Flip That Bank!

A Bad Workman Blames His Tools...

Image by ChernobylBob via Flickr

In political blogging about the Great Recession it is a common thread to find someone or something to blame.  Amidst all the mud-slinging and counter-arguing the easiest thing for the beleaguered voter to do is to blame the president.  He is the most visible leader and the duly-appointed spokesperson for the country.  But, any student of history is aware that economics is complicated and the root causes of its problems are hard to identify.

David Smick

David Smick, via Wikipedia

Columnist Morton Kondracke in today’s Globe (10/26/2010) injects some new thought on the issue by discussing the theories of one David Smick, a wealthy investor and editor of International Economy magazine. In a recent speech Smick sees the GR as a problem of historic proportions, one that is likely to cause high unemployment for many years to come.  But what is really interesting is that Smick, a Republican by the way, blames BOTH parties for the mess.  He says, “Since the economy collapsed in 2008, both Bush’s and Barack Obama’s administrations “caved into big banks’ power” instead of restructuring them, leading them not to lend.”  He says that America may be “. . . the next Japan . . . lost in two decades of stagnation and pessimism.”  Now why did Congress cave in to the banks?  Could it be that their constituents wanted really cheap credit?

wall of banks

Wall of Banks, by Dystopos via Flickr

Smick says that there are “. . . up to $4 Trillion dollars sitting on the sidelines (i.e., in banks) waiting to invest in a new era of American confidence if the government changes policy and encourages small-business and start-up investment.”  Exactly how to encourage that he doesn’t say, except that it would likely take a leader (also an Anson Burlingame theme) with the business acumen of a Michael Bloomberg and the political charm of a Ronald Reagan.  Had I been asked to comment on Mr. Smick’s speech (like that could happen!), I would have noted that a good part of the much-maligned stimulus money has been directed that way, and the banks are sitting on that money too. After all, why should they risk so much as a penny until

the economy improves?  And the economy won’t improve until they do.  Thus the circular conundrum.

Smick does make one very interesting statement.  “Had Americans not been able to take out cheap home equity loans to engage in hyper-consumption, the U.S. economy for the entire George W. Bush administration would have grown each year by an average of 1 percent.”  That word, hyper-consumption, caught my eye as significant.  I recall before the bust that there was actually a TV program, “Flip That House“.  Hyper-consumption.  It resonates with our culture.

Ask the 82% or so of people still fully employed what is meant by “the American Dream”

Kua 'Aina - Cheese Burger

Image via Wikipedia

and I think they would say, a bigger house, an extra car, a newer truck, a swimming pool, a vacation home, a longer vacation, more expensive dinners out.  Bigger, extra, newer, longer, more, more, more. Hyper-consumption is even built into the fast-food meme.  “Gimme a triple bacon cheese burger with fries and extra sauce.  Oh, and a diet Coke with that.”  Such is our mentality.

To review, dear reader, a Republican says that BANKS NEED MORE REGULATION, NOT LESS. And I say, it’s not all the banks’ fault, a big chunk of it is ours for mistaking QUANTITY for QUALITY. IMHO, we need to do more than “get a life”.  We need to redefine what’s important in life.

Let’s notify Bloomberg and start resurrecting Ronald Reagan.  They’re going to have their work cut out for them.

About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Democratic.
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3 Responses to Flip That Bank!

  1. Moe says:

    Hyperconsumption – that is one fine word. A fine, fine word. I hope I remember to credit you when I find myself using it one of these days.

    A favorite theme of mine – in life anyway – is our odd confusion between desires and necessities. I live in Florida and never identified a real need for a clothes dryer. And since space is at a premium in my house anyway, I don’t have one. This single fact sets me well outside the norm and in fact confuses people.


  2. Jim Wheeler says:

    Good for you, Moe. We used to live in FL too – 1964 to 1966 in Patrick AFB near Cocoa Beach.

    I often marvel at the disconnect between pundits blaming the “absence of the consumer” for the poor economy and other pundits urging us to be better consumers and look for quality of life over quantity. It’s yin and yang. It just might be that a little recession is good for the soul. (Unless of course you are on the bottom of the food chain.) 😉



    • Moe says:

      Being an ‘American consumer’ has replaced being an ‘American citizen’. Apparently.

      Certainly after 9/11, instead of committing the country to something like energy research (at a time when people would have supported absolutely anything a president asked of them), he said ‘go shopping’.


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