The Economic Crisis: Lessons Yet to be Learned
Kurdishaspect.com - By Rauf Naqishbendi
It started with Bush-Paulson’s rescue package and continued with Obama’s stimulus package. The Fed and the Treasury Department keep on pumping trillions of dollars into troubled financial institutions. These are bold experiments but it is beyond anyone’s knowledge to determine their factual benefit to the economy. Nor can they predict a recovery timeframe. One thing is for sure, however: the policies helped fraudulent corporate officers to maintain their jobs and draw their bonuses. Evidenced by actions, whether it is called rescue or stimulus, the aim is recovery, even if temporary, for political reasons. The irony is that lessons from this economic meltdown will be lost as long as our political establishment continues to play politics and adheres to more spending as a policy- without knowing the outcome - for lack of an alternative viable solution.
Bold experiments at the expense of the taxpayers continues. Obama's first stimulus package has just been passed and already lawmakers are making noises about a second stimulus package. These are all expensive packages entailing enormous sums, but the response to that seems to be "don't worry about it; it's borrowed money and need not be repaid now." But it will translate into skyrocketing inflation and high taxes for future generations. It’s all bold experiments, as no one is able to fathom the depth of our economic problems. The main government theme to surmount this fiasco has been engineered by the Federal Reserve and Treasury Department, who persist in the belief that the solution is to spend more money. Besides that there isn’t an alternative plan. Hence, when this spending plan is found unworkable, then the nation will be deep into an economic and social catastrophe.
At the beginning of this economic crisis, both the Fed and the Treasury Department were handing out trillions of dollars to maintain solvency of the giant banks and insurance companies. The justification was that these institutions are too big to fail, for if they were to fail they would take down the entire economy with them. The immediate question that comes to mind regarding this matter is why these institutions have been allowed to grow to an extent that their collapse would cause ultimate financial crisis? If their size is a matter of concern, why don’t we break them up into pieces and then let the government help them out?
We as a nation became a hostage to the size of these corporations. It surfaced during the economic heyday of President Clinton when he allowed deregulation of Wall Street. Prior to this period, banks were only banks; insurance companies were insurance companies and brokerages were brokerages. But deregulation allowed these entities to be anything and everything they wished. This resulted in the creation of conglomerate financial companies. As we saw, they collapsed under their own weight. The irony is Mr. Clinton still talks about his great performance and how during his presidency ten million jobs were created. Yes, millions of jobs were created. But most of them were dot com jobs and they all evaporated when the dot com bubble burst. Mr. Clinton has never admitted his shared fault in today’s economic problem through his deregulation policy. Now these huge corporations must be resized and none should be allowed to grow so big as to be too big to fail.
The current economic meltdown should be the impetus to legislate national security laws that would prohibit financial institutions from growing so large as to pose a threat to our national economy if indeed they failed for any reason. In this case, the size of the banks and insurance companies must be defined. If their size reaches the point where their failure would endanger our economic – and, therefore, our national –security, then there should be a reasonable measure to deal with the oversize. Wall Street was busy preaching to main street regarding how consumers would benefit from the phenomenon of giant corporations. But reality has proven otherwise. In fact, it is much better to have a dozen small banks than one huge Citibank. That way more jobs would be created, more competition would emerge, more taxes would be paid and overall, both consumers and the government would benefit. Wall Street had its own vested interest: make more money. They made tremendous profits through mergers and acquisitions.
The economic dilemma we are facing is a direct result of our cracked democracy. Democracy loses its essence once manipulated by special interest groups. But invisible hands were allowed to manipulate our democracy through financing lawmakers’ political campaigns. It must be realized that economic stability and faith in our system will remain questionable as long as democracy remains broken. Therefore we need a Constitutional amendment to mandate campaign financing reform so that we, as a people, can restore our rights. Reforming political campaigning will be a direct strike in favor of true democracy and the covenants that uphold our social contracts. Suffice to say that economic and social democracy go hand in hand and one cannot survive without the other.
The main contributing factor to our financial system is the byproduct of borrowing and spending. Here we go again with lessons never learned. The same medicine that made us sick in the first place, our economists and government alike are trying to use as a healing medicine. They encourage borrowing and spending. The Fed is lowering interest rates to ease qualifications for homebuyers. What is wrong with this picture? The economy has to create well-paying jobs and that is a true test for qualification, not the manipulation of interest rates.
There are many lessons to be learned from these economic difficulties. Many broken pieces of our system can be pieced together, and much good legislation can be enacted. It all depends on our will and how we, as a nation, surmount our economic predicament. At the same time, we must be mindful that improving our system does not make the lives of future generations more difficult.
Rauf Naqishbendi memoirs entitled "The Garden Of The Poets", recently published. It reads as a novel depicting his experience and the subsequent 1988 bombing of his hometown with chemical and biological weapons by Saddam Hussein. It is the story of his people´s suffering, and a sneak preview of their culture and history.
You may order The Garden Of The Poets at Amazon