Kevin Phillips NAILS what should be the Big Issue -- Destruction by Big Finance

Armstead

(1000+ posts) Send PM | Profile | Ignore

Tue Apr-01-08 12:04 PM
Original message

Kevin Phillips NAILS what should be the Big Issue -- Destruction by Big Finance

http://www.huffingtonpost.com/kevin-phillips/the-destructive-rise-of-b_b_94351.html

The Destructive Rise of Big Finance
By Kevin Phillips

Excerpts:

Economic, financial and regulatory issues should dominate politics and government in the United States for the next two or three years, which is important enough. National discourse may also have a new and deserving bogeyman. Franklin D. Roosevelt had Big Business, Ronald Reagan had Big Labor, and my guess is that the new president inaugurated next January will have Big Finance.

True, finance has been whupped by presidents before...Today's financial services sector, by contrast, is a grasping, gargantuan combination of banks, stockbrokers, insurancemen, loan sharks, credit-card issuers, hedge fund speculators, securitization mavens and mortgage operators. Over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy.

Manufacturing led financial services by 2:1 back in the 1970s, but by 2006 beaten goods production had shrunk to just 12% of GDP.

Do most Americans understand this? Of course not. Newspaper front pages have shunned any discussion; 60 Minutes has not even spared the transformation sixty seconds, despite its vast implications. This upheaval is probably "the greatest story never told" about the two decades between, say, 1986 and 2006.

Nor was it an economic accident. Computerization was a prequisite, as was the rise of financial mathematics. However, I would say that the two most important underpinnings of financialization lay in the rise of public and private debt as a mainstay of American culture and economics and the perpetual liquidity and bail-out support of the Federal Reserve Board under Alan Greenspan. During Greenspan's 1987-2005 tenure, the sum of public and private debt in the United States quadrupled from just over $10 trillion to $43 trillion. Finance became the industry that was not allowed to fail but was permitted to enlarge and metastasize its behavior almost at will. Regulation was minimal. Favoritism was omnipresent.....

<SNIP>

I began writing about these matters with a 1990 book entitled The Politics of Rich and Poor, and in several other volumes since then. Today, the economic negligence of Washington and Wall Street, more than two decades in the making, has led to a multi-dimensional crisis in which this country faces an unprecedented convergence of problems: unprecedented debt, tumbling home prices, reckless money supply expansion, growing inflation, insufficient and expensive oil, and an eroding dollar. Sadly, there may no longer be a plausible way out.

Kevin Phillips' new book, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism, is being published in April by Viking.