A Failure of Political Will

The collapse of the US and European economic systems that we call the Great Depression of 1929 was the result of ignorance; no one understood just how a global economy worked. The Great Depression heralded in domestic and international regulation of finance and commerce. By the time FDR came into office in 1933, after years of inaction, unemployment was stunningly high; there remain discrepancies in how it was measured. Some place it as high as 25% of workers, or 37% of all non-farm workers. We aren't there yet. But don't take solace in that.

This time we understand what happened and there are a lot of wagging fingers.

Here's an explanation of the world financial collapse. We lived beyond our means. Housing was a big part of it: unregulated and often predatory, discriminatory lending offered fast commissions to unscrupulous brokers. Those brokers enabled the purchase of over-priced, inflated value homes to buyers who couldn't afford to live there unless the value of the homes continued to rise and everything in their precarious financial world stayed steady. The rich, the middle income, the working class--everyone lived beyond their means. The predatory lending, however, was aimed at the poorest, and was clearly racial. It has a name "reverse redlining."

These unregulated, often predatory, discriminatory mortgages offered quick profits to the mortgage companies and banks that bundled these mortgages up and resold them as a new form of unregulated paper that didn't require reserves. Everyone was buying up these securities--banks, countries, hedge funds--and guess what?

George Soros, the international financier and hedge fund operator, came out of retirement in the summer of 2007 to personally guide his company's voyage through these turbulent times. Back in April 2008, Soros said: “I consider this the biggest financial crisis of my lifetime.” This is a man who escaped the Nazis in Hungary where extermination was especially effective, so when he speaks in hyperbole, we should listen.

At a private dinner at Columbia University Friday night, Soros had some gloomy predictions. Why should we listen to him? He is an extravagantly generous philanthropist who through a network of foundations supports projects in 50 nations, spending $400 million annually. He makes that much money that he can afford to give away $400 million annually. And in 2008, the worst performing year in stock market history, Soros' Quantum Endowment Fund, a hedge fund, made 8% whereas the average hedge fund lost 18%.

He didn't invest with Bernie Madoff. (Just as an aside. According to reports, Madoff had not make a single investment on behalf of his clients in at least the last 13 years.)

Deregulation of the financial markets, something that started in the 1980s under Ronald Raygun, began the progression that created this mess, according to Soros. A failure of regulation has brought about the "end of the free-market model" that has dominated capitalist societies. Just as the Communist economies collapsed in the 1980s, so ours is collapsing now.

Although no one has ever seen anything like this, there is agreement that radical solutions are needed. Forget these Republican governors who are refusing to take stimulus funds to extend unemployment for their residents. Haley Barbour of Mississippi and Bobby Jindal of Louisiana, are saying NO to unemployment extensions, but might take construction funds. Mississippi and Louisiana are on the bottom of US states economically, and their leadership will keep those states so poor. In 2007 13% of the US population lived in poverty; Mississippi was well over the national average at 20.6% and Louisiana, still reeling from Hurricane Katrina, was at 18.6%. So I doubt these guys will become national leaders for their political savvy.

We need the political will to tax the rich, the rich who got so much richer during the free market orgy these last thirty years. We need to turn back the Bush tax cuts. We need to tax the gains of those who gamble in hedge funds, yes, even Mr. Soros, at ordinary income rates. There is no other way. Nationalizing zombie banks will wipe out all of the taxpayers who invested their retirement funds into "safe" investments like Bank of America, CitiBank, and other failing banks. Is that fair? We have to trust other, smarter people to make those decisions. Pouring money into insolvent, zombie banks without accountability and requirements for lending certainly isn't working.

What next?

Two things will keep me going today. First, at 5:00 pm est I will participate in a teleconference mediation for world peace. Mary Swanson, a dear friend, and gifted spiritual woman, will be leading it. Browse through her website: http://maryswanson.net/. You can sign up to participate by going to her website and clicking on "Make Payment," and sign up for a single "teleclass." The power of the collective is enormous. Remember, none of us can get through this alone.

The second thing that I am looking forward to: The Academy Awards. Give me some glamour!!!