Just before the 1929 Market crash Andrew W. Mellon, Secretary of the Treasury sounded much like Jim Cramer cheer leading for Bear Stearns when Mellon said: “There is no cause to worry. The high tide of prosperity will continue.” As the depression started in 1930 the Washington news stories read: “Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction.”
On March 8, 1930 Washington Dispatch wrote: “President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days.” Three months later unemployment began to skyrocket as the real effect of the depression finally hit the country.
In October of that year Charles M. Schwab, another of the “elite” from that era, looked to the inevitable faith in science as a way out of the crisis: “Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment.” In fact, after ten years of depression it was not science but the calamity of WWII that finally reversed unemployment in 1941.
Is it any wonder that faith in our government and leaders will find itself in very short supply these days? The arc of hope and change Obama rode to the White House has now broken on the shore of reality, and the rocks on this coast are sharp. He is sitting on the shoreline contemplating how to reassemble the wreckage into something that floats and resembles, as much as possible, the old ship of state that brought us to this place, and with the same crew that wrecked the boat in the first place!
This wasted effort, and the trillions of wasted dollars spent so far, could have been better directed at building a new America from the ground up. For the fourteen plus trillion committed to the banks and their investor bets so far we could have paid off everyone’s mortgage, retired all their credit card debt to give the whole nation a clean start, and still had billions left over for roads, bridges, schools, health care, and alternative energy. As it stands, AIG got more money than most of the public works allocations in the new “stimulus package,” and all they did is piss the money away into the largest corporate loss in history, a whopping $61 billion in 3 months, which was actually just payouts to the folks who insured their securities bets with the company. Bucks for the Boyz.
The reason why people are in such psychological distress is that they perceive no benefit from any of the trillions they have been asked to pony up for the banks and big investors to save the system that has been deemed “too big to fail.” The operative state is that we are all in a kind of suspended animation while we wait for the trillions in economic medicine to try and restart the failing heart of our banking system. Then, so the logic goes, the banks will all start lending again, people will all start borrowing and spending again, securities will trade as before and we’ll all return to “normal.” Sorry folks. The soup in the bowls will be thin for a very long time. We had better get used to that fact. People without jobs cannot spend, and nearly 20% of the workforce is now unemployed if the numbers are counted correctly. The fact that Wall Street and the banks have managed to fool themselves into thinking the recession is over is typical of the ignorance that caused the collapse in the first place.
Jim Kunstler opened his post today with this: "A broad consensus has formed in the news media and among government mouthpieces and even some "bearish" investors on the street that "the worst is behind us" in this tortured economy. This view is completely crazy." And he closed it this way: "Here, in the dog days of summer, it seems to me that the situation in the USA is so fundamentally bad, so unpromising, so booby-trapped for failure, that I wonder if there has ever been a society so badly deluded as ours. We're prisoners of our wishes, living in a strange dream-time, oblivious to the forces gathering at the margins of our vision, lost in a wilderness of our own making."
I am in total agreement. We so long to return to the good old days of shopping on credit, that we will believe any good news whispered our way by the media. Yet reality tests every opinion in time. We are still in the denial stage of our grief over the diminishing prospects for our collective future. The anger is yet to come, and it will be very uncomfortable politically when it finally does come--when people realize things haven't really changed at all, in spite of what MSNBC, CNN and Fox News think.
