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A Crisis Made in the Oval Office

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A financial panic provoked by President Bush was designed to stampede Congress into passing the bail-out for Wall Street

By Dean Baker

07/10/08 "The Guardian" -- This is the first time in the history of the United States that the president has sought to provoke a financial panic to get legislation passed through Congress. While this has proven to be a successful political strategy - after the House of Representatives finally passed the bank bail-out plan today - it marks yet another low point in American politics.

It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: "We have nothing to fear, but fear itself."

It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.

The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.

This effort to promote panic is especially striking since the country's dire economic situation is almost entirely the result of the Bush administration's policy failures. First and foremost, the decision of Paulson and Bernanke (and previously Alan Greenspan) to ignore the housing bubble, allowed for the growth of an $8tn bubble, which is now collapsing.

It is the collapse of this bubble - which has already destroyed more than $4tn in housing wealth, and is likely to destroy another $4tn over the next year - that is at the root of the economy's problems. While competent economists were warning of the bubble and the dire consequences of its collapse, the top officials in the Bush administration were celebrating the rise in homeownership rates.

The Bush administration made the crisis even worse by deregulating Wall Street. This led to the huge over-leveraging of financial institutions, which has vastly complicated the country's economic policies. It is especially disturbing that Secretary Paulson personally profited from these policies, earning millions of dollars in compensation from Goldman Sachs during his years there as its chief executive.

The collapse of the housing bubble, while falling short of the magnitude of the Great Depression, is likely to lead to the worst recession since the second world war. Repairing the damage caused by this bubble will be a long and difficult process. Cleaning up the damage to the political system from President Bush's unprecedented fear campaign may prove to be even more difficult.

07/10/08 © Guardian News and Media Limited 2008
Vierotchka

16 responses // A Crisis Made in the Oval Office

  •  

    Confirms all our suspicions.

    Secondly, all recessions are but opportunities for Wall St. insiders. When the markets have all reached bottom, the insiders will pick up the bargains if they have not already made fortunes selling short in the meantime.

    Certainly, the number of folk 'left behind' increases with each cycle; the number of folk further enriching themselves decreases with each cycle. That's why a tiny elite of about 1 percent of the US population now owns over 90 percent of the total wealth of the nation.

    Even so --it is hard to sympathize with greedy idiots who indulge the delusion that they can play this game forever and by doing so become one of the 'elite'. The cruel fact is that the elite is getting smaller with each cycle even as their share of total wealth increases.

    It's a cruel game of monopoly ---but in the end no one wins.

    recommended by Vierotchka
    lenhart
  •  

    A case of the blind leading the blind

    Is GW giving everyone the finger or giving his pooch a rectum inspection?

    I ask as the doggie looks a little fed up

    recommended by Vierotchka
    themanwithadog
  •  

    Those who do not understand history are doomed to repeat it. Time and time again, simple greed has waylaid everything from caravans to civilizations.

    Where there is an easy, deregulated market to manipulate, it opens a lot of doors for pass-the-buck debt and multilayered, complex securities that at day's end aren't worth the digital bits they're stored as. Several senior officials, politicians, and the usual crew were all involved, as were a few new shady partners no doubt. I'm sure we will all watch it unravel over the coming months.

    Sadly, the real losers here are hardworking American taxpayers. It is time for widespread, fundamental change.

    care_
  •  

    ci sono presidenti che amano il proprio paese e fanno tutto quel che è possibile per far stare bene i propri concittadini e ci sono presidenti che sguazzano nel fango coi loro simili

    dagos
  •  

    This is really funny... many people will hide inside their home and will put blinds to protect them from sunrays... and the rest will seek for another dim light at night rather than strong rays of brighter bulbs and flourescent lamps... funny... funny...

    rosyjane
  •  

    Michael Crichton wrote a book in 2005 called the "State of Fear". In it he describes how this (and other) administrations have used fear to control popular opinion. This administration has used fear as a club to beat both houses of representatives and the American public into submission on virtually every program he wanted support on.

    It is a sad commentary that a free nation like America should live in a constant state of fear, especially a fear that is generated by public officials that we elected based off of their lies and deceit.

    This administration has behaved no better than any dictator of any third world nation. At least a dictator is honest and open about his detest and open disregard for the populace he represents. Bush smiles as he establishes fear of certain catastrophic consequences if the American people are unwilling to subject themselves to his will.

    The pundits and talking heads downplay Bush's actions as wrong minded, or mis-directed. The truth of the matter is G.W.Bush and his cronies have purposely lied, generating a sense of fear to rape, pillage, and plunder this nations wealth, not to mention its Civil and Constitutional rights, all for the betterment and pleasure of a very select group of their supporters.

    We have yet to see the total ramifications of this presidency, we need to be very afraid.

