The Transparent Casino
Executive Summary
- How the Financial Casino Works
Introduction
The credit roulette wheel that Americans have been playing has its roots beyond the financial industry and is related to stagnating wages and a high-level class warfare which has been waged and won by the ultra wealthy. They desire what other oligarchies have desired, an indebted and complicity populace.
Rick Wolf at The University of Massachusetts wrote a harrowing article about the backdrop of the financial crises. We tip our hat to Rick, who has looked through the financial crisis to its underlying causes. His proposition is that the lowering of financial standards that lead to this crisis have their roots in the class warfare that stagnated wages since 1973, and which caused individuals to look towards credit as a way to continue their standards of living. Secondly, that this philosophy that the US has been following for roughly 35 years has just hit its limit. The mean-spiritedness of individuals who would design such as system is truly appalling. See his explanation below.
“The American working class had to do a second thing to keep its consumption levels rising. It went on the greatest binge of borrowing in the history of any working class in any country at any time. Members of the business community began to realize that they had a fantastic double opportunity. They could get the profits from flat wages and rising productivity, and then they could turn to the working class traumatized by the inability to have rising consumption and give them the means to consume more. So instead of paying your workers a wage, you’re going to lend them the money—so they have to pay it back to you! With interest!
That solved the problem. For a while, employers could pay the workers the same or less, and instead of creating the usual problems for capitalism—workers without enough income to buy all the output their increased productivity yields—rising worker debt seemed magical. Workers could consume ever more; profits exploding in every category. Underneath the magic, however, there were workers who were completely exhausted, whose families were falling apart, and who were now ridden with anxiety because their rising debts were unsustainable. This was a system built to fail, to reach its end when the combination of physical exhaustion and emotional anxiety from the debt made people unable to continue. Those people are, by the millions, walking away from those obligations, and the house of cards comes down.
If you put together (a) the desperation of the American working class and (b) the efforts of the finance industry to scrounge out every conceivable borrower, the idea that the banks would end up lending money to people who couldn’t pay it back is not a tough call. The system, however, was premised on the idea that that would not happen, and when it happened nobody was prepared.”
Reference
https://www.dollarsandsense.org/archives/2008/1108wolff.html