The Great Depression 2.0 to come later...

Perhaps this isn't the Great Depression 2.0, but really the Panic of 1907 2.0 with the Great Depression 2.0 to come later.

At this point, I've lost count on how many trillions of dollars we've given to financial institutions to cover for all their unorthodox investment practices.

What if we would have given those trillions to the bottom 75% of the people who paid income tax? It seems to me the surge in demand would have inflated asset values necessary to make the banks sound.

Ah, but that would have meant giving the median worker money. God forbid we do something like that!

The fundamental problem is the median wage has not gone up in 35 years, while GNP went up 150%.

There isn't enough real demand to help prop up asset values and there isn't enough demand relative to supply to allow investors to make reasonably good returns on orthodox investments.

Because the median worker hasn't gotten a raise in 35 years and GNP has gone up 150%, trillions and trillions of dollars have gone to the 'supply side' of the ledger of our society.

Those supply-siders are supposed to invest, we were told by Ronald Reagan and his ilk, in building factories, businesses and the like to create jobs for the rest of us. Those are the 'orthodox' investment practices.

But what happens when there is no demand? Do the supply-siders go off and build a factory anyway?

Of course not. They are driven by the desire to make good returns. This has two negative effects - it causes bubbles and it induces unorthodox investment practices.

Since their is no demand, supply-side investing rich start eye-balling the unorthodox investment practices they've been roped off from through regulation. Since building a factory won't generate a good return, they want to make payday loans, credit card loans, subprime loans and a host of other things they dream up.

Meanwhile, if some small segment of the economy comes along and starts generating decent returns, like say, a new technology, which brings with it its own latent demand and so reasonable returns, the 'supply-side' money rushes to it like moths to a light bulb, flooding that sector and thus creating a bubble.

Investment bubbles are a sign that society, the economy, have past the 'supply-side' saturation point. That's where we were in 1999 - when the supply-side was at least ten trillion dollars poorer than it is now.

In the mean time, because investors are rich and powerful and relentless at trying to get at unorthodox 'investing' the government eventually relents. Then its just a matter of time before the meltdown and/or implosion begins.

But it all goes back to the supply versus demand economics. When you have too much demand (inflation), supply-side bias policies make sense. Whoopee, then, lets give money to the rich! That was 1979. Such policies were played and should have been turned off by 1985. By 1987 we had signs of supply-side saturation, junk bonds, the savings and loan debacle and Black Friday (or was it Monday). By 1999 we were well past "supply-side saturation" and the bubbles and deregulation efforts confirmed all of this. Yet President Bush spent the next 8 years moving perhaps as much as another $11 trillion dollars over to the supply-side (now that's audacity!) like a drunk with a suicide bent. Making the situation worse. The financial bailout so far has been the same thing - giving more trillions of dollars to the same people Ronald Reagan began giving money to 29 years ago: the supply-side, investing uber-rich.

Throughout all of this I've heard no serious talk anywhere about demand economics - even though demand is the obvious problem.


Because that means giving more bargaining power (and thus money) to the average Joe at the expense of the investing rich. Gasp! The horror of that!

The average Joe doesn't have a powerful lobbyist working for him. He has only the ballot box which amounts to one day of influence every two years.

The problem today is the concentration of wealth in Wall Street has lead to the concentration of power there as well. The power is so great and so concentrated that neither Obama, nor Republicans, nor congressional Democrats can chance ignoring Wall Street very long, if at all, while they are willing to ignore Main Street with the possible exception of the first Tuesday of every other November. (A good dose of advertising, culture wars and false news hysteria can make half of Main Street forget where it's true interest lies anyway.)

Our economic problems won't end until median wages go up.

The Great Depression dragged on for 10 long years (in most developed countries it was over by 1935) in the United States. Then still, it took a world war to generate demand side economics. I'm not sure if even a world war would shake things up this time around.

This brings to mind a famous quote by Winston Churchill: "American's always do the right thing, after having tried everything else first."

Tim Kane, Mesa, Arizona

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