THE GREAT REJECTION - IT'S NOT ARMAGEDDON
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Tuesday September 30, 2008
THE GREAT REJECTION OF SEPTEMBER 29, 2008
It was a legitimate populist eruption. The End of the World is not at hand. But the end of the “boomer” domination of American politics is within sight. To them, it just seems like the end of the world.
THE “GREAT REJECTION” IS JUST THE BEGINNING OF A POPULIST BACKLASH
In today’s New York Times, a moderate voice, speaking reason and truth to panic and obfuscation about yesterday’s failed “rescue”, slipped into print under the editorial radar.Titled, “An Alternative to Armageddon”, the piece came from a new web based addition to the NYT’s business section.
Some key pull quotes will follow and I follow them with the web link.
“The failure of the United States government to emerge as a willing buyer for hundreds of billions of dollars of toxic assets will accelerate the painful process of de-leveraging, bringing with it more bank failures. That, in turn, will shrink the size of the private sector balance sheet that consumers and companies have come to rely upon.”
After discussing the rescue of Washington Mutual and Wachovia, and the adroit employment of F.D.I.C. guarantee mechanisms to sweeten the pot for the acquisition of these institutions, the author (“Rob Cox”) added that –
“These deals — along with JP Morgan’s acquisition of Washington Mutual in another F.D.I.C.-brokered deal on Thursday — show that willing buyers can be found for distressed institutions with the government mechanisms that are already available. The more the government helps, up front or through some sort of insurance, the less risible the price a savior will offer.
And he closed the piece with this:
“As the credit spigot dries up further, it will be harder for companies to borrow and invest in their businesses, despite the Federal Reserve’s separate efforts to flood the system with money. It will cost more for consumers to mortgage their homes or gear up their car purchases. But the additional pain of living without the [Bailout] could be beneficial in the long run, if it brings more reliance on sound market principles.”
HERE’S THE LINK TO THE ENTIRE PIECE:
The bottom line: We’ve been addicted to a toxic credit-based finance system; withdrawal from the addiction is very painful but not Armageddon.
In 2006, 2007 and earlier this year, I posted some observations about a resurgent American Populism. A brief reprise:
Here’s the deal: We’ve evolved two cooperating political elites, each of which runs one of the two parties and shares three common traits: (1) high education levels, (2) important wealth (3) a distrust of the populist vote bordering on fear. Winning elections for each requires a periodic courting ritual during which the populist vote (on which success depends) is earnestly sought, followed by a measure of post-election betrayal.
The corporate country club conservatives and the Lexus limousine liberals have so far succeeded in achieving a rough division of the populist center: social populists on one side, economic populists on then other.
But conditions are rapidly changing.
THE COMING POPULIST REFORMATION
As the conservative and liberal elites grapple with the implications of coming populist reformation, everyone should remember that the main populist strands of opinion, concerns and perspectives are not the only such threads in American politics, just the ones most often neglected by the elites of the left and right.
This is why populism tends to erupt from time to time, instead of congealing around a particular party or set of interest groups. The center of gravity of American populism is located among those who are too busy working, earning and living real lives (elites would say “mundane” lives, here) to become political junkies. They periodically awake -- like the mythical sleeping giant – only when provoked by prolonged policy neglect or irritated into sufficient anger by repeated disregard of their core values and concerns. When the elites forget who really serves whom for long enough, there is hell to pay.
Populism has a sharply different look and feel in the USA as opposed to – say- Venezuela or Iran because the American middle class is so well entrenched and numerous that its numbers overwhelm those who cling to hereditary privilege. While ours is not a fully “classless” society, its various divisions tend to be blurry and membership levels very fluid as people and families migrate from hardship to wealth and back again. This is the country where the less wealthy can reasonably aspire to wealth and the wealthy can reasonably worry about losing everything.
In this milieu, there are only two great “class” divisions in the populist mind that really matter: those who work, create value and struggle to make productive things happen for themselves, their families and the community at large, and those who manipulate the former group. In the populist mind, the manipulative class includes the idle rich, the idle poor, and the political and cultural leaders who exploit the productive “class”.
The coming populist reformation will be driven by the events and exigencies of the next few years because these challenges will bring the failures of elites of right and left to address the core populist values and concerns into sharp relief.
This is just the beginning. Stay tuned…