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Dear Sirs,
In his article today (" The Federal Reserve must prolong the party"), Martin Wolf refuses to acknowledge one obvious [cause] of the current financial crisis: the [] policies of the Bush administration, [carried out] with the open support of the Greenspan Fed. These policies, [through tax cuts targeted at the well-off , massive corporate pork made possible by a war of choice, and lax monetary and banking policies, had to making the rich richer as their goal] . Stagnant wages, made possible by weakening of corporate regulation and increased access to the Chinese labor pool, were instrumental in making higher profits possible, and lax monetary conditions allowed bubbling financial asset values. Lower taxes made capture of that wealth easier for the rich, and share buybacks (instead of investment) [have been] among the preferred instruments.

The debt bubble also had the great advantage of making it possible to hide from most Americans that they were not sharing in that wealth capture by allowing them to keep on consuming through spending money provided by easy debt instead of actual income. That spending was underpinned by debt and not by income, which is an inevitable result of the neoliberal pollicies pursued, is the main cause of the American deficits and the need for the rest of the world to finance them. As US spending is directed at manufacturing based in other countries, their complicity has been easy enough to procure.

The imbalances are totally unsustainable and need to be corrected - in fact, they should have been several years ago. That correction will be painful enough; arguing for yet another round of the bubble merry-go round, which will can only lead to a worse outcome in the end, is utterly irresponsible.

by Colman (colman at eurotrib.com) on Wed Aug 22nd, 2007 at 04:57:36 AM EST
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