The death knell of an economic generation,We did it to ourselves

An Economic Generation is About to End

by

Charlie Champion

The 1980’s were certainly “the good old days”.

Beginning inthe early 1980’s, newly elected President, Ronald Reagan, began implementing hisconservative,Kenseyan brand of economics, labeled ” Reaganomics”, as an immediate responseto the morass that was the U.S. economy,as bungled by Jimmy Carter.

Thanks to the Carter administration’s incompetent provincial leadership, theeconomy was experiencing a high rate of inflation, a high level of unemployment, and very little growth A situation known as Stagflation.

.Interest rates in the upper teens.were a stranglehold on any potential growth.

Our bungled mission in the desert of Iran was a National embarassment.

In general the U S economy and national psyche were at historic lows.

In a multipronged initiative, Reagan’s team worked to reduce taxes and restrict Government spending. This had the effect of forcing more spending into the private sector and encouraged the return of the entrepreneurial spirit.

To further nurture this renaissance spirit, he reduced government regulations, helping to make the business climate more user friendly than it had been under the Carter administration.

The two linchpins of this economic initiative were the manipulation of the money supply, and adjustment of interest rates to control Inflation.

To orchestrate this, Reagan nominated Alan Greenspan to be Chairman of the Federal Reserve.

President Reagan was forced to pull the Democrats along, kicking  andscreaming .

Lowering taxes and reduced spending were difficult concepts for “tax and spend” Liberals to grasp ..

Reaganomics proved to be a successful economic system for its time.

Under the bi partisan leadership of Federal Reserve chief ,Alan Greenspan, our economy has survived several “bubble” disasters,and sustained an upward standard of living for the American people.

 Despite these periodic spikes of excessive speculative expansion, the economy has continued to thrived for almost 25 years, due to the Federal Reserve’s increasingly excessive application of monetary manipulation.

The key to understanding the disaster which we now face , is comprehending the methodology which the Feds have employed.to manipulate the economic currents.

Historically, the free enterprise system, has involved several years of expansion, followed by a year or two of contraction. This enabled the gains can be digested, consolidated, and readied for the next economic growth.

There is a certain rhythm to this type of ebb and flow. An economic logic, which keeps speculation in some framework of caution and helps to limit too much excess.

If you go too far you can get wiped out.”If you play the tune (toon) you better be prepared to pay the piper”.

The methodology of having the Government bail out failed or flawed industries, graduated from smaller, strategically necessary actions, like saving the airlies, or the domestic automotive manufacturers, to more serious and questionable actions.

The list is extensive, and the bail outs have become more and more intrusive.

The excesses of speculation have been protected by various public bail outs. We have printed money by the ton and manipulated the interest rates to mitigate the pain of those excesses.

These government actions have made it easier for speculators to take certain risks, providing a “down side” , safety net of public money , to ease the pain of failure.

The progression of small bailouts culminated with the stock market . Com meltdownin the Spring of 2000.

To ease the pain of the Market collapse,and the subsuquent 9 11 disaster, interest rates were dropped too low (1%) and held there or too long. This low cost, plentiful money, led to the housing boom in the United States. This boom quickly grew into an enormous bubble, fueling a World Wide expansion.

 The Housing Bubble here has become a Global bubble of credit , liquidity, andmassively undercollateralized monetary lending vehicles, and funding institutions.

This has been a grave and irresponsible miscalculation of the effects of prolonged low interest rates and easy money , when used as a method of controling the economic cycle..

Easy , cheap credit, was nourished by the deregulation of the banking industry. The lowered lending standards and collateral requirements,championed by Congressional Democrats, Alan Greenspan, and the Federal Reserve encouraged excessive speculation in construction and residential real estate.

What had been a major good policy in its inception, has rolled into larger and larger bailouts.

We are paying the price, now, but the worst is still to come.The Freddy and Fanny bail outs, and the Wall Street open invitation to feed at the trough/Fed, bodes ill for the future in terms of inflation and liquidity.

Home ownership for everyone, regardless of credit or income.

No income check or income verification.

Fanny or Freddie will buy your paper.

Real Estate will only go up.

Leverage the loans.

Borrow, borrow, the sky is the limit.

Don’t be the one left holding the bag, when the ponsy scheme collapses.

Keep cooking the books, it will be years before anyone figures it out, and we’ll be long gone with our multi million dollar bonus’s and golden parachute’s.

CRASH BOOM.!!!

They all fall down,

 

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