I’ve said this many times. There are many great books out there, but some are too detailed, too technical, too poorly written, and too long. One great example is Jane Jacobs’ The Death and Life of Great American Cities. I would guess that most planning students couldn’t make it all the way through, which is hugely unfortunate. Just like there are Cliff Notes for fiction, there should be something like that for great nonfiction but a bit more comprehensive, perhaps 100 pages, even including a criticism section and rebuttal by the author. I firmly believe that the main reason this has never happened is not lack of ingenuity but rather the elitist mentality that great ideas like great literature is not meant for the masses. I would also argue that many great ideas challenge the status quo and the elite. This is one book that should get the 100-page Cliff Note treatment. While it is well written, it is way too much detail and way too long for most readers.
Some people may object to David Stockman as the Reagan voodoo economics lackey, but in the book, he makes it clear that he became disillusioned with Reagan. After leaving the White House, Stockman entered Wall Street, and while he was indicted for shady business dealings, it gave him a front row seat to how shady Wall Street operated. In this sense, I would trust that he knows exactly what he’s talking about when he talks about the crony collusion of government and Wall Street.
I’ve read several books relating to the Great Recession including Fortune’s Formula; Traders, Guns, and Money; Fiasco: The Insider Story of a Wall Street Trader; Two Trillion Dollar Meltdown; and The Devil’s Derivatives, but many of those books gave you the micro-insider perspective as opposed to the big picture. This book gives you the big picture as well as the micro-insider knowledge. Basically what happened was the big investment banks created a huge gambling system using very little collateral filled with toxic junk (subprime mortgages packaged together) to create huge leverage. The ratings agencies aided and abetted this by rating all these big gambles as safe bets. The gambles had gigantic payoffs but with the slightest downturn they blew up in your face. Stockman argues that had we not bailed out the banks and let them get their faces blown off, it would not have destroyed Main Street as the Chicken Littles Bernanke and Paulson suggested. It would have been contained. Wall Street succeeded in terrorizing the nation and saving their behinds for getting caught with their pants down making extraordinarily idiotic bets. However, I would argue, Wall Street had us by our balls. Had we not bailed them out, they would have figured out ways to make Main Street pay and probably would have laid off millions and caused a riot. It is the same thing that happens when the federal government shuts down. I call it the starving baby analogy. When a meth addict begs her parents for more money and the parents refuse, the meth addict starves the baby first. Certainly, she could stop paying her cell phone bills or stop buying meth or sell her car, but by starving the baby first, she gets her parents to send her more money. Likewise, when the federal government shuts down, it shuts down places that have the greatest immediate impact on the public like White House tours and the national parks. Likewise, had we not bailed out Wall Street, I’m sure they would have made us all pay for it somehow.
It is probably safe to say that not only do we live in the most corrupt times ever in American history, not only is the wealth inequity at its greatest since perhaps the reign of aristocrats, but we have lost, and by we, I mean the vast majority of Americans. The oligarchs have won. If you thought Russia and their oligarchs were corrupt under Yeltsin, they were mere child’s play compared to America’s oligarchs and corruption. Unlike the days of Robber Barons when journalists called muckrakers spawned a progressive revolution, today’s oligarchs own major media. Additionally, unlike a century ago when most American schools were independent, today’s public education system is standardized and systematic in its brainwashing of obedience and conformity. As a result, few Americans can think for themselves and are more inclined to repeat verbatim the sound bites and slogans of major media. We have lost, but that may not be such a bad thing. First, America will not be able to borrow any more money and other countries may finally dump the dollar causing hyperinflation and a Great Depression. The oligarchs may then simply leave America alone and it will be able to recover slowly and create true free markets. Obviously, however, no America will vote for such shock treatment for its addiction to corruption despite most Americans earning less, working less, and owing more.
There is a glimmer of hope in the Millennials who are discovering that they are the first American generation to do worse than their parents, that their college debt is greater than ever, and their employment options fewer. Unfortunately, however, many of them are the victims of the system. The few who can think for themselves are trending toward independent political parties, Bernie Sanders, or Rand Paul. Without getting too political, it is safe to say that our nation is now so much in debt that the idea of government spending more to help out Millennials will put the nails in our coffin. Perhaps that is a good thing, because nations do not change unless there is a sufficient crisis which means more people are suffering than benefitting from the status quo. I’m not much into conspiracy theories, but I am pretty convinced that there is a small group of elite who run the world, and they don’t care if America fails, because they will just move on to the next host to infect whether the EU, Japan, China, whatever. Perhaps it is better, because then we can be freed of this virus and like Canada or Sweden, we can be freed from the curse of policing the world while benefitting from a relatively high standard of living after we collapse that is.
There are three reasons why America has not collapsed, and these three reasons mask the folly and stupidity we enjoy without repercussions. First, we have dollar hegemony. The world trades in dollars and holds so much of our debt that if they were to all dump the dollar, they would be shooting themselves in the foot. It is this dollar hegemony that allows us to print astronomical sums of money without suffering inflation domestically while shifting that inflation to the world especially Third World nations. In order to mitigate this, Third World nations succumb to the IMF which imposes austerity measures and demands these nations to open their resources to global ownership, a more sophisticated form of imperialism. Second, we have technology. Technology is a productivity multiplier, and once you’re ahead, it is near impossible to fall behind. We are moving so quickly ahead of our competitors and especially the Third World, that no matter how wasteful and stupid we are, the rest of the world still cannot close the gap. I should say third, the rest of the world is almost as stupid as we are. But third, we have a natural gas and oil boom that will soon make us an energy exporter. At the same time, it is depressing the foreign energy market which in contrast makes us even more powerful and prosperous. Because of these three advantages, most Americans have yet to feel the pain of our folly and corruption. They’re saving money at the gas pumps, unemployment is extremely low, and wealthy Baby Boomer and Gen X parents are subsidizing the income of their Millennial kids. I should add the fourth reason. Just like any household, you can only use your credit once to bail you out. If you lose your job, you can either try hard to get another job or live off your credit cards for a couple years. In those two years, you will be enjoying life, not working but spending as if you did. But you only get to do this once, because you ultimately can’t pay off the monthly credit card bill using your credit card. Likewise, America only gets to get out of a Great Recession once using credit. If we fall into another Great Recession, we’re fucked.
