What killed our economy was moving to a leveraged

[mmonk]

asset based economy for the middle class based on bubbles in the stock and housing markets and away from a wage based economy. That is why as we cut the public sector and wages, we are heading towards a double dip recession or prolonged depression. I wish the average Joe could see it instead of accepting the scapegoats the ruling class is providing.

[badtoworse]

1. Are you saying that debt was to easy for the avergae Joe to acquire?

[mmonk]

2. Yes and was a substitute for lack of wage growth.

But not only for the average Joe. It was also the currency for CEO packages which they could cash in and/or acquire financing for buyouts. The financialization of the economy became a house of cards.

[badtoworse]

6. There is a lot of truth in what you say

Leverage is a two edged sword.

[NNN0LHI]

3. We had our first concession contract in 1982 so I already knew this

Problem was I couldn't get anyone else to see this until very recently.

Don

[HughBeaumont]

4. In the past 30 years . . .

. . . have there been any periods of economic growth that weren't the result of a bubble of some kind (housing, credit, real estate, tech, S & L, etc)? Take those periods away, and it's been an understatedly less-than-stunning growth record for Milton Friedman and his crackpot nonsense.

[Egalitarian Thug]

11. Yes. The tech boom was a real boom. It was sold off to the monoploists and covered up

with the stock market bubble. IOW, the real economic growth was commoditized and transferred to Wall Street for export while the monetary product was leveraged into the bubble so that when the bubble burst, little of the real value was left here.

Other than that though, no. Virtually all American economic growth since the 70's has been illusory. Pretend prosperity to enable one small sector to rob the prosperity of a whole nation.

[marmar]

5. Exactly. Debt became a substitute for higher wages....and the chickens have come home to roost.....

....... My grandfather supported a wife and 8 children on an autoworker's salary with virtually no debt.

[Bonhomme Richard]

7. They thought it would be better to issue easy credit...

and convince people they had money to spend when they didn't rather than pay a decent wage. This way the top got to keep all the real money.
Basically it made everyone a tenant farmer.

[badtoworse]

8. Who is "They"?

Credit is not issued until someone applies for it. Overleveraging is first and foremost the fault of the borrower.

[Bonhomme Richard]

10. "They" are the one percenters that drive everything from.....

economic policy to union bashing to driving down labor cost to leveraged buyouts, etc..
The drive toward easy credit was not hard to see. Everyone was receiving cards. I actually thought that the economy would buckle years ago but they kept surprising me with new ways to con people into debt. The last one was the home equity scam. Everyone was being told through commercials, mailers, major news outlets that you had all that money tied up in your home equity and you ought to spend it. Get that new kitchen or car or vacation you always wanted. You were your own bank. It was marketing at its best and it did continue to drive the economy without sharing the wealth with the middle class.
Yes, the guilt goes both ways but not everyone uses their brains when emotion takes over. Just look at all the people that still vote republican.

[badtoworse]

13. You make it sound like there is some cabal that plans all this stuff

I don't see it that way. People have lost lots of money because they became overleveraged, but so have the banks - they've lost tons of money on the foreclosed properties they now own and lose everytime someone defaults on any other kind they hold. Both should have known better. I don't have a lot of sympathy for people who became overleveraged because they could borrow a lot of money and then used it on stuff. I don't have a lot of sympathy for banks that did away with the traditional standards for mortgage lending and wound up with a portfolio of bad loans.

[TheKentuckian]

9. Yup, why pay more wages when loans and credit cards must be re-payed with interest?

Wages are lost money to the predator class and they have to provide value to get that money back and allows the "small people" to lift themselves up.

[coalition_unwilling]

12. Although I am one of its victims currently, I would not describe this economy as 'killed' or 'dead,'

although I will describe it as 'stagnant.' Even if one accepts the most expansive defintion of unemployment (which would put it at about 20%), 4 out of 5 Americans are still employed. This is not a failure of too much leverage, it is first a failure of a capitalist economic system to utilize resources (labor) fully and a failure of politicians to take adequate measures to prime the pump and get the capitalist economic engine back to running on all cylinders.

[mmonk]

14. Austerity will kill it in many ways.

An economy cannot grow or be stable with widespread wage decline except for the top. All money at the top creates money chases which are nothing more than temporary capital bubbles until the bubble bursts.