So let’s see where did we leave off?
In 2004, economists at the Economic Policy Institute (EPI) recognized that the US was experiencing the greatest sustained job loss since the 1930s.
By 2005, it was clear that while the rich were getting exponentially richer, the middle class was declaring bankruptcy in record numbers and the number of people living in poverty was increasing.
By 2006, the first signs of problems in the subprime mortgage mortgage market were clearly apparent as was the fact that Americans were drowning in debt. One of the fastest growing areas of the financial sector was debt collection.
So in spite of recent comments by persons like former Vice President Dick Cheney and financial advisors like Jim Cramer that no one could have predicted the current economic crisis three years ago, there is clear evidence that quite a few people did just that.
But you ask, why should we care whether people saw this economic collapse coming or not? Shouldn’t we all be focusing on just getting out of this mess?
Of course we should be focusing on moving the economy forward but shouldn’t we ask ourselves do we really want to go back to doing business as usual. Phrased another way, is it wise to rebuild a house of cards.
In an op-ed article for the Washington Post, columnist E.J. Dionne Jr. stated, " .. if this near meltdown of capitalism doesn't encourage a lot of people to question the principles they have carried in their heads for the past three decades or so, nothing will.”
As I mentioned in my last post, one of the movies that changed the way that I viewed Wall Street and the banking system was James Scurlock’s Maxed Out.
In the following video clip Nightline's Vickie Mabrey interviews the movie's Director, James Scurlock and Harvard Law Professor, Elizabeth Warren.
Professor Elizabeth Warren was one of those who recognized that the economy was teetering on the edge of collapse three years ago. And, in one of the smartest moves that Congress has made in a long time appointed her to be Chairperson of the TARP (Troubled Assets Relief Program) Congressional Oversight Committee.
Last night, during an interview on The Rachel Maddow Show Professor Warren warned us that the bailouts won't work if the banking industry doesn't change their ways.
In the same year that James Scurlock released his film “Maxed Out”, Emmy winning journalist, Danny Schecter released another documentary, In Debt We Trust, which closely examined the nature of the economy and the banking and mortgage industries. In his film Schecter poses the question, “When did the mall replace the factory as America’s economic engine?" He also explains “financialization”, a phrase that he credits to former Reagan advisor Kevin Phillips, which refers to “a powerful credit industrial complex deliberately engineered by excessive debt.”
In the film former credit card executive Steve Barrett explained:
“We’re doomed to shop until we drop. Two thirds of our economy is based on consumption which leads to a rather petrifying paradox. If we cut back on consumption which is obviously good for the environment, good for a number of things, the US economy collapses. In a sense we’ve built an economy that needs rampant consumerism as a fuel to keep the engine going.”
Later in the same film, Ronald Silverman, Hofstra University Law Professor, comments on the sub-prime mortgage crisis:
“The severity of the problem of home mortgage lending in a predatory way may be quantified in the following terms. You are talking about a problem that transfers hundreds of billions of dollars from the pockets of the poor to people who are in a far better position than their so-called victims.”
Apparently all of the people who are now claiming that no one could have predicted the current economic crisis never heard the little parable about the mousetrap in the house.
A mouse looked through a crack in the wall to see the farmer and his wife opening a package. What food might it contain? He was aghast to discover that it was a mouse trap. Retreating to the farmyard the mouse proclaimed the warning: "There is a mouse trap in the house, a mouse trap in the house!
"The chicken clucked and scratched, raised her head and said, "Excuse me, Mr. Mouse, I can tell this is a grave concern to you, but it is of no consequence to me. I cannot be bothered by it."
The mouse turned to the pig and told him, "There is a mouse trap in the house, a mouse trap in the house!" "I am so very sorry Mr. Mouse," sympathized the pig, "but there is nothing I can do about it but pray. Be assured that you are in my prayers."
The mouse turned to the cow. She said, "Like wow, Mr. Mouse. A mouse trap. Like I am in grave danger. Duh...NOT!"
