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Columbia University economist and Nobel Laureate Joe Stiglitz -- the person who, six years after the markets crashed, still gets my vote for “most important human being on the planet” -- is at his stunningly concise best, once again, over at Politico’s “Magazine” (July/August 2014 Edition), in a piece published there over the past 24 hours: “The Myth of America’s Golden Age.”

Stiglitz starts out discussing his youth, growing up in Gary, Indiana; matriculating at M.I.T.; and coming to the following basic conclusion: "...Most disturbing is the realization that the American dream—the notion that we are living in the land of opportunity—is a myth. The life chances of a young American today are more dependent on the income and education of his parents than in many other advanced countries, including “old Europe.”

He then segues into Thomas Piketty’s watershed book, Capital In The Twenty-First Century—and Stiglitz clearly concurs with Piketty’s conclusions in it–as he discusses the economic myths of America’s Golden Age (1945-1980).

Like Piketty, upon looking back at the past three-plus decades, Stiglitz agrees that our country’s Golden Age was an “aberration.”

And, it’s at this point in the piece where Stiglitz hits it out of the park…

… Ironically enough, the final proof debunking this very Republican idea of trickle-down economics has come from a Democratic administration. President Barack Obama’s banks-first approach to saving the nation from another Great Depression held that by giving money to the banks (rather than to homeowners who had been preyed upon by the banks), the economy would be saved. The administration poured billions into the banks that had brought the country to the brink of ruin, without setting conditions in return...
...

...Obama promised to stop these abuses, but so far only a single senior banker has gone to jail (along with a very few mid- and low-level employees). The president’s former Treasury secretary, Timothy Geithner, in his recent book, Stress Test, made a valiant but unsuccessful attempt to defend the administration’s actions, suggesting that there were no alternatives...
...

...In fact, Geithner’s attempts to justify what the administration did only reinforce my belief that the system is rigged. If those who are in charge of making the critical decisions are so “cognitively captured” by the 1 percent, by the bankers, that they see that the only alternative is to give those who caused the crisis hundreds of billions of dollars while leaving workers and homeowners in the lurch, the system is unfair...

Stiglitz reminds us that the approach our government ended up implementing: "...exacerbated one of the country’s most pressing problems: its growing inequality."

Later, he continues...

...None of this is the outcome of inexorable economic forces, either; it’s the result of policies and politics—what we did and didn’t do. If our politics leads to preferential taxation of those who earn income from capital; to an education system in which the children of the rich have access to the best schools, but the children of the poor go to mediocre ones; to exclusive access by the wealthy to talented tax lawyers and offshore banking centers to avoid paying a fair share of taxes—then it is not surprising that there will be a high level of inequality and a low level of opportunity. And that these conditions will grow even worse...

Cautiously and belatedly, some six years after the fact, the Obama administration has now begun to revise its views about the Great Recession. Even Geithner, in his book, agrees that more should have been done. But hey, resources were scarce, and one had to make bets where they would be most effective. That’s the point: Listening to the bankers, it’s not a surprise that he placed his money on the bankers. Even before Obama took office, I urged a greater emphasis on homeowners: that we should combine at least a little trickle-up economics with trickle-down economics. But those of my persuasion were given short shrift, as the administration sought counsel from the vested interests in the financial sector.

The Obamians seem bewildered that the country is not more thankful to its government for having prevented another Great Depression. They saved the banks, and in doing so, they saved the economy from a once-in-a-hundred-year storm. And they proudly point out that all the money given to the financial sector has been more than repaid. But in making such claims, they ignore some critical realities: It was not something that just happened. It was the result of reckless behavior, the predictable and predicted consequences of deregulation and the inadequate enforcement of the regulations that remained, of buying into the mind-set of the 1 percent and the bankers—for which Geithner and his mentor, former White House economic adviser Larry Summers, had more than a little culpability. It was as if, after an accident caused by drunk driving, in which the last drink was served by the police officer on duty, the drunk driver was put back into the driver’s seat, his car rushed to the repair shop, while the victim was left to languish at the scene of the crime.

The repayment itself is, at least in part, the result of a game that would do any con man proud. The government, under the auspices of the Federal Reserve, lends money to the bank at a near-zero interest rate. The bank then lends it back to the government at 2 or 3 percent, and the “profit” is paid back to the government in repayment of the “investment” the government made. Bank officials, meanwhile, get a bonus for the hefty returns they have “earned” for the bank—something a 12-year-old could have done. This is capitalism? In a true rule-of-law world, a drunk driver would have to pay for not only his own repair costs but also the damage he has inflicted—in this case, the cumulative loss of GDP, which now amounts to more than $8 trillion, and which is mounting at the rate of $2 trillion a year. The banks recover, while the typical American’s income plummets to levels not seen in two decades. It is understandable why there might be some anger in the body politic...
...

...The problem was that Americans saw what they were doing...

Stiglitz reminds us that, "There was a healthy debate in the country about alternative courses of action—before, during and after the bailouts. The reason critics like Sheila Bair, Elizabeth Warren, Neil Barofsky, Simon Johnson, Paul Krugman and others (left, right and center) won the day—at least the intellectual debate and the war over public perceptions—was not that they were better communicators. It was that they had a more convincing message: There were alternative ways of rescuing the economy that were fairer and that would have resulted in a stronger economy."

...The result? Ever greater disillusionment with our democracy…
The piece isn’t too long, but I’ve left out many of the more salient points that Stiglitz makes in it. It’s definitely worth a read. In fact, I’ve already read it twice, and I’m sure I’ll read it a few more times, just to let it sink in. That's due to the fact that I don't think I've ever read anything that so comprehensively and closely mirrors my own sentiments with regard to the manner in which our own Party's leadership has implemented our country's so-called economic "recovery."

As always, Stiglitz takes no prisoners. It’s a significant part of his brilliance!


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