    TerryA
  •  

    First they stole 2 elections… the first by perverting the supreme court…nothing happened…Then 9-11 & a war based on lies… nothing happened… then they shredded the constitution, kidnapped & tortured the world over, spied on everyone & fired the best US attorneys… nothing happened…then conducted a thinly veiled ethic cleansing during Katrina…nothing happened…now they are taking us all to the cleaners…

    Is there a limit to the damage this executive branch can inflict to the USA ?

    It seems not !

    Fear & Greed Corp reigns under the guise of Mindfuck Inc.

    Get a third job ! Sell a vital organ ! Move in a card box by the river, but stop your whining buba ! You are but a victim of your own imagination, you suffer from a severe case of "mental recession"... Now get over it !

    * WAR IS PEACE, FREEDOM IS SLAVERY, IGNORANCE IS STRENGTH *

    WhiteNoise
  •  

    WhiteNoise,,, Well said. I said basically the same thing as you, on a different post concerning the same topic, and was called Ignorant. I was told because I believed the people that followed this arrogant piece of shit, mindlessly without question deserves what happens to them, I was ignorant and should keep my political beliefs to myself.

    keep speaking out,,I'll keep listening.

    TerryA
  •  

    Seems like the Stockholm syndrome is indeed on the rise in America...

    "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." - Groucho Marx

    WhiteNoise
  •  

    Once again, what can be done to stop this?

    ChristmasAsen
  •  

    Shithats.

    onechance
  •  

    gain…let an alternate US history be known ;)

    John Perkins’s "Confessions of an Economic Hit Man" for a recent take…
    http://www.johnperkins.org/

    & Howard Zinn’s for a broader scope.
    http://www.thirdworldtraveler.com/Zinn/HZinn_page.html

    This one is a graphic novel & should be required high school knowledge...
    A People's History of American Empire
    http://books.google.ca/books?id=dL0KHQAACAAJ&dq=ina...=

    Any documentary by John Pilger here…
    http://freedocumentaries.org

    start with this one…
    THE WAR ON DEMOCRACY
    http://freedocumentaries.org/film.php?id=171

    Just a hint...
    http://www.deliberatedumbingdown.com/

    "Plus on est ignorant, moins on s’en aperçoit." – Louis Pasteur

    WhiteNoise
  •  

    We gave our selves the finger when we elected him

    limitsnone
    1 response to this
  •  

    WhiteNoise - Thank you for sharing!

    LeCastel
  •  

    Sometimes, war is used in making some peace but on other part, to destroy the country even an economy..

    Freedom is used for slavery to follow orders and destroy the community at other times is also used to take revenge against enemies.

    Ignorance is strength when it comes to law and at other times it is used to make evil deeds and even in killing innocent lives.

    rosyjane
  •  

    NATIONAL STRIKE DAY PROPOSED!

    Dear Americans,

    I would like to propose a "NATIONAL STRIKE DAY" for every American that is able. I have heard France has been doing this with great success. Please let us get everyone engaged here and anywhere we can post this message or one of your own.

    The Questions I would ask here are as follows: What day should it be and when and how often? Once a month to start or? I believe this would really give the people back their power in this country. It is time to take action! If we do not take some action now as our Declaration of Independence says we have the right and obligation to, it looks like our country will fall.

    People are losing their homes by the millions, and jobs of course with it, and our government with the media's help are trying to hide it from us. They are going to let us just fall, we have to save ourselves, to many good people's lives are being ruined.

    This is the responsibility of a free people. Be sure the world bankers have a diabolical plan for us and unless we truly want to be slaves, we have to do something. I am open to other ideas, or maybe someone is already doing this (I heard something). I plead with each American here on Twitter to get involved and support this idea, and everywhere else we can get this message out.

    This will be a peaceful way to get our government's attention, while we take back our country. Trust me if George Washington and the many honorable men and women who fought our war of Independence were here today, they would have already taken action years ago, many years ago, and I doubt it would be very peaceful.

    Thus, no one works until our demands are met. Start with say five or ten demands. So my idea, proposal is that Americans just go to the street, your city hall, or what is ever appropriate in your state. No one works until our demands are met. But absolutely No violence, no vandalism, no matter what please. That will destroy our honest political cause afforded us by our constitution. In fact, we should make, in my opinion that it is a very somber and quite sit in, almost complete silence until our demands are met, so they cannot try and intimidate people or arrest them unlawfully as they have been doing. I believe this is very important point, no conflict what so ever, just freeze everything. We are all allowed to stay home from work. We need to get employers involved obviously.

    My list of demands start as follows:

    1.) No more bail outs, but instead money is to be given directly to the American people.
    I heard some experts are saying that this is the only real cure, some 450,000.00 to each American is the answer to our financial crisis. http://www.dvorak.org/blog/?=26321

    2.) Abolish the IRS, period!

    3.) Reinstate our fourth Amendment rights.

    4.)

    5.)

    I hope others will give their suggestions. I would recommend we elect a board and thus work to organize our first AMERICAN NATIONAL STRIKE DAY, or if someone has already started this, please if anyone is aware of this let me know.

    Sincere hope for our beloved nation,
    Stephen Paine

    ACrisisinAmerica

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