U.S. stock market crashes. That wouldn’t have been such a big deal for most Americans in 1929 except that unregulated banks had invested their depositor’s funds into the stock market, too, and without having to tell anyone what they were doing. When the stock market tanked and there no buyers, the banks couldn’t sell their holdings either. Some had to close. They no longer had the one thing a bank is supposed to have – money.
Remember, this is an unregulated industry and there was no such thing as the FDIC and deposit insurance. That didn’t come along until 1933 (http://www.fdic.gov/about/learn/learning/why/index.html)
Panic about being able to get to one’s money, of course, causes the “run” on the banks. Bankers have no money. They lost it all. Oops. Sorry about that.
No money in banks also means no credit for businesses to operate, either. Businesses, naturally, start to worry about preserving whatever remains of their capital so they let workers go. People don’t have work so they have no income. Remember, this is before unemployment insurance or any sort of government welfare programs, too. People literally have nothing. No money in the bank and no one working means no one is buying anything, either, so there’s no reason for businesses to produce much in the way of goods and services. It certainly doesn’t mean there will be any growth and rehiring any time soon. The spiral downward has started, and it’s adios amigos to everyone.
Ain’t unregulated, unfettered capitalism grand?
And with sincere apologies to some of you, that stupid fucking Russian cunt had the balls to write a few pieces of fiction less than 30 years later and some people like Alan Greenspan either came to believe it was a new religion, suffered severe amnesia about what had happened and why a few decades earlier, simply never bothered to study history at all, or more to what I believe saw then and now that deregulation is the surest way to become filthy rich at expense of ordinary people.
Back to the 30s. So, the federal government creates programs to put people back to work – work that actually benefits society as a whole. My father worked in the CCC program. He and many other young men from PA took care of parts of the Appalachian Trail. So what, you might say. What did that really do for society? Ok. Forget the A.T. Ever hear of the TVA, Triborough Bridge, the Bay Bridge, or Grand Coulee Dam? There’s a good chance something where you live that serves you, your neighbors, and the common good – a school, a hospital, or a highway, for example – was built by people employed by BOTH private businesses and the government as a result of the federal government and deficit spending to fund work programs. (See http://americanhistory.about.com/od/greatdepression/tp/new_deal_programs.htm and http://www.pbs.org/wnet/blueprintamerica/reports/the-new-new-deal/public-works-administration/693/)
Let’s speed things up a bit. This is getting pretty long.
Lawmakers and citizens alike come to realize that businesses and especially banks are either too stupid or too greedy or both to be completely trusted to regulate themselves. Glass-Steagall is passed in 1932. The “Truth in Securities Act” is passed in 1933 and the SEC and a bunch of other laws are passed beginning in 1934. Banks, at least, are safe and some rules are in place to regulate the financial services industry.
Now it’s 1999. The Gramm-Leach-Bliley Act, a GOP disaster euphemistically referred to as the Financial Services Modernization Act (reminds me the so-called “Patriot Act”. We should always get very suspicious of legislation given names that sound like sugar coating or the titles of Mel Gibson movies) effectively repeals Glass-Steagall.
Only a few short years later we find ourselves once again in an economy where too little regulation and oversight exists, thanks mostly to Greenspan, the GOP, and weak-kneed Dems.
W drives the final nails into the coffin up by giving away the federal surplus to the rich, invading 2 countries off the books based on total lies (except for the fact that Afghanistan was harboring bin Laden and he proceeded to fuck that up totally by invading Iraq) and running up the biggest debt since – you guessed it – that other GOP nitwit, Reagan. The financial service sector, who had been merrily creating so-called investments out of highly speculative debt, and the real cold-blooded capitalists who were making even more billions on derivatives tied to that shaky debt, have been doing so without regulation or oversight.
When the bubble bursts ON W’s WATCH, who pays? We the taxpayers do.
So I get the tea party anger. Honestly, I do. But the anger, frustration, and demand for change needs to be directed where it belongs; at deregulation, failed GOP economic and fiscal polices dating back to Reagan, and the disaster created that forced Bush to have to put TARP in place for Obama to have to accept and implement. Wake up, tea baggers and you Obama-haters. Have you just conveniently forgotten or chosen to ignore how we got here?
Now I can’t believe I’m going to say this, but the more I read and listen to people a lot smarter than I the more convinced I am that TARP had to be done to save the economy and that, perhaps, the biggest mistake being made in DC is that the feds are not spending enough.
The parallels all seem to be there to the 1930s. Some experts say that FDR was too concerned about fiscal restraint in the beginning. Had he done more, they say, the Depression may not have lasted as long or required WWII to really pull us out of it. (I’m sorry that I can’t find a reference to that and don’t have time to keep searching right now as we’re going to a grad party. Maybe someone else can find something on it. I only remember hearing it or reading it somewhere; maybe last Sunday on one of the news programs.)
There are people out there a lot smarter than I who can explain all of this a million times better. Here’s one…..
What got me going on this today was an article in today’s NYT. http://www.nytimes.com/2010/07/11/us/politics/11tarp.html?_r=1&th&emc=th
It’s proof to me that Americans really aren’t very well-informed. Candidates for public office are probably the dumbest of the lot. Trying to make hay on who voted for TARP is like blaming the iceberg for the sinking of the Titanic (the iceberg didn’t do anything). Captain W and his administration steered us into that iceberg. In case you haven’t noticed, they and their cronies are long gone in their yachts for life boats.
How refreshing would it be for politicians to stand up to the STYLE OVER SUBSTANCE HYSTERIA IN THE MEDIA and actually educate the voters on what really caused the bottom to drop out of the economy and the fact that….gulp….there was no other choice but to go with W’s bailout. I mean, really. What alternative was there?
The real objective ought to be what comes next to keep this from happening……AGAIN!