"They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread? "
"Brother, Can You Spare a Dime," (Depression era song)
lyrics by Yip Harburg, music by Jay Gorney (1931)
The Fruits of the Republican Revolution
A global credit crisis, collapsing housing market and equity markets worldwide teetering on the edge. We are at the beginning of the unraveling of the great Republican scam. Ronald Reagan was certainly a transformational president. He began the transformation of the American economy from the greatest economic income producing engine in the world into a vast Ponzi scheme designed to transfer wealth from the American middle class into the pockets of a tiny elite - and it worked. The unions were destroyed, New Deal liberalism was demonized and America's manufacturing base was boxed up and shipped out. It's been downhill for middle class earnings and astronomical gains for the richest 2 % ever since.
In the new Republican economy workers and savers are losers, held in contempt and victimized by inflationary bubble economic policies that reward asset speculation and debt creation. The new American hero's are predatory capitalists and speculators. Working for a salary and saving? That's for suckers. As in the best selling book "Rich Dad, Poor Dad" the "poor dad" got an education and a professional job that contributed to society (everything a previous generation of workers dreamed for their children) -what a loser!
The Secret Engine of the "New Economy" Runs Out of Gas
But the new economy built by Reagan's heirs is having a catastrophic collision with reality. In order to get the kind of leverage to drive asset prices forever upward you need massive amounts of leverage. More then our regulated financial system (or any responsible economic entity) could or would supply. But to keep the pyramid scheme going you need to multiply the buying power of speculators by astronomical factors.
Enter the shadow banking system, a secretive and unregulated global web of exotic debt instruments, hedge funds and financial conduits so arcane and unfathomable that Federal Reserve chairman Ben Bernanke required a one on one tutorial from hedge fund managers in mid-August. From PIMCO Managing Director Bill Gross's monthly market commentary for January 2008: "Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever."
Unencumbered by the government regulation and oversight so despised by Republicans this was the enabler of the new bubble economy. But this ponzi scheme like every other before is ending in tears with potentially severe consequences for our economy.
The last time the US was dominated by the Republican Party was 1929. The credit bubble of the Roaring 20's ended in the crash of '29. It took more then a generation for Americans to forget the consequences of Republican policies. But here we are again, brought to the precipice by the party of ignorance, avarice and greed.