How Did We Get Here?

We've been hurtling towards this particular Abyss since 1972. (Or 1918 - but 1972 will do.)

We got here by abdicating the responsibility to think.

There are simple logical fallacies with each proposition that fooled us, that everybody with the equivalent of a grade school education in Greece Circe 300 BC, would have been able to see in a second.

1972. Nixon takes us of the Gold standard Theory: Without the limitations of gold the US could print money and inflate away the debts accrued in the Viet Nam folly. Fallacy: This would result in terrible global distortions through the systematic debasement of the world's reserve currency. In fact, many people saw this but just didn't care since they realized that at first these distortions should benefit us.

1980 Ronald Regan adopts Art Laffer's academic theory of Supply Side Economics in which there is Good Debt and Bad Debt. Theory: Good Debt - through the process of unlimited money printing - "as long as it is allocated properly" is thought to unlock the potential of an economy and smooth over natural business cycles. Fallacy: when bankers are enriched by both good and bad debt, there is no natural incentive to distinguish - assuming they're even bright enough to do so. So all forms of debt are embraced. And money is inevitably allocated inefficiently. Fallacy 2: this new Debt/Capital results in a temporary boom derived through financial distortions that stupid people mistake for good policy.

1988 Clinton hires Goldman Sachs chairman Robert Rubin to run the economy and he immediately trashes Glass-Steagal which separates by law the activities of Investment Banks and Commercial Banks. The law exists because Commercial Banks are given money by the Central Bank (that they own) that they must lend to the public. Investment Banks must raise money through the capital markets that they can legally gamble in any way they see fit. Now all banks can get money from the Fed and gamble it to their heart's content. Theory: Less regulation leads to greater business innovation. Fallacy 1: In a world without regulation "innovation" can be used to allocate capital directly into a banker's own pocket. Fallacy 2: Institutions become "too big to fail" So Profits from gambling are kept private, while losses are socialized.

1996 George Bush institutes a policy of tearing down the regulatory system that monitors all banking activities. Theory: Less regulation leads to innovation. Fallacy: (again really?) Okay: without oversight of what amount to extreme gambling activities the gamblers at the banks were free to rev up their debt to equity levels from 12-1, to 17-1 to 100-1 to 1000 to 1. This means that if the markets moved against them they would collapse.

2001 After an unfortunate incident where a building was destroyed and 3000 American killed, George Bush initiated a policy of Interminable War at the cost of 3-6 trillion dollars depending on how costs are calculated over time. Theory: War makes us safe. Fallacy: Dumping trillions into wars only weakens us if it destroys our economy. It necessarily destroys our economy unless we can steal the natural resources (like oil) of the countries we attack to pay for the war. Otherwise we pay for it with DEBT.

2008 The banking system collapses when bets levered at close to 1000-1 on the housing industry turn against the banks. All the major banks are wiped out. George Bush hires Goldman Sachs Chairman Paulsen to take 6 trillion more of tax payer money and give it to the Banks in what turns out to be the greatest transfer of wealth in human history. Theory: Our economy will collapse if we allow banks to fail. Fallacy: Robbing the public to pay off bankers will make the economy collapse eventually anyway. Fallacy 2: Since no oversight had/has been restored to then banking system, the banks were/are free to gamble this new capital and steal as much as they like in the form of "Bonuses." Which they did/are doing, digging the debt hole ever deeper.

2010 Cyncial but Stupid, War-Weary Americans elect a complete novice with no government experience to clean up a Financial and Military mess he can't possibly begin to understand. Theory: Yes, he can do it. Fallacy: if you can't understand a mess it's not possible to clean it up. He makes the mess worse by starting a third war, while ignoring the banking mess, and instituting a confused and expensive policy of National Health Care.

2012 Political and Media Hate Monger from both Parties decide the best way to deal with this massive Economic/Military mess is to destroy Trust in Government in the hopes that the public will blame their political enemies. Theory: If the public gets angry enough they'll vote out the OTHER SIDE for ever. Fallacy of Fallacies: When the public loses trust in Government the entire economic system collapses as TRUST ultimately is the lifeblood that enables any economic system to live.

Please read this last sentence over and over: Trust is the lifeblood of any economy; once lost, the economy dies.

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