Transcript Death by Debt Strangulation - School of Cooperative Individualism

DEATH BY DEBT
STRANGULATON
The Consequences of Becoming a
Society Perpetually in Debt
Edward J. Dodson, M.L.A.
Director, School of Cooperative Individualism
www.cooperativeindividualism.org
Revised: May 2011
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TRIGGER
Creation of the Money Market Funds
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Depository Institutions
Deregulation and
Monetary Control Act
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$3.9 Trillion -- 2008
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TRIGGER
Central Bank Policy Shifts
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Paul Volcker
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TRIGGER
Reaganomics: Supply-Side
Expectations
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TRIGGER
Reaganomics and an Escalating
Government Debt
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 Investment tax
credits were phased
out
 Speculative
investments exploded
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TRIGGER
Thousands of mainstream financial
institutions failed
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John Kenneth Galbraith
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“the largest and
costliest venture in
public misfeasance,
malfeasance and
larceny of all time.”
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TRIGGER
Prolonged high interest rates brought
down land prices by creating a huge
inventory of unsold housing units
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TRIGGER
The Conventional Secondary Mortgage
Market Responded to the Need for Liquidity
and Uniformity
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MORTGAGE BACKED
SECURITIES
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ADJUSTABLE RATE
MORTGAGE LOANS
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TRIGGER
An Explosion of Speculation Erupted
at the Close of the 1980s
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TRIGGER
The Clinton Administration’s Third Way
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“Even when the
Bush recession
ends, most
Americans will
find themselves
worse off.”
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“We’re
Eisenhower
Republicans here.
We stand for lower
deficits, free
trade, and the
bond market.”
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Jack Godwin
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“Clinton was the fixer,
the policy wonk who
reengineered the
Reagan Revolution
evolution, effectively
solved problems such
as welfare and the
budget, and offered a
coherent governing
philosophy equal to the
global era.“
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Laura D’Andrea Tyson
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“squarely on a path of
sustainable growth.”
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TRIGGER
Home Equity Drives a Resurgence in
Consumer Spending
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TRIGGER
Emerging Demographic Patterns
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TRIGGER
Falling Interest Rates Benefited Millions of
U.S. Households
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Alan Greenspan
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“Indeed, the surge in
mortgage refinancings
likely improved rather
than worsened the
financial condition of the
average homeowner. …”
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“Some of the equity extracted
through mortgage refinancing
was used to pay down more
expensive, non-tax-deductible
consumer debt or used to
make purchases that would
otherwise have been financed
by more expensive and less
tax-favored credit. Indeed, the
refinancing phenomenon has
very likely been a supportive
factor for the general
economy.”
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TRIGGER
Accelerated Financial Deregulation
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Catherine England
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“Excessive regulation was the
initial cause of the S&L industry’s
problems” and that “Federal
deposit insurance was ultimately
responsible for the high costs of the
debacle.”
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“Government-sponsored
efforts to protect the
industry only invited
abuses and increased the
ultimate cost of
restructuring.”
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TRIGGER
Investors shift from high-tech to
bank stocks
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TRIGGER
Household debt-to-income ratios
climbed to dangerous levels
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TRIGGER
The Subprime Mortgage Market
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TRIGGER
Predatory Credit Terms and
Outright Fraud
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TRIGGER
Raising Maximum Mortgage Loan
Limits to Accommodate Skyrocketing
Land Prices
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Will the Crash Deepen?
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“For the 40 months
between January
2005 and April 2008,
the personal saving
rate averaged
1.8%.”
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Death by Debt
Strangulation is Here!
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Paul Samuelson
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“truly among the great
inventions of the 20th
century, a beacon that
helps policymakers steer
the economy toward key
economic objectives.”
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Joseph Stiglitz
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“In many cases,
GDP statistics
seem to suggest
that the
economy is
doing far better
than most
citizens' own
perceptions. …”
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“Moreover, the focus
on GDP creates
conflicts: political
leaders are told to
maximise it, but
citizens also demand
that attention be paid
to enhancing
security, reducing
air, water, and noise
pollution, and so
forth – all of which
might lower GDP
growth.”
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The Weight of Household
Debt
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Total Household Debt
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Housing Starts
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Employment
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Crashing
Commercial
Property Markets
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Recharging the
Residential
Property Markets
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