Governments of all kinds can create economic booms that eventually go bust by favoring certain economic actors and creating an unbalanced economy. Example: Dubya promoted the building of real estate for home ownership by people who usually did not qualify for home loans. So long as housing values rose, lenders could make profits on houses bought on mortgages by reselling foreclosed housing. Predatory lenders were pushing people with no qualification to buy houses far beyond their ability to pay on exorbitant interest, and they would inevitably default. Thus one gets "Julio and Maria Rodriguez", who both work in sweatshops (and Mexican-Americans were particularly targeted for such dealings because they are the people most likely to buy owner-occupied housing at the lowest levels of income than whites, blacks, or Asians) to buy a $500K house with their life savings as a down payment. They would end up spending half their shared income on interest alone on a house that would rise in value... but they would usually default on the loan. The lender would repossess while the house value had gone to $700K, and the lender could of course sell the appreciated house for a neat profit.
"Julio and Maria Rodriguez" would never have qualified for anything other than a fixer-upper with big problems in a bad neighborhood, but in the real estate boom based upon predatory lending the shysters weren't pushing loans for such housing. Such housing had little potential for gain in the event of a default. But note well that the federal government practically threw money at that activity, and the shysters wasted it badly. In a normal economy with normal economic policies, money would be going to some combination public projects and industrial investment, the mix reflecting the political stances of the political leadership of the time.
Here is the most basic rule of sound business:
NEVER HURT YOUR DIRECT OR INDIRECT CUSTOMERS
That explains why most governments repress narcotics and regulate gambling and even the financial sector extensively. That is why Barack Obama, who ended up one of the best Presidents ever for most Big Business, could turn off the spigot for government loans to operators of educational rip-offs that sold overpriced and worthless vocational training to people who could never succeed in any normal post-college education while promising the students jobs that either did not exist or for which no employer would hire them. That is why Kellogg's Corporation took legal revenge against the executives of a firm that recklessly sold bad peanut butter that would have made customers of Kellogg's Corporation sick -- revenge meaning that those executives would end up in prison.
The real estate boom of the Double-Zero decade depended upon shysters hurting customers -- and such a boom ends when people no longer believe in it. It would have been better that "Julio and Maria Rodriguez" got better pay due to corporate investments in plant and equipment than that they had gotten a loan for a house that they could never afford, or that Julio or Maria had gotten a chance to attend Cal-State Fullerton on a modest loan to learn accounting or computer programming -- or got teaching degrees.
But there's nothing new about that sort of destructive economics. The Crash of 1929 followed a similar phenomenon that began in the early 1920s, when the fictional George Babbitt was selling houses in the fictional "Zenith" to people who couldn't really afford them. I had tried to get through Babbitt a few times from the 1970s on, but it did not become relevant again until the Double-Zero Decade -- and then, oh, did it become relevant.
Yes, recessions happen, often when big government projects like the most expensive bridges, tunnels, and dams that use incredible amounts of labor, steel, copper, and concrete no longer fuel a boom for construction workers and suppliers of the commodities needed in those projects. Yes, those projects are usually done for long-term benefit, and they give long-term benefit. But when the construction ends one usually sees a recession within a few months. The 1973 recession followed the completion of the costly Eisenhower Tunnel on Interstate 70 west of Denver; The 1970 recession followed the completion of the Verrazzano Narrows Bridge; the 1958 recession followed the completion of the Mackinac Bridge; a really nasty recession followed the nearly-simultaneous completions of the Bay and Golden Gate bridges of the San Francisco Bay Area, Boulder Dam, and the George Washington Bridge. One was certain after the completion of Boston's "Big Dig", but that recession came at the same time as the implosion of the corrupt real estate bubble of the Double-Zero Decade. Of course, the big projects have all justified themselves with bounties of cheaper transportation or with providing water to farmers and cheap energy. The solution to the recession that follows the completion of as justifiable big project is another justifiable big project. The solution to a corrupt boom is its prevention.[/size]
"Julio and Maria Rodriguez" would never have qualified for anything other than a fixer-upper with big problems in a bad neighborhood, but in the real estate boom based upon predatory lending the shysters weren't pushing loans for such housing. Such housing had little potential for gain in the event of a default. But note well that the federal government practically threw money at that activity, and the shysters wasted it badly. In a normal economy with normal economic policies, money would be going to some combination public projects and industrial investment, the mix reflecting the political stances of the political leadership of the time.
Here is the most basic rule of sound business:
NEVER HURT YOUR DIRECT OR INDIRECT CUSTOMERS
That explains why most governments repress narcotics and regulate gambling and even the financial sector extensively. That is why Barack Obama, who ended up one of the best Presidents ever for most Big Business, could turn off the spigot for government loans to operators of educational rip-offs that sold overpriced and worthless vocational training to people who could never succeed in any normal post-college education while promising the students jobs that either did not exist or for which no employer would hire them. That is why Kellogg's Corporation took legal revenge against the executives of a firm that recklessly sold bad peanut butter that would have made customers of Kellogg's Corporation sick -- revenge meaning that those executives would end up in prison.
The real estate boom of the Double-Zero decade depended upon shysters hurting customers -- and such a boom ends when people no longer believe in it. It would have been better that "Julio and Maria Rodriguez" got better pay due to corporate investments in plant and equipment than that they had gotten a loan for a house that they could never afford, or that Julio or Maria had gotten a chance to attend Cal-State Fullerton on a modest loan to learn accounting or computer programming -- or got teaching degrees.
But there's nothing new about that sort of destructive economics. The Crash of 1929 followed a similar phenomenon that began in the early 1920s, when the fictional George Babbitt was selling houses in the fictional "Zenith" to people who couldn't really afford them. I had tried to get through Babbitt a few times from the 1970s on, but it did not become relevant again until the Double-Zero Decade -- and then, oh, did it become relevant.
Yes, recessions happen, often when big government projects like the most expensive bridges, tunnels, and dams that use incredible amounts of labor, steel, copper, and concrete no longer fuel a boom for construction workers and suppliers of the commodities needed in those projects. Yes, those projects are usually done for long-term benefit, and they give long-term benefit. But when the construction ends one usually sees a recession within a few months. The 1973 recession followed the completion of the costly Eisenhower Tunnel on Interstate 70 west of Denver; The 1970 recession followed the completion of the Verrazzano Narrows Bridge; the 1958 recession followed the completion of the Mackinac Bridge; a really nasty recession followed the nearly-simultaneous completions of the Bay and Golden Gate bridges of the San Francisco Bay Area, Boulder Dam, and the George Washington Bridge. One was certain after the completion of Boston's "Big Dig", but that recession came at the same time as the implosion of the corrupt real estate bubble of the Double-Zero Decade. Of course, the big projects have all justified themselves with bounties of cheaper transportation or with providing water to farmers and cheap energy. The solution to the recession that follows the completion of as justifiable big project is another justifiable big project. The solution to a corrupt boom is its prevention.[/size]
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.