The Crash Was the Best Thing for Finance Ever

Simon Johnson quantifies the benefit of the crash to the ones who caused it:

the purely fiscal damage wrecked by big banks – apparent in 2008 but building for longer – will end up increasing our net government debt held by the private sector by around 40 percentage points of GDP.  . . . Around half of our existing government debt burden and much of our continuing fiscal vulnerability is due to the dangers posed by unreformed big banks.

There's the direct benefit to private financial interest of the bailout with public money.  There's the indirect benefit of crippling the public sector and lowering its tax costs to corporations and wealthy individuals.  This is the only agenda of the California Republican party, whose social vision consists in its entirety of blocking tax increases on large incomes, this year by gutting the pensions of public employees.

This has already happened in Illinois, and click here to hear Arnold Schwarzenegger's spokesperson repeatedly saying that the state budget deficit makes public pensions unaffordable. In America, saying something again and again makes it true.  Another guest pointed out that state employees get 2% of their salary as a pension for every year worked, so after 30 years they get 60% of their final few years averaged salary, and the average is $24,000 a year.  Apparently this is too much money for someone who worked for the public for 30 years, compared to the enormous piles both needed and deserved by wealthy investors.

The banks are continuing on much as they were: too big to fail will survive the reforms,  along with the banks' first lien on all national wealth.  Derivatives trading will carry on with small changes.  The only tools at ordinary folks' disposal - disclosure, data, discussion- will remain unavailable (see Morgenson's summary).   The economic leadership's silent passion for impoverishment means that people are still losing their houses even with loan modification programs. In the California counties of the new middle class of the 2000s -- around 1 in 100 houses received a forelosure notice just in the month of May 2010.

This system is grossly unjust and inefficient - inefficient like baronial 18th century French agriculture. Inefficient like Greece agreeing to austerity and paying even more for credit than before. Inefficient like families having no place to live. Inefficient like a third depression.   Inefficient like today's college-age adults being less well educated than their parents.

What amount of decline is going to upset the middle classes enough to fight for their jobs and their homes?