcker raised interest rates to loan shark levels, the S&Ls found themselves in a world of hurt. Their assets were a bunch of 5% mortgages and their cost for money was 20%. So the "solution" was to let the safe and staid home mortgage business come to the casino.
The Garn–St. Germain Depository Institutions Act of 1982 (Pub.L. 97-320, H.R. 6267, enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the act was a mitigating or contributing factor in the savings and loan crisis of the late 1980s.
The bill, whose full title was "An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans," was a Reagan Administration initiative.
The bill is named after its sponsors, Congressman Fernand St. Germain, Democrat of Rhode Island, and Senator Jake Garn, Republican of Utah. The bill had broad support in Congress, with co-sponsors including Charles Schumer and Steny Hoyer. The bill passed overwhelmingly, by a margin of 272-91 in the House. moreKrugman argues that we are still paying the bills for Garn-St. Germain.
Reagan Did It2005 Grassley Bankruptcy Abuse Prevention and Consumer Protection Act: The credit card industries weren't abusing anyone by charging 25% interest rates, of course, but it was never too early to prevent "abuse" by the borrowers. So the banksters passed this vile little act whose worst feature was that students could never discharge their loans through bankruptcy. The greatest single output of the USA educational system is debt peons.
By PAUL KRUGMAN Published: May 31, 2009
“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression. more
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) (Pub.L. 109-8, 119 Stat. 23, enacted April 20, 2005), is a legislative act that made several significant changes to theUnited States Bankruptcy Code. Referred to colloquially as the "New Bankruptcy Law", the Act of Congress attempts to, among other things, make it more difficult for some consumers to file bankruptcy underChapter 7; some of these consumers may instead utilize Chapter 13. Voting record of S. 256
It was passed by the 109th United States Congress on April 14, 2005 and signed into law by President George W. Bush on April 20, 2005. Most provisions of the act apply to cases filed on or after October 17, 2005. It was hailed at the time as the banking lobby's greatest all-time victory.
It was widely claimed by advocates of BAPCPA that its passage would reduce losses to creditors such as credit card companies, and that those creditors would then pass on the savings to other borrowers in the form of lower interest rates. These claims turned out to be false. After BAPCPA passed, although credit card company losses decreased, prices charged to customers increased, and credit card company profits soared. moreThe war on Producers
The whole point of deregulation was to make it possible to organize massive plunder and not go to jail. All other reasons proffered are just so many distractions. At the start of the Reagan administration, there were still a lot of heavy assets to loot. There have been books written about this era—some of them very good—and there will be a lot more. The reason is simple—the era of neoliberal plunder of real assets and the deindustrialization that followed represented a historical reversal of a national pro-industrial development strategy that goes back to those inventor founding fathers such as Jefferson, Franklin, and Tom Paine.
During the madness, it mattered little how well an industrial concern was managed. Loyal customers, good products, great research teams, whatever—didn't matter to a raider. In fact, suppose a company had set aside a nice nest egg to pay for the development of new products. In the world of Producers, this made such a company a shining example of industrial capitalism. In the mind of a raider, this nest egg was what he intended to grab during the hostile takeover. The idea that the "restructuring" specialists only destroyed the weak and deserving is utter nonsense. Lots of fine companies were destroyed. Not merely stolen—destroyed!
It was during this era that USA lost its economic muscle. I am not going to try to summarize the destruction or highlight some especially bad actors because in truth, EVERYONE got sucked into the madness. Union pension funds were used to destroy the very industries that would pay future pension costs. Environmental NGOs invested their endowments in currency swaps. City administrators bought junk bonds because the higher return meant raises down at city hall without raising taxes.
But there is an interesting new chapter to this story. In a Republican Primary where a field of political whack-jobs struggle to pander to the party's looniest members, we saw that on Wednesday, a superpac associated with Gnoot released a documentary called When Mitt Romney Came to Town detailing some of the sleazier aspects of Romney's career as head of vulture-fund Bain Capital. It is well produced, shot, and edited—28 minutes of very professional documentary making. Something like this required a minimum of three months to make.
It is almost impossible to imagine anything even remotely like this coming from the Obama people. The Democrats have two problems:
- They are terrified of offending their new friends on Wall Street,
- The critics of capitalism that still remain in the party tend to lump all private enterprise into this big ball of evil—to them, there is no difference between a Steve Jobs who built a roaring success from a handful of good ideas and a vulture like Mitt Romney who stole everything not nailed down.
Well, leave it to some conservatives to understand the difference between industrial and finance capitalism—or as Rick Perry puts it, the difference between venture and vulture capitalism. Actually I am shocked, puzzled, and delighted by this development. Here is the documentary (in full) that catalogues some of the destruction caused by the war on Producers.
There are literally thousands of variations to this story. I could easily spend my life writing about nothing else. But here are some of the highlights.
Firing of PATCO workers. In August of 1981, 13,000 air traffic controllers went out on strike for better wages and working conditions. Reagan fired them all. And the unions did almost nothing to support their brothers. Labor has not been the same in USA since.
P9 Strike. In August 1985, the meatpackers at Hormel's plant in Austin Minnesota went out to protest job cuts, pay cuts, and insanely dangerous working conditions. This fight would be fought to the bitter end—local P-9 never gave up. The Minnesota governor who was a member of the Democratic Farmer Labor Party would eventually call in the National Guard to crush the strike—proving that even in "liberal" Minnesota, the DFL had sold out.
The North American Free Trade agreement (NAFTA) initially agreed to by GHW Bush but signed into law by Bill Clinton in 1993, would accelerate the destruction of manufacturing jobs in USA. A lot has been written about this but the main lesson was that the Democrats had already sold their shriveled souls to the neoliberal agenda.
SPEEA Strike (2000). SPEEA Union (Society of Professional Engineering Employees in Aerospace) is quite literally a union of rocket scientists. One of the reasons unionization is so weak in USA is because most people believe that if their profession is prestigious enough and they are good enough, they don't need union protections. This was the strike where arguably the MOST prestigious profession found out they needed unions as much as truck drivers. In fact, without the assistance of the Teamsters, this strike would have been another failure.
Beyond some spectacularly unsuccessful strikes, the struggle against the new economic order has had few actions of note. The most notable exception came when protestors shut down WTO meeting in Seattle. There would be attempt to close down further gathering of bankster planning sessions. None would succeed.
#OWS. Ah yes, the latest manifestation of opposition to raw Predation. We have no idea how this will turn out, but the fact that people are still screaming about the bankster agenda probably means something—we just do not know what...yet.