Friday, February 5, 2010

What's Wrong with What's Wrong Articles

West Coast Wasteland, by Sasha Abramsky, January 21, 2010, is a very good article on what’s wrong with California … except, there’s something wrong with it. Sasha does an excellent job covering the devastating the effects of the "Great Recession" on the Golden State, and in Standing Up for Change, she very responsibly points out the major populist efforts afoot attempting to make California’s problems right. No, my problem is not with what she wrote; I read both articles with interest.

It is just that the first article is typical of a multitude of articles currently being published on every entity experiencing financial problems, describing the effects of what the: Federal Government did wrong, on what Bear Stearns did wrong, Lehman Brothers, AIG, Merril Lynch, Washington Mutual, Fannie Mae, Freddie Mac, General Motors, all the major banks, the Fed, nearly every State and local government in the country, individual investors, homebuyers, European banks and governments, Japan, China, Russia, Dubai, etc. The list of people, groups, and organizations with financial problems is endless. It's almost like the days after 9/11. Oh my God, look at that, and that, and that. And, not enough how and why.

Truth is, well before the financial crisis of 2007/2008, it was understood that California had problems. So did many other states. But, it is hard to make changes while the “good times” roll. Stock markets were rising. Credit was available to states, corporations, and individuals. A rising tide of expanding credit lifts all boats. No one wanted to listen to prophets warning of danger ahead. Then along came the financial train wreck that brought the long party of the 80’s, 90’s, and 00’s to an end, with massive damage to balance sheets across the board: banks, corporations, federal, state, and local governments, individuals, etc.

Did California break the financial system, or did the financial system break California and just about everything that depends on steady money flows, all at once? Is it really possible that every person, every business organization, every level of government screwed up simultaneously and nearly destroyed the world financial system and world economy? Or, was there an actual epicenter to this crisis from which the problems emanated?

Sasha wrote, “There's not only no will to modify the residential property tax constraints imposed by Prop 13; the majority also opposes a "split roll" property tax that would allow for commercial properties to be taxed at a higher rate." Sure, any number of individual issues contributed the State's specific problems, but is California in trouble because of the likes of Prop 13, or was Prop 13 a reaction against the real problem that caused the current financial and economic crisis? Sadly, it is unlikely that Sasha or more than a very few writers at this time can connect the dots between this mundane observation about property taxes and the financial problems afflicting “developed” nations worldwide.

Simply said, Proposition 13 was a reaction against relentless tax increases on homeowners caused by inflation, caused by the very same Fed, major banks, and Wall Street types responsible for the current financial crisis. If excessive credit were not relentlessly expanding the money supply, and the banking industry were not so thoroughly deregulated, there would have been no stock market bubble, housing bubble, no subprime crisis, no derivatives blowups, toxic assets, outrageous increase in the national debt, etc. California homeowners finally said, no more unlimited property taxes based on inflation beyond our control. But, they had no control over much else the state and national governments did, or the Fed, the major banks, Wall Street, and the rest of the crew responsible for relentless inflation.

No, there is no excusing the State Government of California’s poor financial condition. It’s consistently ranked near the top if not the top of all U.S. States in financial trouble. It was already making plenty of its own mistakes before the financial crisis hit, but there is a difference between walking near the edge of a cliff and being pushed off. California Government is definitely not wearing the white hat, but it is not wearing the black hat either. Call it dark grey. The folks wearing the black hats are: the Fed, the banks, Wall Street, and our very own Federal Government, with the monetary system at epicenter of the financial earthquake.

I have dear relative who took issue with my claim that the cause of the crisis was and is not well known. She said, "Why, everyone I know saw it coming." But, she is very smart, well educated, well read, perceptive and hangs with similar people. She's not typical, while I teach high school, and I can say with confidence that the number of teachers and students who even suspect the source of our problems, let alone understand it, is one in a hundred. We need more people writing about it. We need more people involved in the national populist movement to reform the national monetary system.

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