Bank Crash – Economics 101

Seen the news lately?

Banks closing left and right, the government stepping in to bail some banks out.

How does this happen? Maybe that’s your question and watching the news it might seem a bit over your head.

Yeah, that’s intentional. Bankers and politicians like to make it seem more complicated than it is.

That way, they can promise to change it and guard against it without making any specific promises that might change it and guard against it.

I’ll try to explain it to you – and tell you what euphemisms to look for in political speeches, so it won’t be over your head. It will land right smack in your brain and you will be able to interpret what politicians really mean when they use their euphemisms.

Let’s begin with two different ways to measure an economy.

One is to measure growth and profit.

This is how Republicans measure the economy. This serves their interests.

If Mega-Corporations, like banks and mortgage companies, report massive profits this makes politicians look good.

The news reports “Stocks are up, banks report growth again.”

It makes you feel confident and secure about your own 401K plan and your own security in the company you work for.

The other way to measure an economy is how the middle class or the “median” – the average family – in America is faring.

This is measured using average income. Is it going up and can you buy anything with it?

Can the average family buy and PAY for a home?

Can the average family afford its healthcare needs?

Can a family afford to feed itself at the grocery store?

Can average family send its children to college?

Is the average family’s income keeping up with inflation?

This is how Democrats measure the economy.

This is how you get both sides using very different interpretations of the same thing. The economy is in trouble (Democrats) or the economy is sound (Republicans).

For instance: Republicans might say the average family today is doing fantastic because it’s average income is higher than ever.

Where Democrats might say, the income is an illusion created because one adult worker can no longer support a family of four and now both adult workers have become wage earners to afford the same lifestyle.

Theoretically, and I mean by the standards of Capitalist Economic Theory here, if big business is doing great and reporting growth and profits, the average family should be doing better also.

Except, for one problem.

These Mega-Corporations – banks, credit card companies and mortgage companies – which have been reporting massive profits and growth over the last several years were lending money to people they knew couldn’t pay.

Theoretically this isn’t supposed to happen because of self-preservation. Self-preservation assumes banks, credit card companies and mortgage brokers care whether their loans are paid back, ensuring that they do not sell bad loans.

Except they did sell bad loans. On purpose. Knowingly. And they turned around and sold them to the next market speculator like that old Hot Potato game.

Now, the loans are coming due and whoever is stuck holding the Hot Potato is going under.

See they had a self-preservation instinct – they just didn’t have an us or U.S.- preservation instinct. There are a whole lot of selves that got mega-rich off the deals.

What’s our mistake? Our government and its electorate?

We confused corporations with people.

We assume that corporations will act as people would because they are made up of people.

But, it isn’t so. Mega-Corporations judge success by one criteria only – profit.

If it makes a profit, then it’s a success.

Unfortunately, banks and credit card companies and mortgage brokers have been reporting massive profits and huge growth – which on the surface looks like success and economic stability.

Except that the people taking all those loans couldn’t pay. They never could pay. They were borrowing money they didn’t have and the banks, credit card companies, mortgage companies and the government knew they were borrowing money they didn’t have.

So, that’s really not growth. What it really is, is LYING and deception.

It’s a deception that makes politicians look good in the short term.

And its a really good way to cause economic collapse.

The electorate – and by that I mean YOU and ME – have confused corporations with people.

People – good ones, successful ones, responsible ones – have a moral core. They act out of morality or a sense of justice, fairness, right and wrong and a sense of responsibility.

We must learn not to expect such things from The Market or Mega-Corporations.

All evidence suggests this is a huge mistake with great economic impact on all of US.

Why?

Mega-Corporations are a-moral. Which is different than immoral. Immoral means you have a moral core, but you choose to behave the wrong way. Amoral means you are incapable of making a choice based on right and wrong.

Expecting Mega-Corporations to “do the right thing” or dictate its actions from a place of morality is like expecting your blow up doll to love you back.

It CAN’T because it’s not a person, it’s an object or an entity incapable of acting out of feelings or morality.

Why do we confuse Mega-Corporations with People?

One massive reason for our confusion about whether a corporation is capable of acting from a moral center is that Republicans use the word YOU in an intentionally misleading way to confuse people. By YOU they mean Mega-Corporations.

John McCain will say the word YOU in sentences like, “I will lower your taxes” – but what he means is “I will lower Mega-Corporations’ taxes.”

The listener needs to be wary of the distinction.

When he’s going to give more power to YOU, he means he’s going to give more power to Mega-Corporations.

Now, do you really think that’s the same thing?

John McCain and Republican economics do believe that’s the same thing.

As I said above, they are operating from the principle that Mega-Corporations are made up up people and are capable of acting out of a moral-core.

That’s a false belief.

Both our presidential candidates claim they will fix this problem.

While listening to their sound-bites and their debates and speeches – listen for two words.

Privatization and Deregulation.

Privatization means a Mega-Corporation takes an industry over. The cable or satellite company for instance – maybe that doesn’t effect our life much. Unless, of course, you ever had to deal with their customer service and realized how inefficient it is because they know they’ve got all the power. It’s like banging your head against a brick wall.

But, what about energy? In the near future, we’ll be going through massive energy transitions. If Mega-Corporations have complete control over the energy industry your power as their customer will be the same as your power over Dish Network or Direct TV. Have you ever tried to get a repair or call those people? Do you want them controlling your lights? Your gas? Does that give families more power or does it give Mega-Corporations more power?

Republicans, John McCain specifically, will completely privatize the energy industry and maybe, if you think about it, this isn’t the best idea considering what you know now about Mega-Corporation’s inability to make moral and ethical choices.

Deregulation means we reduce the laws governing what Mega-Corporations do.

There used to be more laws governing what corporations could do to the people, its customers.

In fact, it was deregulation that caused our current economic crisis. The government no longer required banks, credit card companies and mortgage brokers to care whether its customers could pay.

So they didn’t.

Government regulation against it was the only thing protecting U.S. families from predatory lending.

Regulation was also the only thing protecting you from hyper-sexual and hyper-violent commercials on television. Does anyone else watch TV screaming, “Kids close your eyes!”

That’s the direct result of Republican deregulation of the media industry.

Now, John McCain loves these words Deregulation and Privatization. Because they sound innocuous and he knows The People, the average voter, didn’t really know what they mean. He knows you didn’t really understand the direct correlations between deregulation and privatization and how they impact your daily life.

He also thinks you don’t really understand The Market or how it works, but Republicans have been doing a great job teaching you to have a God-like faith in it.

In fact, John McCain has said he will tax the market less and deregulate the market more.

The bank failures are a direct result of deregulating the market.

Republican’s favorite strategy is to make people fear the government and it’s control over The People.

The question is – do you fear the Mega-Corporation and its control over you life more?

Now myself, I live in a Democracy, governed by The People, for The People. I have much more power in my government than I do in any given Mega-Corporation. With a Mega-Corporation I have an issue with I’m on hold listening to mood music and pressing 0 to speak to an operator, at best.

My government’s only interest is the welfare of its people.

The Mega-Corporation’s only interest is its own profit.

You do the math, adjust your vote accordingly.