This quote says it all: "The people at the top were not willing to pay people at the bottom wages.."

[Richardo]

Last edited Tue Jan 31, 2012, 10:26 AM - Edit history (1)

... but they were willing to lend them money."

Heard on NPR's Marketplace last evening:

Kai Ryssdal: There's reassuring news on the macro-economic personal finance front today. We learned this morning personal income rose in December by the biggest amount in nine months. And here comes the good part -- Americans saved almost all the extra money they brought home. That's no mean thing in a country where debt is all too familiar. Debt is, in fact, and has been, an American way of life. Louis Hyman is the author of a new book called "Borrow: The American Way of Debt." Thanks for being here.

<snip>

Ryssdal: Yeah, which gets us to, writ very large, the banking industry. Right? Depending on who you talk to, banks are either directly responsible for the freeflow of capitalism, and thus the economic glory that is America. Or it is a vampire squid on the face of humanity. (OP's comment: )

Hyman: Yeah. Either way it's a monster and it's impersonal, and it's treated as if it were something we can't control. ...

<snip>

The question is why do we let them have all our money to play with? Certianly in the last year -- with the rise of Occupy Wall Street -- you have an increased sense of, oh, people are concerned again about inequality. For me the essential question is: How did inequality produce indebtedness? And in the book I talk about how the people at the top were not willing to pay people at the bottom wages, but they were willing to lend them money.

<snip>

Audio here: http://www.marketplace.org/topics/economy/big-book/history-american-borrowing

That boils the entire economic crash down to one sentence like I've never heard. The 1% literally owns and recirculates the money - 99% are NOT paid, they're LOANED to. Amazing.

[PuraVidaDreamin]

1. Make this the new meme.

It's short and sweet and even a tea bragger could understand it.

[hfojvt]

21. it also has a long history

[xtraxritical]

22. It was not so long ago

that it was called "the company store".

[Itchinjim]

2. knr

[liberal N proud]

3. That explains the whole economic catastrophe very simply.

[xchrom]

4. Du rec. Nt

[limpyhobbler]

5. rec'd

inequality leads to debt, debt leads to slavery.

[City Lights]

6. That sums it up nicely.

Spread it far and wide!

[mother earth]

7. Slavery didn't die, it only morphed. nt

[FailureToCommunicate]

8. Yes, "were" willing to lend money. Try to get loans these days (after WE bailed THEM out!)

They were also happy to profit from Bush's two wars whose (borrowed) costs were hidden from Joe and Jane taxpayer.

[EC]

9. There should have been more reporting

when Nancy Pelosi said the guys on top want us to be in a spiral of everlasting indebtedness. But they shut her down.

[Richardo]

10. That might in the book...

I'll look for it when I see a copy.

[jwirr]

11. They were willing to lend them money EVEN when they knew they were not going to be able to pay

it back.

[Uncle Joe]

12. Kicked and recommended.

Thanks for the thread, Richardo.

[Richardo]

14. You're welcome, Uncle Joe

Yesterday in the car, I literally heard only the last sentence of that interview, and it totally gobsmacked me. (I looked up the rest of the interview this morning. - Now I've got to find the book.)

[JDPriestly]

13. K&R

[lumberjack_jeff]

15. It's the major factor in tax policy too.

The rich would much rather extend loans (through deficit spending) than pay taxes.

[stockholmer]

16. the top of the heap have been, for well over 1000 years, rentiers

Rentier capitalism is a term used in Marxism and sociology which refers to a type of capitalism where a large amount of profit-income generated takes the form of property income, received as interest, intellectual property rights, rents, dividends, fees, or capital gains. (Wikipedia)

-------------------------------------------------------------------

On Short-Termism and the Institutionalization of Rentier Capitalism

http://www.nakedcapitalism.com/2011/05/on-short-termism-and-the-institutionalization-of-rentier-capitalism.html


Andrew Haldane and Richard Davies of the Bank of England have released a very useful new paper http://www.bis.org/review/r110511e.pdf on short-termism in the investment arena. They contend that this problem real and getting worse. This may at first blush seem to be mere official confirmation of most people’s gut instinct. However, the authors take the critical step of developing some estimates of the severity of the phenomenon, since past efforts to do so are surprisingly scarce. A short-term perspective is tantamount to applying an overly high discount rate to an investment project or similarly, requiring an excessively rapid payback. In corporate capital budgeting settings, the distortions are pronounced:


First, there is statistically significant evidence of short-termism in the pricing of companies’ equities. This is true across all industrial sectors. Moreover, there is evidence of short-termism having increased over the recent past. Myopia is mounting. Second, estimates of short-termism are economically as well as statistically significant. Empirical evidence points to excess discounting of between 5% and 10% per year. The result is that projects with long-term payback, beyond the 30 to 35 year timeframe, are treated as having no value. No wonder we don’t fund basic science, infrastructure, or climate change related projects.

The writers point out the first order bad effects: good projects don’t get funded, and those projects are often the ones with the highest potential for broad social impact (would we ever build the US highway system now?). But the knock-on effects are if anything more pernicious. The fact that most investors employ overly high discount rates produces is the same result you’d see with oligopoly pricing: overly high returns with restricted output. And this is consistent with the picture we see in most of the world. Perversely, the corporate sector has been a net saver for nearly a decade in the US, longer than that in some other economies. As we wrote with Rob Parenteau last year:


snip


We have a peculiar desire in America to pretend that we have unfettered capitalism when, even before you consider the banking industry boondoggle, we have a remarkable amount of industrial policy by accident, via lots of special interest receiving subsidies and tax breaks. We’d do much better to try to put some of it on a more rational footing and implement broad-based programs of the sort Haldane and Davies suggest. But we may need to lose more ground to advanced economies before complacent CEOs and their various message validators are willing to consider more radical changes in how we do business.

[TahitiNut]

17. Noting new about that. It's "company store" economics.

We're regressing. Next stop: "plantation economics." (Courtesy of your local Banana Republican.)

[Canuckistanian]

18. I had a boss once who LOVED to give loans to his employees

He made me a loan offer once, but I would rather have chewed off my own arm.

He KNEW that an indebted employee was a loyal employee.

So, I was free to organize union representation at the company. Which I did.

[WillyT]

19. Yep... K & R !!!

[Citizen Worker]

20. One not so minor revision. Yes, the 1% are more than happy to loan money to the working class

between paydays at USURIOUS interest rates that at one time were illegal.