Back in the 90’s as both defense and welfare spending skyrocketed, I realized that the Republicans were not about small government after all. I remember a conversation I had with my boss. I told him that the Republicans seem to be spending so much on defense and cutting taxes that the US is so much in debt, it simply doesn’t have anything left over to spend on welfare. This is their strategy for destroying the welfare state. But this was wrong, as this book points out. What happened was Reagan tripled the defense budget and set America on course to become a warfare state using nothing but loans. The Democrats were not left with no money for welfare. The Democrats became so embittered at the marked size of defense spending in contrast to welfare spending that the two parties had to engage in collusion. The Democrats united, and the only way the Republicans could ever pass a bill in their favor was for them to support a welfare spending bill in the Democrats’ favor. As a result, both warfare and welfare spending skyrocketed all fueled by borrowing. In essence, it was the creation of the warfare state that led to the creation of the welfare state and the ballooning of healthcare costs it enabled.
As I’m reading this 700+ page tome, it just becomes so disturbing how much we are being manipulated and lied to by mainstream media that is now firmly under control of big business. I understand why the majority of Americans, most all Baby Boomers, most Gen X, and to a lesser degree Millennials, blindly follow mainstream media. It’s ignorance. It also has a lot to do with public schools, and to a lesser degree, private schools that teach you obedience and conformity above all else. There was a time when I believed that being anything but mainstream meant you were some freak, a radical, a rabble-rousing outcast who just wanted to destroy everything and had some chip on your shoulder. Increasingly, I find myself believing the opposite. If you’re mainstream, you are part of the problem, you are naive, you are brainwashed, you are controlled and manipulated by exploitative forces that don’t even like you. While I applaud the rise of the Internet which provides alternative sources of information and ideologies, fundamentally, you must read books. While the publishing industry is increasingly owned by big business, books like this still make it through the cracks. Countless conscientious publishers are out there who realize the value of dissent and independent thinking. It just startles me to think of how so many Americans are being lied to, manipulated, and exploited by big business and their PIO department, big media. The only unfortunate thing is that very few Americans will ever buy a 700+ page book and read it. Again, we need condensed versions of all these great books. But how do you come to terms with the idea that the vast majority of people in America, your friends, neighbors, acquaintances, relatives, coworkers, all of them, believe in so many of the lies they have been told and are so unafraid of thinking for themselves? It makes me feel both uncomfortable and estranged from my community.
Stockton points out major events in world history that are huge contributors to the Great Deformation but also other important world events. In particular, the London Economic Conference of 1933, an attempt to stabilize world currencies and spur global trade was single-handedly destroyed by FDR, resulting in what Stockton claims, undermined international trade, encouraged nationalism, and led to World War II. France’s monetary and economic woes pressured them to demand full reparations from Germany. Fixing the international currency and trade problem would have significantly alleviated that problem for France as well as forgiving both English and French World War I war debts. The problem with America was that it wanted to capitalize on their ascent to economic primacy after World War I with trade protectionism that meant huge trade surpluses, but it also impoverished the world which fell into despair with the Great Depression. The New Deal was not the solution. The solution was lowering tariffs and encouraging global trade.
After about 200 pages I started skimming. There is simply too much information here, and after a while, you just get depressed and frustrated by all the corruption, incompetence, and unfairness of it all. You also realize that David Stockman is an astoundingly intelligent guy, and perhaps part of the problem is that astoundingly intelligent people are on both sides fighting corruption and trying to game the system. The problem is that we elect Presidents who are astonishingly stupid yet charming and photogenic. They are easily manipulated by intelligent con-artists. Also, unlike a Prime Minister, the US President has amazing power especially after FDR expanded the federal branch. There is supposed to be checks and balances, but it seems these days the executive branch has most all the power.
As depressing as this book was, I am an eternal optimist. I believe we are living in the Great Era of Evil that started with the Agrarian Era and climaxed during the Industrial Age. While we have done many great and noble things, they are far outweighed by our evil, the carnage of wars, slavery, social injustices, discrimination, oppression, tyranny, statism, corruption, mass poverty, etc. Only the top 1% of the population reaps the rewards of this system. But I firmly believe the Information Age will change that. The Information Age, as its name suggests, is about information, not crops or machinery, but information. It is about knowledge. It is about the importance of both gathering, disseminating, and analyzing information and being rewarded for being good at it. It means that you are good at uncovering lies, distortions, myths, delusions, illusions, and propaganda. It means that you read and understand books like this and know when your government, economy, and society is doing wrong and being corrupt. This knowledge is essential for taking the necessary steps to fix things.
If you want to tackle this monster book I would suggest you only read the first 13 chapters and the last 2. The very last chapter offers some controversial but necessary reforms to fix our economy.