In 1979, near the end of Jimmy Carter’s presidency, the USA was said to be suffering through an “economic malaise.” So when Ronald Reagan came along the following year, he promised to bring a new dawn to the country. But while Reagan’s “Morning in America” looked rosy for a few years, it has actually turned into “mourning in America.” And there’s plenty to cry about.
The situation is grim and foreboding – from the sluggish growth of the economy, to the trillions of dollars in debt, and to the quadrillions of dollars in derivatives strangling the US and the globe. But what else could we expect, after the excessive money-printing and the complete financialization of the economy.
Let's rewind to the early 1970s. A few years before Carter was elected, the US could not afford to fight its war in Vietnam, so it started printing more money to pay for its massive war machine. It proceeded to lose the war, but continued to print money. The results are what you might expect.
Less Money Means Less Fun. This Sucks.
During the first few years of Carter’s presidency, the economy had actually been humming along quite nicely. In 1979, however, the second oil crisis of the decade put a major damper on the economy. And in July of that year, Carter gave a nationally televised speech in which he advised all Americans to tighten their belts – that is, to NOT continue spending money. Carter also hinted that maybe it was best NOT to continue printing money.
In general, America reacted like a spoiled child who was about to have his allowance cut in half. They were not pleased.
Then, out from the west came Ronald Reagan, riding boldly and determinedly towards the bright morning sun, with 4 clear objectives, as follows:
- Reduce income tax and capital gains tax
- Reduce the regulation of business
- Reduce government spending / debt
- Limit the money supply
Reagan planned to achieve those goals through supply-side economics, which is just a euphemism for trickle-down economics. The point is to make the rich richer, in the belief that the extra riches will trickle down and make the middle class rich too. Furthermore, it is believed that the new riches will eventually trickle all the way down to the poorer people, and soon, everybody will be rich.
George HW Bush disparagingly and correctly called the trickle-down plan “voodoo” economics.” Nevertheless, Reagan won, and so did trickle-down economics. For the most part, America has been run on voodoo economics ever since, even though it was clear in 1980 that “It just isn’t going to work.”
More Money Means More Fun. Let’s Party.
Reagan achieved his first two objectives, but failed to achieve the latter two. He reformed the tax code in mostly beneficial ways, and deregulated business, albeit in not entirely beneficial ways (just google “savings and loan crisis”). However, he did not rein in government spending or debt. In fact, his administration’s spending spree was among the most profligate of the past few decades.
He also failed in his promise to limit the national debt. During the 30 years prior to Reagan’s tenure, the national debt had remained relatively stable, as shown in the following graph.
But soon after Reagan took over, the national debt started to increase – rapidly. In fact, by the end of his second term, he had tripled the US debt, increasing it from $900 billion to $2.7 trillion. And since then, no president has been able to reverse the trend.
As for Reagan’s fourth objective – well, he did not manage to achieve that one either – to say the least. While he had planned to limit the money supply, he ended up increasing it significantly. And, just as with the ever-increasing national spending / debt, this set in motion a trend which has not abated, and which is now unstoppable.
A Looser Belt, A Tighter Noose
These large increases in debt and in money supply should have been seen as ominous signals, but most Americans (including politicians and economists) were so pleased to have all the extra money in their pockets that they did not bother to consider the consequences of their debt spiraling out of control. Hell, they did not even consider if there might be consequences.
But there have been consequences, and they have had significant impacts on the economy and society.
Quite simply, voodoo trickle-down economics does not work. It may appear to work at first, and it may work to a limited degree, but not for long, and not much. That has become increasingly obvious over the past few decades.
Sure, with the increase in money supply, the rich clearly get richer. And some of their new money might even trickle down to the middle class – probably as loans or as credit on their credit cards, both of which reap nice healthy rates of interest for the lenders / the banks / the rich. With that extra credit, the middle class too got a bit richer. And there was so much extra credit that some of it trickled down to the poorer people too, and they too seemed to get a bit richer.
But neither the middle class nor the poor were really any richer. They simply had more debt. (Y’know, the kind that you have to pay back eventually.)
Most of the new-found wealth was temporary and ephemeral. It’s what is called the “wealth effect.” You feel richer, but it’s not real. In effect, you’re getting screwed.
Naturally, if you feel richer, you’re gonna spend a bit more money. But that just puts you further into debt. (See “spiraling out of control” above).
The Truth. The Consequences.
As seen in the above graphs, both national debt and the money supply are still spinning far out of control. Just a few months ago, US debt surpassed the $20-trillion mark. That is definitely not good for the economy, the society, the country, the businesses, or the individuals.
Moreover, the results of voodoo economics clearly show how bad the situation actually is. Following is a list of the some of the major failures resulting from America’s policies over the past few decades.
