Ten years ago, the U.S. entered a Great Depression. A decade on, the depression still occupies a strange place in the American psyche. America suffered a cumulative loss of output equaling $4trillion. By any measure, working stiff’s haven’t recovered. Many lost everything they were working for. Because our political economy doesn’t allow working people to get to equity/capital formation, we rely on credit cycles to finance our entire lives. Anyone over the age of 40 has some memory of what America was like as a cash economy. Those days are returning along with a convention of the States, regional based economies and mercantile state based practices. But it all began with giving government a larger share in civil society. It didn’t have to be this way, but members of Congress did an unconstitutional thing, they punted to the Federal Reserve. Congress is forbidden by the doctrine of non-delegation of power from abdicating. Yet it did just that. The rest was Obama’s tenure. But the wreckage was and is still with us.
By seeking redistribution instead of innovation in the growth of civil society, the speed and efficacy of the creative response left our political economy less reformed and vulnerable to the identical policies that procured the crisis.
Three authorities have grasped this better than anyone: Peter Wallison at the American Enterprise Institute, author of Hidden in Plain Sight, and Charles Calomiris with Stephen Haber, coauthored Fragile by Design: the Political Origins of Bank Crisis’ and Scarce Credit. Even though the late, great monetary authority Allan Meltzer spoke of how the origin of the Great Depression was adherence to a Protestant ethos called the real bills doctrine. Because money was dependent on effort and minted in gold, it wasn’t elastic. You couldn’t just print money. So the intrinsic requirements of the gold standard were exacerbated by emerging totalitarian movements. But our own Bretton Woods system that in effect replaced gold with the U.S. dollar hasn’t reformed participating political economies toward the efficiencies promoted by its architects.
With massive swings in capital flows dependent on volatile market sentiments, hinged to Congressionally mandated credit cycles, participating economies become dollar denominated and accumulate massive foreign exchange reserves that depress interest rates and encourage borrowing. This immediately destabilizes entire continents exposed to American financial crisis’. We saw this with the Arab Spring, whose origin was massive capital outflows from American into BRICS that destroyed efficient price signals on subsistent peoples dependent on stable crops.
Under team Obama, the punishment continued with ever growing unaccountability and unconstitutional regulatory institutions that openly sought to constrain our market based economy.
So why was there no V recovery?
The Federal Reserve sought to fight deflation and had to do it alone because Congress never promoted fiscal stabilizers that would have prevented the social impact of falling prices by working closely within the confines of the business cycle. Instead what we got was redistribution, confiscatory taxation and currency depreciation. In effect, the economic fundaments that procured our crisis remain. We still don’t openly promote work, equity-capital formation. In a word, we no longer believe in the efficacy of civil society.
Even still, this ain’t the final chapter on the impact of the Great Recession.
This great Republic is moving in social, political tones that aren’t captured by mass media, but are structured by the very digital mediums that source disruption. Get ready for a convention of the States, regional based economies, sound money, and a return to equity and capital formation.
In a word, get ready to enjoy the fruits of a new civil war that has already taken off and bequeathed us a new world about work, about the moral, even theological sources of human capital. Yes, the defeated Socialists abandoned Marx for the green movement’s anti-capitalist rhetoric. But working American’s aren’t beholden to those who work the commanding heights of our political economy.