Wall Street is not the problem

Wall Street is the result.

The problem is an economic ideology based on two assumptions. The first is that there is nothing wrong with national debt. The second is that our economy is best served by cutting taxes on the wealthy. This ideology goes by the unlikely characterization of keeping government out of our way. I will call this ideology, republican dogma.

America has a long history of fiscal conservatism. We did not spend more money then we had. We were what China is now, a creditor nation. This changed during the Reagan administration. America became a debtor nation. Republican dogmatists asserted that this was a good thing, and they haven’t questioned it since. They have only debated how much debt is too much.

America also has a long history of entrepreneurship. We became the richest nation in the history of the world because people were free to take risks and start businesses which might succeed or might fail. People could take their dreams to their parents, their banker, their own savings, to get money to start those businesses. They succeeded or failed according to whether people bought what they sold.

During the Reagan years the “trickle down theory” was added. This theory asserts that the economy grows best when those with the most money get tax cuts. The rationalization is that they will invest their excess money and create jobs.

It has taken twenty-five years for this ideology to reach its conclusion. Our national debt is now so great that we borrow money to pay the interest. The very rich have gathered up most of the money that was once taken by the government in taxes and spread among all of us through spending on roads, bridges, schools, etc.

What went wrong? Simply put, the rich are now able to pay cash for more homes than they can count, and too many of us have had to borrow more than we could pay back just to have one. The money that was supposed to trickle down, didn’t. The national debt that wasn’t supposed to matter, does.

What, then, of Wall Street? For the more complete account, read my post on Bernanke discovering that the economy has problems. In brief, Wall Street’s job was to grease the skids of the economy. While the rich were getting richer, the rest of us were getting poorer. We were running out of money that could be transferred to the rich. The financial community had to find ways to keep feeding the beast. They had to figure out ways to promise a high rate of return to investors while the supply of money, to draw that return from, was getting smaller. So they used leverage, derivatives, whatever they could dream up. They could not allow the republican dogma to fail.

Fail, however, it did, and they are taking the fall. You can’t make sense of nonsense.

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2 Responses to “Wall Street is not the problem”

  1. Stacey Derbinshire Says:

    Hello.

    I would like to put a link to your site on my blog roll if you want to do the same for mine. It would be a good way to build up both of our readerships.

    thank you.

  2. Mike Harmon Says:

    Thanks for posting the article, was certainly a great read!

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