Editor,
Why are politicians sounding alarm bells as Wall Street goes down in flames? It's simple: Our economy is three-quarters goods and services. When people don't have disposable income or access to credit, three-quarters of our gross domestic produce will slide. Therefore, we need a strong, confident banking system. To have a strong, confident banking system, you need a strong, confident Wall Street. So yes, this does mean bailing out powerful, greedy CEOs, but you can rationalize this as a necessary evil.
If you want to blame anyone for this catastrophic disaster, blame Alan Greenspan. Greenspan's extraordinary rate cuts in 2003 - combined with the post-9/11 message from Washington telling the American public to spend to be patriotic - meant that borrowers got money easily and spent it just as easily. Home ownership soared in the U.S. in 2003, and as the real estate markets boomed due to Greenspan's interest rate cuts, borrowers pulled the equity from their homes created by this fake boom.
This housing bubble gave new (borrowed) wealth to the homeowners who thought they had achieved their American dream. This borrowed wealth was simply not sustainable in the long run. First the housing bubble burst, and now Wall Street is in collapse because it can't put a price tag on its own investments. No wonder Greenspan was nicknamed Chairman Bubbles in 2004.
This crisis is a direct consequence of the wholesale financialization of the U.S. A shrinking manufacturing sector was replaced by a deregulated expansive financial sector, but instead of diversifying our portfolio, as Wall Street likes to say, we put all of our eggs into one basket. Now we are entirely dependent on a healthy financial sector for the strength of the rest of the economy. Contrast this with countries like Japan and Germany, both of which have successful financial and manufacturing sectors. Japan and Germany typically enjoyed large budget surpluses when we had record-setting budget deficits. Following previous superpowers, the U.S. has gone down the same treacherous road: from agriculture and fishing to commerce and industry, and now to post-industrial, large-scale financialization.
Naturally, from 2000 to 2008, under President Bush's watch, the U.S. accumulated unprecedented debt in all areas: from Uncle Sam's record deficits to the average Joe's unpaid credit card - everyone owed someone else more money than ever before. A professor of mine called this financial crisis a "collapse of the free-market ideology," but history will call it the first casualty in the unavoidable disintegration of the supremacy of the U.S.
Get content from The Daily Lobo delivered to your inbox
My message is simple: It is time to relieve ourselves of the American exceptionalism, self-aggrandizing ethnocentrism and outright arrogance we baptize our thoughts and discourse in. Say goodbye to hegemonic dominance, absurd claims of being God's chosen nation and egotistical babble such as God bless America. Instead, say hello to the mediocrity of inferiority.
Raj N. Patel
UNM student
