Street roots
13
Sept 30, 2011
When did the Great Recession really begin? Ask Tricky Dick
BY THOMAS VINCENT
Madrick’s criticisms of our economic
system lie mainly in the area of regulation.
or many liberals'and progressives, the In case after case, the author demonstrates
cause of all of America’s economic
how boom-and-bust cycles, crests of inflation
woes begins and ends with the
and depths of recession have been enabled
presidency of Ronald Reagan. As a historian,
and even caused by government’s increasing
Jeff Madrick feels that to fully comprehend
unwillingness and/or inability to rein in the
our country’s current economic angst, it is speculative excesses of the marketplace. For
necessary to cast a slightly wider net:
example, when analyzing the recent credit
“Coupled with the Watergate scandal and
debacle that resulted in the stock market
the continuation of the Viet Nam War, which crash of 2008, Madrick writes: “The law
Nixon had promised to end quickly, it was
was simply inadequate to the task of
Nixon more than anyone else who
regulation, and the regulators failed to
undermined the nation’s faith in what it
enforce strongly what laws there were.
could accomplish and pride in what it was.
Fines were usually meaningless (and) most
He not only created the conditions that led
of the options market was over-the-counter
to punishing stagflation but, by making the
trading and fell entirely between the cracks;
nation so distrustful of government, he lay
many new contracts — the (credit default)
the groundwork for an age of greed freed of
swaps for example -< were simply written
federal oversight.”
between the participants in the trade with
Madrick is a well-known journalist and
no outside oversight” For Madrick, the
academic who has covered the field of
devastating credit crash that resulted from
economics since the 1970s. His writing
unrestricted trade in risky sub-prime
credits include The New York Times, Money mortgages is proof positive that while greed
Magazine and Business Week. In addition,
by itself may dr may not be good,
he has been an NBC News reporter and
unregulated greed is almost always
commentator and has even won an Emmy.
disastrous.
In “The Age of Greed,” Madrick presents a
Perhaps the most alarming aspect of the
straight-ahead history of recent economic
book is how Madrick presents the principal
disasters and the political decisions that
decision makers in our country: Clueless to
made them possible.
the causes of the economic problems of
While its subtitle might suggest that the
their time and even more clueless as to how
book holds capitalism to blame for
to fix those problems when they arrive.
America’s decline, Madrick’s analyses are
“Recession was now likely, but (Fed
decidedly more practical than Utopian.
Chairriian Alan) Greenspan disagreed, still
“Throughout history, financial crises have more worried about inflation. In August
generally been similar to each other. An
1990, he told members of theFed’s Open
asset — land, housing, stocks, bonds, and so
Market Committee, ‘Those who argue we
on — rises in price, financial institutions
are in a recession ... are reasonably certain
lend to investors to buy more, and prices
to be wrong.’ It turned out the nation was
are driven up to unsustainable levels. When
already officially in recession at that point,
the bubble bursts, investors sell assets to
according to the later calculations of the
repay their loans and prices fall further,
National Bureau of Economic Research.”
.often, in l panic. B ad-dëB ts ris e o n - ih e h c o k s -
Furthermore, 4he author notes, even- ?
of the financial institutions, credit stops .
When presidents engage in sincere attempts
flowing, businesses and consumers sharply
to fixthe economy, too often they scale
reduce spending, and the economy slides
backor reverse their own measures. “His
into serious recession.” Thus, the author
(President Carter’s) first economic policy
concludes, our recent economic crisès, are
initiative on taking office in 1977 was to
not so m uchthe product of “aninevitable
keep his campaign promise and stimulate
failureof a system,” but instead aré largely
the economy to get unemployment down. ...
the result of “decisions by individuals, set
In a year and a few months, the Carter
upon making fortunes and becoming one of
administration had already switched the
the Kings of the mountain.” .
direction of policy three times. But in May
CONTRIBUTING WRITER
■
Age of Greed:
The Triumph of
Finance and the
Decline of
America, 1970 to
the Present. By
Jeff Madrick
1978, Carter switched again as both
inflation and the federal budget deficit
started to rise. Now he wanted to cut his
stimulus plan and postpone any tax cuts as
well.”
In analyzing his chosen time period, the
author takes in a huge swath of current
history. Not only does he round up the usual
suspects, he also throws in a whole slew of
economic rogues that you may not have
heard of. Madrick presents thumbnail
sketches of each person’s life and offers a
While Its subtitle m ight suggest that the book
holds capitalism to blame for America's
decline, Madrick's analyses are decidedly
more practical than u to p ia n .... Thus, the
author concludes, our recent economic
crises, are not so much the product of "an
inevitable failure of a system," but instead
are largely the result of "decisions by
individuals, set upon m aking fortunes and
becoming one of the Kings of the mountain."
glimpse into the influences that shaped his
thinking. By weaving these quick
biographies together with the economic
crises that took place during each of their
careers, the author creates a complete
picture of the events leading up to the
drama we see unfolding before us today.
As good as it is at identifying the players
in the drama, the strength of “Greed” is
also its weakness; The author collects and
presents so many different characters, at
times the book reads almost like a police
,dossier=-©r- toe now infamous deck of playing
cards issued by the Pentagon during the
Iraq War with each card containing the
picture of a different “bad guy.” This minor
criticism aside, the book is a remarkably
coherent history. Regardless of your
political leanings, if you believe that
understanding where we are going requires
an understanding of where we have been,
“Age of Greed” will definitely be a
worthwhile investment
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