What follows here is based on an article by Mike Whitney at http://www.informationclearinghouse.info/article25367.htm
Bush, Greenspan and many other high-ranking officials understood the problem with subprime mortgages and knew that a huge asset bubble was emerging from them that threatened the real economy. But while the housing bubble was more than just an innocent mistake, it wasn't caused by any kind of "conspiracy," which Webster defines as, "a secret agreement between two or more people to perform an unlawful act."
No, it's actually worse than that, because bubble making has
become the predominant endeavor on Wall Street, and is being used by the
financial elite to bypass the inherent 21st century structural
problems of capitalism itself, mainly stagnation.
The main stakeholders in Wall Street's bubble-making agenda didn't need to convene
any kind of conspiratorial meeting to decide on what they wanted or how they
were going to get it. They already knew what they wanted; all
they needed was a process that would
help them maintain profitability even as the "real" economy remained
stuck in the mud. And that process
quickly became obvious to all of them. UCLA
history professor Robert Brenner has written extensively on this topic and easily
dispels the mistaken view that the real economy is "fundamentally
strong" (as claimed by former Treasury secretary Henry Paulson).
Here's Brenner's explanation:
"The current crisis is more serious than the worst previous recession (1979- 1982) of the postwar period, and could conceivably come to rival the Great Depression. Economic forecasters have underestimated how bad it is because they have over-estimated the strength of the real economy and failed to take into account the extent of its dependence upon a buildup of debt that relies on asset price bubbles. In the U.S., during the recent business cycle of the years 2001-2007, GDP growth was by far the slowest of the postwar epoch. There was no increase in private sector employment. The increase in plants and equipment was only about a third of the increase in the previous period, and was a postwar low. Real wages were basically flat. There was no increase in median family income for the first time since World War II. Economic growth was driven entirely by personal consumption and residential investment, which would not have been possible without easy credit and rising house prices. Economic performance was weak, even despite the enormous stimulus from the housing bubble and the Bush administration's huge federal deficits. Housing by itself (it's growth fueled by the newly relaxed requirements for getting a mortgage) accounted for almost one-third of the growth of GDP and close to half of the increase in employment in the years 2001-2005. It was, therefore, to be expected that when housing prices stopped going up and the housing bubble burst, wages, consumption and residential investment would fall, and the economy would plunge." (Wages were simply too low to allow workers to buy enough of what was being produced.)
(Source: "Overproduction, not Financial Collapse, is the Heart of the Crisis," Robert P. Brenner speaks with Jeong Seong-jin, Asia Pacific Journal) Click here
What Brenner describes is a "real' economy that's flat on its back, an economy that -- despite unfunded tax cuts, massive military spending and gigantic asset bubbles -- can barely produce enough to be described as "positive growth.'
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