Failed banks – Over 1986–1995, more than 1,000 S&Ls failed. In 2008, Bear Sterns and Lehman Brother collapsed. That year, several other banks almost collapsed, but they were “too big to let fail,” so they were “rescued” with taxpayer money.
Failed companies – Long-Term Asset Management, Enron, World Com, AIG, GM, Countrywide Financial, and many more.
Irreversible debt – Sovereign debt of over $20 trillion. Corporate and consumer debt also at vertiginous levels. Total US debt of over $67 trillion, etc, ad infinitum.
Credit tsunami – Another credit card, for everybody. Apply today, get approved tomorrow, go underwater next week.
Disappearing manufacturing base – By offshoring, company executives make out like bandits. All others are robbed – and they lose their jobs.
Hollowed out cities – No middle class = no middle-class income = no middle-class spending = no vibrant cities.
Wealth gap / income inequality – According to Forbes statistics, US income inequality is skyrocketing.
Financialization of the economy – In the US in particular, wealth nowadays is derived not from production, but from money. That is, the economy has been largely financialized, and if you do not have much money, you cannot make much money. Since this financialization generally involves rigging of markets, you can be sure that you are on the losing end.
Rigged markets – Forex, Libor, precious metals are all undeniably rigged. Not in your favor, so again, you are on the losing end.
Gush-Up Economics
With voodoo economics, all the wealth has been trickling upwards increasingly faster, such that it is now gushing up. The top 1% have benefited, most of the top 10% have benefited to a slightly lesser degree, and some of the top 30–40%% may have benefited a little. But when you get below the 50% point, few benefited, and most were screwed. Many people have lost not only their homes and jobs, but also any hope of a return to prosperity.
In the wake of voodoo economics, we have the societal and economic destruction detailed above.
Now America has another deluded leader who has promised to make the US great (again?). But his prime strategy to bring about a new morning involves building a massive wall.
Good night, America. Let's hope you wake up without a horrible hangover.
Images sourced from Google Images
This is awesome, really well written. You write great and clearly. Can i ask you, what do you do for a living? You seem to know a lot about economy :)
Btw, i wanted to say that i have added you to my latest post about giving thanks. As i have just handed in my exam, i wanted to take the time to say thank you to the people who gave me a warm welcome. I know it's not much, but the welcome people like you gave was really heartwarming :) I hope you have a great December, and stay warm and cozy :)
Thanks, I think this is the first post of mine that has been called "awesome."
I worked for many years as an English teacher in Japan, and also as an editor and a writer. So, yes, I spend a lot of time making sure my writing is clear and readable. And I'm thrilled when people appreciate it.
As for the economy, I did not understand much about it for many years – until the 2008 crash. Then I started reading about the world of finance and how shady and corrupt and misguided it has become. (Particularly over the past 30 years or so.)
I still have very little interest in economics, etc, but I am NOW very interested in the impact that economics / finance / money has on people / society / culture.
And as I stated in the above post, those policies have had a severe negative impact on not only the middle class, but also on the entire economy and society as a whole. And soon, there will be a reckoning. The petrodollar regime is collapsing, and that will have a profound effect on not only the USA, but on most people around the world.
Interesting times. I hope we survive them.
@majes.tytyty As usual your post is very interesting. And I appreciate the research you're putting into sharing information with us.
As my vote is not worth much, I sent your post to @minnowsupport for an extra vote.
Thanks, Natacha, for the compliment and the appreciation. The great thing is that, when doing the research, I also learn a lot.
Also, thanks for your support, which is worth a lot. :-)
Like my mom always used to tell me, if it's good, say it's good. Well, she was talking about her food, but the principle is the same.
I barely read your post. It took me about 10 minutes. How much time did you spend writing it? You told me a story that I never heard of before. I could not imagine that even the US lives in debt. In many ways, for me this is a revelation. Good luck to you and good. Resteem.
The US is in debt that it can never repay. http://www.usdebtclock.org/
Since 2008, the US has been printing more and more money, to save its too-big-to-fail banks and other companies. That money has not helped the economy, only helped blow up a bubble in stocks, bonds, and other things, It's called the everything bubble.
When the bubble bursts, the US will print more and more money. It will have no choice. Then it will have hyperinflation.
I'm glad that the post was a "revelation" to you. I also did not know any of this info until about 8 years ago. Since then, I've read over 100 books on the current economic situation and 100s of articles. Each one is a revelation, and each one has some scary news.
Keep learning.
very useful for those who do not yet know
Agree. The number of people who have no idea about the current situation of the economy is staggering. Part of the problem is that the media does not report certain facts and figures.
For instance, the actual unemployment figure in the US is about 20%. But the powers-that-be "adjust" the numbers by not including people who have completely given up looking for work. And the media just reports those numbers. It's a recipe for disaster.
Thanks for your comment.
