Bubble Economy

In all the financial industry’s history it’s invented maybe three scams total, which it cloaks in an infinite number of ever-shifting disguises. And the housing bubble was one of those basic scams: in essence, it was a gigantic counterfeiting operation.

Everyone knows that you can counterfeit money. But money is just a piece of paper that everyone believes has value, and there are other pieces of paper that people believe have value too — government bonds, corporate bonds, stock certificates, etc.

During the 2000s housing bubble, the market “value” of U.S. homes swelled to about $8 trillion more than it would have been if prices had followed historical trends. To give you an idea of how big a bubble that is, the entire U.S. Gross Domestic Product in 2005 — that is, the value of literally everything produced by the United States that year — was only $13 trillion.

Wall Street joyfully issued bonds “backed” by trillions of dollars of that imaginary wealth, and paid ratings agencies to certify that the wealth was real. The effect on the economy was more or less the same as if Lloyd Blankfein had printed trillions in cash in Goldman Sachs’ basement and somehow persuaded everyone it was real and belonged to them.

  The Intercept

My understanding of our monetary system is that perhaps he did. How would we know?

As Fed chair [at the time of the 2008 economic debacle, Alan Greenspan] didn’t need to know precisely when the bubble would deflate, something that was essentially impossible. He only needed to know that it existed, something that could be figured out by anyone with a subscription to the Economist.

And this is funny: after Greenspan “missed” the housing bubble and caused the greatest economic catastrophe since the Great Depression, he was hired by John Paulson, a hedge fund manager who personally made over $3 billion off of it.

Yeah, I remember many, many people laughing all the way to the poor house.

The author of this article recommends we go see the movie "The Big Short" (starring Steve Carell, Christian Bale, Ryan Gosling and Brad Pitt) - a "comedy" about the bankster-guided financial crash and the few who knew what was coming.

 I'm not sure enough time has passed for this to be funny.

The actual price we’ve paid is that the U.S. economy has been operating far under capacity for eight years. The total value of the goods and services we could have produced but have not is over $7 trillion. That’s more than enough — about $90,000 for every family of four in the country — and as long as the economy remains depressed, it will keep accumulating, along with millions of broken lives.

Thus the real criminals are exactly who you think they are: Wall Street, plus the Republicans and Democrats who execute their orders. But the biggest crime they committed isn’t their spectacularly creative financial fraud. It’s been their absolute refusal afterward to allow us to use our own government to fix the disaster they created.

[...]

But there was a solution available: the federal government just had to spend a gigantic amount of money to replace [...] $1.2-1.4 trillion in annual demand [lost when the housing bubble burst]. But Obama was never willing to ask Congress for enough, and Congress might never have provided it even if he had. Instead we got $300 billion of stimulus in 2009 and 2010, and then dribbles afterward. It shouldn’t be any surprise that everyone under 30 is still living in their parents’ spare bedroom.

Maybe their parents can spare the price of a movie ticket.