So the mouse returned to the house, head down and dejected, to face the farmer's mouse trap alone. That very night a sound was heard throughout the house, like the sound of a mouse trap catching its prey. The farmer's wife rushed to see what was caught. In the darkness, she did not see that it was a venomous snake whose tail the trap had caught. The snake bit the farmer's wife. The farmer rushed her to the hospital. She returned home with a fever. Now everyone knows you treat a fever with fresh chicken soup, so the farmer took his hatchet to the farmyard for the soup's main ingredient. His wife's sickness continued so that friends and neighbors came to sit with her around the clock. To feed them, the farmer butchered the pig. The farmer's wife did not get well and a few days later she passed away. So many people came for her funeral, that the farmer had the cow slaughtered, to provide meat for all of them to eat. So the next time you hear that someone is facing a problem and think that it does not concern you, remember that when there is a mouse trap in the house, the whole farmyard is at risk. -- Author Unknown
and while we’re telling stories here’s a good one that circulated in June of 2006.
The Corporate Boat Race
An American automobile company and a Japanese auto company decided to have a competitive boat race on the Detroit River. Both teams practiced hard and long to reach their peak performance. On the big day, they were as ready as they could be.
The Japanese team won by a mile.
Afterwards, the American team became discouraged by the loss and their morale sagged. Corporate management decided that the reason for the crushing defeat had to be found. A Continuous Measurable Improvement Team of "Executives" was set up to investigate the problem and to recommend appropriate corrective action.
Their conclusion: The problem was that the Japanese team had 8 people rowing and 1 person steering, whereas the American team had 1 person rowing and 8 people steering. The American Corporate Steering Committee immediately hired a consulting firm to do a study on the management structure.
After some time and billions of dollars, the consulting firm concluded that "too many people were steering and not enough rowing." To prevent losing to the Japanese again next year, the management structure was changed to "4 Steering Managers, 3 Area Steering Managers, and 1 Staff Steering Manager" and a new performance system for the person rowing the boat to give more incentive to work harder and become a six sigma performer. "We must give him empowerment and enrichment." That ought to do it.
The next year the Japanese team won by two miles.
The American Corporation laid off the rower for poor performance, sold all of the paddles, cancelled all capital investments for new equipment, halted development of a new canoe, awarded high performance awards to the consulting firm, and distributed the money saved as bonuses to the senior executives.
The bottom line is this. Not only were there quite a few people who saw the current economic crisis coming but a few were desperately trying to warn the public. However by 2007, those voices were drowned out by news coverage of Anna Nicole Smith's baby daddy drama, Britney Spears' breakdown and the never-ending tale of Paris Hilton's will she or won't she go to jail.
Wall Street, K Street, Madison Avenue, Capitol Hill and 1600 Pennsylvania Avenue didn't want the general public to realize that during the last decade "capitalism" had been redefined and a not so subtle transfer of wealth from the middle class to the rich was occurring. And when Americans began to complain, people like Phil Gramm aka "Foreclosure Phil" tried to convince them that they were whiners.
Friends, if you think that it was an accident that there were record gasoline prices right before Americans lost their shirts in the stock market then you probably believe that the current economic stimulus bill is socialism and want a return to the good old days of excessive debt and spending.
But if you think that there is more to this story than un-educated consumers who didn't read the fine-print on their sub-prime mortgage then I implore you to demand the truth from the news media, demand that Congress hold Wall Street accountable and that you hold Congress and the White House accountable.
And most importantly, don't believe it when someone says that no one saw this coming.
This post is lovingly dedicated to my former coworkers who made jokes about the people trapped on roofs during Hurricane Katrina. I hope that their 401Ks are all doing well.
Saying "No One Saw This Coming" Just Doesn't Ring True - part 1
The Best Joke of the Day No One Saw It Coming
A Modern Bedtime Story, 09/08
Bad Luck, Incompetence, Lack of Regulation or Simple Avarice, 3/08
Remember Watch for the Signs, 2/08
When the Middle Class Can No Longer Cope, 12/07
Are You Preparing for A Recession?, 9/07
A Change in the Public Discourse on Poverty, 7/07
Poverty Gap in US Widened Under Bush by Andrew Gumbrel for the Independent/UK , republished by CommonDreams.org, 2/07
Conspiracy Theories Abound as Oil Prices Fluctuate by Steven Mufson for The Washington Post. 10/06
New Survery Report Reveals Truth Behind Credit Card Debt Explosion in the US a report from the Center for Responsible Lending, 10/05