All and Many Ways of the 2008 Crash: Another Silent Robbery of Trillions (updated)

Posted: June 12, 2011 in Uncategorized

Only one instance here, that comes from the States, but this applies to the entirety of global and European economies as well.  Not only did those companies and people “betting” against the economies (or against their own “loan” packets), or just making incompetent decisions about moving money around (on “super-leverage” non-existent funds), get the Big-Money Bailouts (what we ironically call “Advanced Socialism for the Privately Owed”) after the Economic Crash of 2008, but they seem to have stolen another 7.7 trillion unnoticed:

One reason that the U.S. economy still struggles to achieve sustained growth is that Americans are a long way from recovering the trillions of dollars of household wealth lost during the Great Recession.

U.S. household wealth fell by about $16.4 trillion of net worth from its peak in spring 2007, about six months before the start of the recession, to when things hit bottom in the first quarter of 2009, according to figures from the Federal Reserve.

While a rebound in the stock market, an improved savings rate and consumer steps to reduce debt resulted in net worth gains since 2009, only a little more than half of that lost wealth – $8.7 trillion — is back on household balance sheets.

That leaves American household wealth $7.7 trillion less than it was before the recession.

That explains these graphs side by side:  While the majority populations lose money (on top of the bailouts and cut social programs), the top percentages get record high profits and conjoined with record low taxes.

Household Net worth

We just can’t stop giving to the upper 2% but as a Zero-Sum game it means the bottom 98% have to shift that money upwards. The above chart shows 7.7 trillion was never replaced in Average household earnings after the crash. the Money was shifted, within the economy to the upper percentile earners.  What happens (other than the money given them in other ways) then?  Their taxes go down dramatically in the same period, i.e. since they crashed the economies of the world.  This is also the time when the Average Households are asking to give up (Austerity Programs, or Krugman’s “Pain Caucus”) their share of the social “pie”.

How can this make any sense? It doesn’t,  so, even the Nobel-Prize Economist Krugman has a head-scratching ponder about the class that takes all the money and giving us back Austerity Programs (cut the social programs for the majority) and Jobless recovery (they keep the money and get windfall profits while the rest get unemployment)

What lies behind this trans-Atlantic policy paralysis? I’m increasingly convinced that it’s a response to interest-group pressure. Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense…
Ask for a coherent theory behind the abandonment of the unemployed and you won’t get an answer. Instead, members of the Pain Caucus seem to be making it up as they go along, inventing ever-changing rationales for their never-changing policy prescriptions.

While the ostensible reasons for inflicting pain keep changing, however, the policy prescriptions of the Pain Caucus all have one thing in common: They protect the interests of creditors, no matter the cost. Deficit spending could put the unemployed to work — but it might hurt the interests of existing bondholders. More aggressive action by the Fed could help boost us out of this slump — in fact, even Republican economists have argued that a bit of inflation might be exactly what the doctor ordered — but deflation, not inflation, serves the interests of creditors. And, of course, there’s fierce opposition to anything smacking of debt relief.

Who are these creditors I’m talking about? Not hard-working, thrifty small business owners and workers, although it serves the interests of the big players to pretend that it’s all about protecting little guys who play by the rules. The reality is that both small businesses and workers are hurt far more by the weak economy than they would be by, say, modest inflation that helps promote recovery.

No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios.


Update 1:  Hate to bring Dr Krugman into it again, but one of his recent posts trys to make it simple:

“there’s a good case that fiscal stimulus right now would actually improve the long-run fiscal situation, while fiscal austerity makes it worse.”

Austerity Measures will only make the General Economies Worst, but is a wonderful means for the upper Percentiles to get their hands on the rest of the Cash in a Society!

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