Eric Margolis: U.S. orgy of debt

[marmar]

from the Toronto Sun:



U.S. orgy of debt
Americans borrowed to hilt, then housing bubble burst

By ERIC MARGOLIS


NEW YORK -- The financial panic sweeping the globe is maddeningly complex, but the cause of the worst financial crisis since the 1930s Great Depression is clear.

America has reveled for two decades in an orgy of debt. The U.S. national debt is now twice its net worth. From Wall Street's "masters of the universe" financial powerhouses such as Goldman Sachs, Merrill Lynch, Lehman, and Morgan Stanley, to the humblest homeowners, America's national motto became "borrow to the hilt and bet."

The traditional regulated banking system was pushed aside by Wall Street's financial titans who created their own money in the form of complex securities and furiously traded these exotic instruments and borrowed recklessly against them with little government regulation or oversight.

As Kevin Phillips points out in his prophetic book, Bad Money, America's primary business became non-productive finance. Manufacturing fell to only 12% of GDP. Wall Street titans grew obscenely rich by simply passing around paper. Inflated or semi-worthless securities increased in bogus value at each stage of the trading process.

Wall Street was allowed to virtually print money and peddle toxic securities around the globe because the big financial houses and heads of hedge funds bought the politicians of both parties.

Equally important, the mammoth financial and housing bubble thus created was hailed by the Bush administration as proof positive of Republican free market philosophy and the true road to prosperity.

More cautious European and Canadian bankers were dismissed by Republican chest thumpers as financial sissies. .......(more)

The complete piece is at: http://www.torontosun.com/comment/columnists/eric_margolis/2008/09/21/6829246-sun.html