I a gree with you
This was an amazing post! Very well written and clear with all your points. Nice job :)
Thanks. So far, this post has been called "awesome" and now "amazing." But what I really I appreciate is comments such as your following comments – "very well written and clear."
Just as your music is a craft and an art, so is writing. I spend plenty of time, compiling and composing and revising and editing, and if readers appreciate it, great. And if they learn something, all the better.
Thanks!
Absolutely, and it shows. You have a real talent for writing.
@majes.tytyty
I really do not like the state of America let alone after donald trump so president. because in Palestine now it is very chaotic especially after the recognition of the trump president who recognizes Jerusalem as the capital of Israel (Jews). THIS IS A CRIME
That's true. There have been many other crimes, committed by the US politicians, military, banksters, and financiers. But they have not been charged with any crimes or prosecuted for them. They simply continue to rampage – across Wall St, across the nation, and across the globe.
The only good things is the realization that the empire is crumbling.
What a great post dear @mates.tytyty I must call you the seeker of information... thank you for sharing... this is the least thing I must say
Good news of bitcoin. i like your post,thanks for sharing.
have a nice day @majes.tytyty
Resteemed this post
Please check my profile once
How much time did you spend writing it? You told me a story that I never heard of before. I could not imagine that even the US lives in debt. In many ways, for me this is a revelation. Good luck to you and good. Resteem.
This is a copy-paste of the above comment, by @cranium. This is plagiarism, and it is strictly frowned upon on Steemit.
Do not engage in any more plagiarism when commenting on my posts. Any further such violations will be flagged.
thats a great news of bitcoin..thank you very much...carry on my friend
I agree with @syedumair.
@nnajmull, this post does NOT contain any "news of bitcoin." Clearly, you did not even read it, so how can you make a comment saying it's "great" when you do not even know what the content of the post is?
please don,t mind..i can not understand this post...i don,t mistake next time sir....
Steemit is a place for original writing and thought provoking discussions. People who write well, and comment intelligently with interesting and thought provoking comments, will gradually build a following, and eventually the rewards will flow. Trying to game the system in the hope of milking the reward pool, before they deserve it, is likely to be spotted by the whales. A single downvote could set them back a long way.
Please see this for information on comment spam and vote fishing.
https://steemit.com/spam/@swissclive/today-you-will-get-up-to-usd55-up-vote-from-me-by-flagging-or-warning-comment-spammers
great information,i like this post
upvoted and following updates...
Making useless comments that don't add value to the the post or doesn't encourage discussions will result in loss of reputation because eventually you will be flagged and a downvote from a whale will put you in a deep hole.
See this and please read it
https://steemit.com/spam/@swissclive/today-you-will-get-up-to-usd55-up-vote-from-me-by-flagging-or-warning-comment-spammers
good information. thanks for sharing.
Making useless comments that don't add value to the the post or doesn't encourage discussions will result in loss of reputation because eventually you will be flagged and a downvote from a whale will put you in a deep hole.
See this and please read it
https://steemit.com/spam/@swissclive/today-you-will-get-up-to-usd55-up-vote-from-me-by-flagging-or-warning-comment-spammers
upvote and following you. Thank you.
Steemit is a place for original writing and thought provoking discussions. People who write well, and comment intelligently with interesting and thought provoking comments, will gradually build a following, and eventually the rewards will flow. Trying to game the system in the hope of milking the reward pool, before they deserve it, is likely to be spotted by the whales. A single downvote could set them back a long way.
You will be flagged for this useless shit.
See this
https://steemit.com/spam/@swissclive/today-you-will-get-up-to-usd55-up-vote-from-me-by-flagging-or-warning-comment-spammers
Congratulations! This post has been upvoted from the communal account, @minnowsupport, by natachayacinthe1 from the Minnow Support Project. It's a witness project run by aggroed, ausbitbank, teamsteem, theprophet0, someguy123, neoxian, followbtcnews/crimsonclad, and netuoso. The goal is to help Steemit grow by supporting Minnows and creating a social network. Please find us in the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.
If you would like to delegate to the Minnow Support Project you can do so by clicking on the following links: 50SP, 100SP, 250SP, 500SP, 1000SP, 5000SP. Be sure to leave at least 50SP undelegated on your account.
wow I just know, steady
bitcoin. Scaring random people
Nice post
good post like it and upvoted
a very interesting post and also useful. simply add insight and knowledge to the reader. good job @majes.tytyty
great post like it
very informative post....
Actually, JP Morgan died over 100 years ago.
Making useless comments that don't add value to the the post or doesn't encourage discussions will result in loss of reputation because eventually you will be flagged and a downvote from a whale will put you in a deep hole.
See this and please read it
https://steemit.com/spam/@swissclive/today-you-will-get-up-to-usd55-up-vote-from-me-by-flagging-or-warning-comment-spammers