Several bloggers, many economists, a small but growing number of journalists, and at least two TV personalities in Dylan Ratigan and Glenn Beck, have now grasped the sad reality that the entire American economy is underpinned by a mafia-like oligarchy that stretches from Wall Street through Corporate America, to Washington D.C. The last vestige of free market capitalism has been replaced. America is now a welfare state where over $2.3 trillion of the $3.8 trillion dollar budget is spent on entitlements. But that is only the tip of the iceberg. Although $2.3 trillion annually and growing is an awesome figure, this basically represents crumbs fed to placated masses.
In the mid 1990's, the six largest banks held assets worth less than 20% of the gross national product. Now, these six banks hold assets valued at approximately 60% of the gross national product. How did this happen? Due to powerful lobbying, the banking industry, as well as big pharmaceuticals, and monopolistic agriculture giants captured the government. Wall Street was particularly effective in their efforts. By placing key figures within the Treasury department and hiring a multitude of lawyers who, combined with lobbying dollars, rewrote laws which enabled Wall Street banks to escape (and evade) regulation, create new, unregulated financial products, and leverage their investments by multiples of anything considered safe.
While the large investment banks were taking over the government, corporate America accelerated the process of off shoring industries in order to take advantage of cheap labor and less punitive taxes. Slavery in America was outlawed with the end of the Civil War, and decades later the practice of exploiting child labor ended. However, with the onset of globalization, corporations were no longer bound to fair labor practices and could once again cut costs by replacing American labor with a global workforce in the billions. Certain industries that remained within the borders of the country, such as construction and big agriculture, could simply pay illegal aliens lower wages with no benefits because the federal government was unwilling to enforce the law. Jobs that used to pay well, such as bricklaying, were now low paying jobs that "Americans won't do."
Both political parties were complicit with respect to the failure to enforce laws already on the books. Additionally, both parties allowed campaign contributions from special interest groups to write laws favorable to their respective industries. This trend resulted in a consolidation of power as smaller, law biding businesses and citizens were unable to compete and eventually forced out of business or into lower wage paying positions. Congress increasingly abdicated responsibilities to the Executive branch of government. As bureaucracies expanded, from the Department of Education to the new Office of Homeland Security, Congress and the citizens whom they ostensibly represent, had less oversight and knowledge of the policies implemented through the various bureaucracies.
And here we are today. Accounting rules have been changed in order to give insolvent institutions the appearance of strength. The unaudited Federal Reserve purchased $1.25 trillion dollars of assets of unknown quality from the financial system over the past year. These same banks park the proceeds of their sales at the Federal Reserve which pays interest back to them. What a sweet deal. The interest provides free profits which help to continue the payout of multimillion dollar bonuses to the banking executives.
The ongoing dismantling of the industrial base, combined with the lawless and corrupt practices of Wall Street are steadily weakening the country. But these practices are now systemic, and if they were abruptly ended, it's likely the nation would quickly collapse. Madoff ran a ponzi scheme. If the SEC had done their job when alerted to the fraud by Markopolous years ago, the losses would have been limited to the tens of millions. By turning a blind eye, investors were able to watch their portfolio grow. Eventually, the truth came out and the losses were astronomical. It's much that way with the American economy. Once reality shines the light on what is happening, there will be much carnage.
In just the past week, quite a few articles have been written about this theme. Below are links to some of them. Read 'em and weep.
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