Saturday, August 15, 2009

I see a bad moon rising

... sang Creedence Clearwater Revival. And as Panzner points out, inequality and growing poverty are factors that destabilise society.

He reproduces a graph (see below) that shows inequality is now higher than it was just before the Crash of 1929. The line also suggests that the rich do get hurt when the economy goes down - but they still do very well compared to the "ordinaries":
See where the least inequality came? Around 1980 - just when "it was decided" that lending and debt should take off and power a generation-long series of bubbles. Please see below my graph from June, which shows that political conservatives can be far from conservative when it comes to handling the nation's finances:


James Higham said...

See where the least inequality came? Around 1980 - just when "it was decided" that lending and debt should take off and power a generation-long series of bubbles.

That is a most significant observation and the corollary interesting.

OldSouth said...

In 1980, the US economy, and everyone in it, were essentially flat on their backs. Remember the 20% prime rate? I certainly do.

There is no excuse for the upward spike in debt from that point, but let me offer a little explanation:

Reagan and 'Bush-One' both had to contend with bitterly partisan Democrat Congressional majorities, who never met an entitlement they didn't love. Every attempt to reign in spending was met with blood-curdling screams of how heartless and cruel the President was, etc. So, the spending continued, because Reagan was also committed to restoring the military that had been gutted by the 1970's.

By the way, he won the Cold War in the process.

Along comes Slick Willy, and everyone piled on the spending, declaring a 'Peace Dividend', with a concomitant gutting of the military, for which we still are paying the price.

That little downturn came after the GOP Congress finally asserted a bit of discipline(not enough, but a little), and the Pride of Arkansas was occupied explaining why sex games with interns and perjury weren't really anything to get upset about. Not much in the way of grand spending initiatives in the late 90's.

As for 'Bush-Two'--really nothing can be said. He and Congress competed to see who could spend more.

Again, not excusing the foolish behaviour, just giving a bit of context.

Obama, Pelosi, Reid and Geither make the rest look like bumbling amateurs when it comes to spending our futures away.

Shame on both parties, though, because both were too busy feeding at the trough to notice what was transpiring in front of them

Anonymous said...

The spike caused by WW2 lifted the debt from approx. $900bn to around $3000bn. So fighting wars on 2 continents and developing atomic weapons tripled the debt (and a bit).

Compare that to 1980 onwards. A rise from $2300ish to approaching $12000bn (we must be there by now). Thats a multiple of over 5. And what do we have to show for all that spending?

This graph is scary. Because anything that rises that much that quickly is unsustainable, and WILL end. Its just a matter of when.

Paddington said...

OldSouth: I have a couple of small comments.

1. The military build-up (except Star Wars, a total gift to the defense contractors), was authorized under President Carter.

2. The Soviet Union did not collapse because of Reagan, at least according to many political and defense analysts, including those in the USSR. The quote I saw by a Russian general was that he hastened things by about 6 weeks.

I still hold that, had we followed the advice of Carter, we would be much better off now, despite the 'feel good' era of Reagan, which started to put us in our present predicament.