Skip to content

Why the Economy Crashed, and Why It’s Still Crashing

Why the Economy Crashed, and Why It’s Still Crashing

August 7, 2010 SVadmin Comments 0 Comment

What’s in a graph?

Source: http://modeledbehavior.com

This graph helps explain the boom that led to the bust of 2008.

The thing to understand is that middle class and worker wages — the primary source of the aggregate demand fueling the American economy — went flat in the late 1970s and stayed that way while wealth-producing worker productivity continued to rise. This was the first time in over one hundred years that wages failed to track increased productivity. Where did that wealth go, if not to middle-class wage-earners? The chart is an indication of a massive shift of wealth from the poor and middle class to the top 1%.

Keep in mind, as Paul Krugman has pointed out repeatedly, that there was nothing economically imperative about this growing income inequality. It was rather a result of policies put in place during and after the so-called “Reagan Revolution.”

So, if consumers after the late 1970s were now less able to consume, where did we find the demand to keep the economy afloat? The top 1% tend to hoard, not spend, contrary to the conservative folklore about this being the wealth-producing class. How to get money back into the hands of the middle-class, the indebted involuntary consumers?

Answer: More debt, especially home mortgage and stock equity debt, a debt bubble, leading inevitably to bust.

The first big bubble following the flattening of worker wages was in stocks, and it finally burst in the “dot com” bust of the nineties.

The next big bubble — because now we always needed some bubble to keep us afloat — was in mortgages and the structured financial instruments built on them. We’re still living in the midst of the burst of the 2008 bubble.

One of the more frightening aspects of our current situation is the fact that, despite the efforts to bail-out the financial sector, nothing has been done to clear the garbage subprime-based loans from the books. The banks are all still pretending that the mortgages have full value, even as the real estate market itself is slowly “crashing” beneath them.

The following is an incredible chart. It shows that banks are holding on to their foreclosed homes as if they were full-valued assets, instead of actually putting them on the market and being forced to revalue them.

Source: Naked Capitalism (http://www.nakedcapitalism.com)

This is our view from inside the ongoing burst of the 2008 bubble.

Stay tuned.

Print Friendly, PDF & Email

Blog, Economics, Politics

Post navigation

PREVIOUS
Tomgram: Bill McKibben, A Wilted Senate on a Heating Planet
NEXT
The Dems Play Charlie Brown to the GOP’s Lucy

Join Our Mailing List

Leave a Reply Cancel reply

Your email address will not be published.

CLICK IMAGE BELOW FOR MORE INFORMATION

DONATE TO THE FOOD BANK OF NEVADA COUNTY

(CLICK IMAGE)

DONATE TO NEVADA COUNTY RELIEF FUND (click image below)

Subscribe to Sierra Voices Journal

Jack Kornfield: A Steady Heart in Time of Corona Virus (Part I)

Erika Lewis, Shaye Cohn, Craig Flory – Got A Mind To Ramble

“Everlasting Arms”

Tara Brach: A Steady Heart in Time of Corona Virus (Part II)

Recent Posts

  • Where to get abortion pills and how to use them
  • In Ukraine, Diplomacy Has Been Ruled Out
  • Why Am I Obsessed With Ukraine?
  • Is “Ukraine Losing Badly” ?
  • Bill Clinton Makes a Pathetic Attempt to Retroactively Justify His Decision to Expand NATO

Recent Comments

  • Putin in Media Myth and Reality: Which is Which? on Ukraine War: A Bonanza for the Arms Industry
  • SVadmin on Countdown to World War III?
  • Pratima Basu on Scenes From Our Weekend at Lake Tahoe
  • IN PRAISE OF WARRIORS, NOT WAR on Celebrated to Death: Memorial Day Is Killing Us
  • SVadmin on How Suzanne Simard changed our relationship to trees

Archives

  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • July 2018
  • June 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • March 2017
  • February 2017
  • January 2017
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • December 2015
  • June 2015
  • May 2015
  • April 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • January 2014
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009

Categories

  • Abortion
  • Afghanistan
  • Aging
  • American Empire
  • Anti-Depressant
  • Arms Sales
  • Articles
  • Atlas Obscura
  • Authoritarianism
  • Black Lives
  • Black Lives Matter
  • Blog
  • Buddhism
  • Budget
  • Buskers
  • Capitalism
  • Carbon Offsets
  • Cartoon
  • China
  • Climate Change
  • Compassion
  • Constitution
  • Corona Virus
  • Corruption
  • Cosmology
  • Coup
  • COVID-19
  • Democracy
  • Depression
  • Disenfranchisement
  • Drought
  • Economics
  • Education
  • Election Fraud
  • Empire
  • Environment
  • Extinction
  • Farming
  • Fascism
  • Filibuster
  • Fire!
  • Food Insecurity
  • Foreign Policy
  • Forest Ecology
  • Forest Management
  • Fracking
  • Gardening
  • Gender
  • GOP
  • Great Movies
  • Groundwater
  • Halloween
  • Health Care
  • High Country News
  • History
  • Humor
  • Hunger
  • Idaho-Maryland Mine
  • Ignorance
  • Immigration
  • Indigenous Peoples' Day
  • Insects
  • Israel
  • Labor
  • Lobbying
  • Local
  • Lunar Influence
  • Marijuana
  • Masks
  • Medical Care
  • Men
  • Men's Issues
  • Mental Health
  • Middle Class
  • Military Industrial Complex
  • Mining
  • MMT
  • Modern Monetary Theory
  • Moral Obligations
  • Music
  • Native Americans
  • NATO
  • Neoliberalism
  • New Cold War
  • Nuclear War
  • Nutrition
  • Oligarchy
  • Palestine
  • Pandemic
  • Parenting
  • Peace
  • Pharmaceuticals
  • Physics
  • Poetry
  • Police
  • Politics
  • Populism
  • Press
  • Race
  • Religion
  • Republican Derangement
  • Reviews
  • Revolution
  • Right-wing terrorism
  • Rights of Nature
  • Rise Gold
  • Rivers
  • Romance
  • Russia
  • Russiagate
  • Science
  • Slavery
  • Sleep
  • Smoke Inhalation
  • Student Debt
  • Summer
  • Technology
  • The Hartmann Report
  • Trump Virus
  • Tuba Skinny
  • Tyranny
  • Ukraine
  • Uncategorized
  • Unipolar vs. Multipolar
  • Vaccine Refusal
  • Vaccine Safety
  • Voting
  • War
  • War on Government
  • Water
  • Watersheds
  • Wells
  • Wildfires
  • Winter
  • Women's Issues
  • Work
  • Yemen

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org
© 2022   All Rights Reserved.