1
Only a Harvard academic could spout such claptrap. By 1991, the U.S. was again at war. The 1st Gulf War was considered a moral war as the U.S. came to the rescue of Kuwait and Saudi Arabia. Using traditional military maneuvers, General Schwarzkopf obliterated Sadaam Hussein's Republican Guard. But, there was no consensus to follow through and eliminate Hussein. Unwittingly, we planted the seeds for the bleak later stages of the Unraveling by leaving military bases in Saudi Arabia. There were not many more feel good national experiences after the 1st Gulf War. A recession in 1991 (remember George Bush Sr. buying 4 pairs of socks at JC Penney to exhort Americans to shop America out of recession) caused by the S&L Crisis allowed an obscure Arkansas Governor to win the Presidency. The election of Bill Clinton ushered in the culture wars of the 1990s. The conservative religious right fought scorched earth battles with the liberal left wing elite who control the media. Pat Buchanan captured the animosity of this conflict:
"There is a religious war going on in our country for the soul of America. It is a cultural war, as critical to the kind of nation we will one day be as was the Cold War itself. Who is in your face here? Who started this? Who is on the offensive? Who is pushing the envelope? The answer is obvious. A radical Left aided by a cultural elite that detests Christianity and finds Christian moral tenets reactionary and repressive is hell-bent on pushing its amoral values and imposing its ideology on our nation. The un-wisdom of what the Hollywood and the Left are about should be transparent to all."
As ideologues fought wars over morality, religion, and abortion, unbridled corporate fascism and individual greed ran rampant. The unholy alliance between mega banks, mega-corporations, the Federal Reserve and Washington DC led to a widening chasm between the haves and have-nots. The 1990s were rooted in three poisons: anger, greed, and delusion. The Presidency of Bill Clinton was marked by a strong economy, political gridlock, declining moral values and relatively minor military skirmishes. Society glorified individuals, their wealth, power and lifestyles. The TV show Lifestyles of the Rich and Famous, hosted by Robin Leach, ran from 1984 until 1995. The show featured the extravagant lifestyles of wealthy entertainers, athletes and business moguls. Glorification of the rich and their profligate lifestyles, spurred the superficial self-centered Boomer generation to idolize and emulate this lifestyle. There was one big problem with emulating this lifestyle. The Boomers didn't have the money to live this lifestyle. Wall Street stepped in to supply the fuel for the two decades of decadence. Household debt grew from $2 trillion in 1984 to $14 trillion in the mid 2000s.
http://www.swifteconomics.com/wp-content/uploads/2009/06/Debt.png
The United States has experienced a three decade long "expenditure cascade". An expenditure cascade occurs when the rapid income growth of top earners fuels additional spending by the lower earners. The cascade begins among top earners, which encourages the middle class to spend more which, in turn, encourages the lower class to spend more. Ultimately, these expenditure cascades reduce the amount that each family saves, as there is less money available to save due to extra spending. Expenditure cascades are triggered by consumption. The consumption of the wealthy triggers increased spending in the class directly below them and the chain continues down to the bottom. This is a dangerous reaction for those at the bottom who have little disposable income originally and even less after they attempt to keep up with others spending habits. The personal savings rate was 12% in the early 1980s and declined to negative 1% by 2005. The expenditure cascade couldn't have occurred without easy access to debt. The question that must be asked is, who benefits from debt and who pays?
http://wallstreetpit.com/wp-content/uploads/2010/01/image016.png
The delusion of the American populace cannot be underestimated. Their worshipping at the altar of materialism and adoration of Hollywood created pop culture was crucial to the societal delusion. Without the corporate consumerism marketing machine, an unlimited amount of credit provided by bankers, and ultra-low interest rates supplied by the Federal Reserve, the delusions of grandeur could not have been realized. Credit cards didn't even exist until 1968. Until the 1990s mortgage lenders followed the 28/36 rule. Your mortgage payment, including taxes and insurance, couldn't exceed 28% of your monthly gross income. All of your debt payments couldn't exceed 36% of your monthly gross income. Homebuyers rarely put down less than 10% of the home's value. Home equity loans were virtually non-existent. The subprime loan market for homes and automobiles was miniscule. In the early 1980s auto loans averaged 45 months and buyers put 12% down on the purchase. By the mid 2000s auto loans averaged 64 months with only 5% down on the purchase. By 1999, 40% of all cars on the highway were leased. The proliferation of easy credit allowed average people to live a life of excessive opulence, occupying 7,000 sq ft McMansions, driving BMWs, and wearing Rolex watches. Americans bought so much stuff on credit they couldn't fit it all in their oversized abodes. So they needed to rent outside storage for their stuff. In 1984 there were 6,601 facilities with 290 million square feet of rentable self storage in the U.S. In 2009, there were 46,000 self storage facilities with 2.21 billion square feet, a 762% increase.
http://www.marketoracle.co.uk/images/2009/May/uk-housing-size.gif
The delusional middle and lower class Boomers believed they were equal to the top 1% of ultra-wealthy, because they were living like them. As Orwell noted, "all animals are created equal but some animals are more equal than others". Those that were "more equal" worked on Wall Street. The repeal of the Glass-Steagall act in 1999 with overwhelming majorities in both Houses of Congress and cheered on by Wall Street groomed Secretary of the Treasury Robert Rubin, opened Pandora's Box. Bank holding companies started dealing in mortgage-backed securities, credit default swaps, and structured investment vehicles. A blizzard of products solely designed to generate fees while ignoring the banks' fiduciary duty to their clients was unleashed. Subprime mortgages surged from 5% of all mortgages to 30% by 2008, as issuing the mortgage became detached from the risk of the mortgage. The issuer of the loan had no risk, since the mortgages were immediately bundled and sold off to investors (suckers). No doc, Alt-A, and Option ARM mortgages proliferated as fraud ran rampant on Wall Street and throughout the financial services industry. The Federal Reserve, led by Alan Greenspan, aided and abetted the delusional debt bubble through its non-existent regulation of the banks and mortgage brokers, and unnecessarily keeping interest rates extraordinarily low from 2001 through 2005.
As the average American middle class worker fell further behind, without realizing it, the financial sector grew ever more powerful and malevolent. A country that had once produced its way to world domination degenerated into a paper kingdom run by Harvard MBAs, lawyers, tax accountants and central bankers. They "create" pieces of paper with terms that no one understands, packages worthless pieces of debt obligations and sell it to other clueless financial experts, borrow 40 times their capital and gambles it based on models that told them they couldn't lose, and rewards themselves with obscene pay packages and bonuses.
Industry1970
