After the disastrous Presidential candidacy of George McGovern in 1972, the Democrats were completely taken over by their socialist wing. (NOTE: these politicians and their supporters prefer to use the scoundrel term "Progressive" to paper over their socialistic beliefs, but they are socialists nonetheless.)
After using their academic and journalistic connections to bring down President Nixon (whose furtiveness didn't help his own cause one whit), both the socialists and the media became enormously full of themselves and decided to use this advantage to bring the New Deal to its logical conclusion: Euro-style socialism for the United States. This meant, primarily, two things:
- Socialize health care.
- Gradually bend the banking system into a Federally-supported subsidy program that would enable ALL Americans to own their own home, courtesy of confiscatory taxes on "wealthy" individuals and businesses, whomever the Democrats deemed them to be.
Although they're trying again, it will be hard to socialize medicine in this country, given socialized medicine's near-total failure to deliver the goods in the rest of the world. (Though our lefty friends are damn-well going to try.)
But the housing situation? There's the sticky wicket.
The disastrous Carter Administration set the table for today's current disaster by beginning a push for the banking system to loosen home loan standards to enable less-qualified individuals to purchase homes, enabling such substandard loans to be supported by mortgage insurance premiums as well as by encouraging/forcing quasi-Federal companies Fannie Mae and Freddie Mac to make a market in these substandard loans, thereby theoretically reducing the risk to lenders.
The Carter-caused hyperinflation of the late 1970s and early 1980s minimized the early damage from this policy since virtually NO ONE could purchase housing during this period when mortgage rates went into the stratosphere. It's the closest we've gotten, BTW, in modern times, to hyperinflation.
Things settled down and began to recover in the Reagan years, whacked briefly, by the S&L debacle in the late 1980s-early 1990s and the near-concurrent Crash of 1987. Both left the financial system wobbly enough to result in the defeat of George HW Bush in 1992 (the incumbent always gets blamed, rightly or wrongly, for this stuff).
The Clinton Administration, as beneficiary of the recovery that started late in the administration of Bush I, increased social spending by squeezing the military and intelligence agency budgets to death (the so-called "peace dividend"). Once having done so, they resumed the old Carter push to force banks and lending institutions to kick subprime mortage lending up a considerable notch, again by putting minions into Fannie Mae and Freddie Mac to make easy money available for these loans by agreeing to make a market in them.
By the time we were in Bush II, first term, both the dot.bomb (actually a Clinton-watch disaster) and 9/11 forced the Fed into an easier money stance to stave off an earlier threat of deflation. This worked magnificently, but too much so since, while the reflation was going on, Fannie and Freddie continued to goose the irrational growth of asinine mortgage vehicles, including loans where, in effect, you didn't even have to document your income.
To their credit, the Bushies spotted this excess early and tried to get legislation passed to slow it down, most notably in 2005. But out of control pols in both parties shouted this down, and the megahits to our economy that resulted began to become evident as early as 2005-2006.
But with the defeat (well-deserved) of Republicans in both houses in 2006, any reform of the easy-housing-vote-buying game instituted by the Dems over a 30 year period became a dead issue. When New Century Financial's CFO declared, in late 2006, that he actually didn't have a clue as to whether the company's reporting of its last 2-3 quarters was accurate, the warning shot was fired. New Century folded a few months later in the spring of 2007 and the dominoes began to fall fast and hard.
The problem was spinning out of control. It was nearly entirely a Democrat-caused problem, but they and their media pals blamed and continue to blame the hapless Bushies, who'd at least tried to slow the beast the Dems had built. But with previous Fed Chair Greenspan failing to put the brakes on his post 9/11 low-interest policy, coupled with Bush-appointed SEC Chair Christopher Cox's fatally flawed decision to kill the uptick rule (which prevented short sellers in the stock market from attacking and destroying stock prices in general and bank stock prices in particular), the stage was set for the initial 2007 market volatility that marked the beginning of this Depression.
The almost overnight tanking of all stocks in two phases in the Fall of 2008 pretty much sealed the doom of our current banking system, not to mention our jobs, our home equity, and the Republican Party. The hapless Stupid Party (the Dems are the Evil Party) got blamed for the whole mess even though its collective guilt was confined to a preternaturally stupid SEC Chair whose blanket laissez-faire attitude blinded him to the repeated, destructive Bear Raids that continue to frighten people from the market and from nearly any manner of investment.
Add to that the moronic investment credit rating agencies which, of late, have been downgrading stocks and bonds AFTER (not before) ALL THE BAD NEWS IS OUT--and you have waterfalling markets and nonexistent confidence and transparency in investments.
The result. Those with any money left are hiding it and using it to pay down debt. They won't be buying new stuff in any quantity anytime soon. They'll be loathe to trust the government, the banks, Wall Street, and pretty much anyone, for the better part of the next decade.
And this, my friends, is what makes for a real Depression. As in 1929, most citizens have now lost faith in "the system." They no longer believe. And when they don't believe, they don't spend on goods and they don't commit capital to building new businesses and products.
As we are beginning to see, the Democrats have the opportunity of a lifetime here. Their profligacy, coupled with the lending institution's spectacular greed and opportunism, have laid fertile ground for the selling of a socialist economy. A little demagoguery here, a little payoff to the public employees' unions there, and we'll be well on our way to Euro-rot.
And that's where we are today. And why. Kind of depressing.
Like a Depression.