By Kevin Phillips

In his acclaimed publication American Theocracy, Kevin Phillips warned of the perilous interplay of debt, monetary recklessness, and the spiking fee (and transforming into shortage) of oil- warnings which are proving to be frighteningly actual. Now, in his most important and well timed publication but, Phillips takes the complete degree of this concern. they seem to be a a part of what he calls "bad money"- not only the depreciated buck, but additionally the harmful attitudes and the wrong items of wayward mega-finance. His devastating end: In its hubris, the monetary area has hijacked the yank economic system and positioned our very international destiny at risk-and it can be too overdue to prevent it.

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The cheaper the interest rate, the better. S. speculative binges born out of booms and financial deregulation—in 1984-1989, 1996-2000, and 2003-2007—each created so much excess, corruption, misjudgment, and threatened (or actual) insolvency that the Federal Reserve had to come to the rescue. Its usual technique was to drop interest rates as low as possible—in 1989-1992, 2001-2005, and 2007-2009. This gave the shaky and hungover financial institutions in particular a chance to get new funds for almost nothing and to loan them out at 8 percent, 12 percent, or even 25 percent (via credit cards).

04. Consumer psychology was the underlying, vital driver. S. 2 Nowhere else were consumers driven to pull so hard on national economic oars. The New York Times rightly observed that “the machinery of American marketing, media and finance all encourage the consumption habit. ”3 But because so many households had stagnant or declining incomes, they had simultaneously to borrow, borrow, borrow. ”4 A vital catalyst had come between 1978 and 1980, when the federal government deregulated credit card and bank interest rates.

Financial writer Michael Lewis noted that “In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion being repackaged as mortgage bonds. ”19 Many of these bonds received absurdly high ratings. Besides banks, many brokerage firms and investment houses were also heavying up in the business of mortgage finance. The New York Times’s Gretchen Morgenson, in a far-ranging analysis, described how the giant Merrill Lynch brokerage firm, “went on a buying spree. From January 2005 to January 2007, it made twelve major purchases of residential or commercial mortgage-related companies or assets.

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