And real capital has been by no means as plentiful in the US as financial capital ... real capital formation has been sluggish for the whole of the current decade. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
It's lipstick on a pig, and China bought the pig.
Bernanke is blaming China, but both he and Greenspan were the ones armed with the lipstick.
I don't entirely agree with Migeru that the bubble was exclusively for Wall St's financial benefit. I think there was an obvious political need after 9/11 to make it look as if Big Brother was raising the chocolate ration.
In fact what we got was a combination of PR spin and classic Keynesian deficit spending on a war. Unfortunately the war wasn't winnable and instead of retooling the economy for total war - which would have been impossible politically, but would have done the job economically - some of the cash was handed out as free money to the mil-ind people, and the rest was snorted as derivatives, et al.
Meanwhile the real economy was tanking, and this had to be disguised - or at least the inevitable outcome had to be postponed for as long as possible.
China was never the problem, because if China hadn't supplied cheap labour, it would have been some other country or mix of countries.
Aside from the corporate welfare angle, another major part of the problem was the US energy sector, which continues to be a massive drain on US capital. If there are 'savings' anywhere, that's a good place to look for them.
Enron died soon after 9/11, but privatised energy has been screwing consumers and businesses ever since, and generally acting like a very heavy boat anchor tied to the real economy.
A better way to avoid a recession would have been to regulate and redistribute wealth from energy profits, and to invest that money in retooling the economy for energy independence.
But that was never going to happen with 43 in the big white house. So - here we are.
Effectively Wall St is now a microstate of its own, and treats both the US and China - and the rest of the world - as its fiefdom. Where the real economy in the US has been entirely passive about its colonisation, China has been slightly - but only very slightly - more robust as a trading partner. This has attracted some minor disdain from the Barons, but not much more than that.
Nothing in the last few weeks has changed this in any way.
A useful question to ask now is - where are the savings which supposedly caused these problems?
The saving evidently existed in the sense of income handed over from the recipients to be spent by someone else. Whether the savings exist depends on the ability of those who made promises to keep those promises ... since a person or people (often in the guise of a going concern) making a promise who is ready, willing, and able to keep the promise is what a financial asset consists of. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
