The elephant in the room...
I feel it's my duty to alert everyone: There is an elephant in the room. And it's making conversation a little difficult as we try to talk over and around it.
Simply put: The rich have too much money
No, it isn't an elephant. It's a forest that we can't see because we're focused on trees like "liquidity," and "Credit Default Swaps."
Capitalism is like Monopoloy. When one person has almost all the money in Monopoly, the game's over. Not because someone has trapped the enemy's king as in chess; not because they scored the requisite number of points as in ping pong; or scored more points in a period of time as in basketball. No, the game of Monopoly ends when the Monopoly economy comes screeching to a halt because only one person has enough money to continue playing.
So you fold up the board, put away the pieces, and play again some other time.
Capitalism is a game, too. There are objectives, and rules for competing. The money is valuable only because we all agree it is in order to play. And that's all fine and good.
In capitalism, when too much of the wealth is concentrated at the top, we have a financial crisis. That's bad. Because capitalism is a game with serious consequences: it creates wealth and spurs innovation when it works; it causes misery when it breaks down.
We don't want to fold up the board and put away the pieces. Nor can we just start over.
In capitalism, we have to find a way to rein in the super-wealthy, and move some more of the fruits of the economy down to the workers (who-- let's not forget-- play a not inconsiderable role in the creation of that wealth) so that the game can continue.
That's what the New Deal (and the War) did. It ended the Gilded Age. There were still rich people, and other people getting rich. But Social Security and war time construction moved a higher percentage of the nation's wealth into the hands of poor and working class Americans so that the game of capitalism could go on in a more vibrant fashion.
All that started reversing in the 1970s, and that reverse trend has accelerated up to the present day, until we've found our system in crisis.
This is why Americans have debt instead of savings. As the non-rich share of the pie shrank, banks gave consumers access to easy credit, and the debt incurred took the place of spending "real" money so that the economy could keep chugging along.
But it couldn't last forever. The rich began doing more and more exotic things with their too big share (Credit Default Swaps, for instance), and found themselves out on a limb when the housing bubble burst. Now the non-rich have so little they can't spend enough to keep the game going. Without that spending the complex schemes of the rich fall apart. Suddenly everybody is in trouble.
So we're going to bail out the bankers. And we're going to hold off on rolling back the Bush tax cuts.
Fine. But if we don't see the forest, if we don't reverse course with a new New Deal, then these bailouts are a ripoff, plain and simple. And won't fix the problem.
We don't need to seize their limos. But we need to increase the minimum wage, and index it to inflation. We need national health insurance. We need to renegotiate NAFTA, and this time consider the health of labor and the environment. We need to change the rules so that small family farms can compete with big business farms; so that every other store in small towns aren't boarded up because a WalMart came in; so that we have a manufacturing base again; so that all Americans can get a good education. And so on.
The poor and working class literally have to rescue the rich by taking a bigger part of the pie as we go forward.
Labels: CDS, financial crisis, Monopoly