INTELLECTUAL AND ETHICAL BANKRUPTCY PRECEDED THE ECONOMIC CRISIS

Every major economic crisis has been preceded, to a greater or lesser extent, by intellectual and ethical bankruptcy. This holds true especially of the current crisis. For many years, Presidents and most members of Congress as well as media pundits constantly and falsely told the nation that it had the highest living standard, the greatest upward mobility and that the economy was the model for global emulation. Reliable studies and comparative statistics, though, told a different story.

Prominent people added to the silly stuff. T. Boone Pickens, billionaire business tycoon, misled the public in nationwide ads by characterizing the annual 770 billion dollar import cost of oil as the "largest transfer of wealth in history." This notion was as wrong as some in OPEC countries believing that they are giving away their oil wealth. Oil for money is an equal exchange.

Bloomberg, mayor of New York, chimed in with dire warnings that “without immigration the U.S. would have no future.” He forgot the causes and objectives of the global population control policy of the sixties and seventies which fizzled almost totally by the eighties. Brutal necessity will revive it to prevent a growing global population from drowning in pollution and impinging catastrophically on limited resources. It will overshadow Bloomberg’s temporary and exploitative self-interest of using more people to stimulate demand for goods and services.

Far worse and proof of intense intellectual bankruptcy was the change in those who analyze the economy in the media. Accomplished liberal and conservative scholars, such as Thurow, Galbraith, Friedman and Hayek and their successors, were muted, pushed aside and replaced with personnel drawn from financial corporations. It was a stunning usurpation of the media by pseudopundits who sold new-fangled financial products and services. They converted news into Wall Street sales pitches, political advocacy and manipulation. Beyond this, intellectual bankruptcy also surfaced strongly when admitted former drug addict and alcoholic Glenn Beck and college flunk-out Rush Limbaugh, among others, became nationally enthroned as wise sages giving simple answers to complex issues.

Becoming the economics equivalent of Jerry Springer, Jim Cramer offered financial advice and economic commentaries by throwing baby tantrums! Newscasters, in turn, ended their programs by crumpling paper and tossing it at the camera. Infantile antics to capture the masses took precedence over substantive content. “Mad Money” and “Fast Money” mimicked the marketing techniques of hyped up play-by-play coverage of sports events and whipped up the masses into hysterical participation in Wall Street’s presumed cornucopia.

Even reputable scholars deformed the facts of history by proclaiming in the ’90s not just the end of economic recessions and depressions but, lo and behold, even the end of history. Shame on you Francis Fukuyama. The decaying intellectual standards allowed parasitic business organizations and unproductive financial instruments and structures to flourish in which ethical bankruptcy swamped the nation.

Starting in the '60s, Bernie Cornfeld's IOS (Investment Overseas Services) tapped into the high European savings rates and promised vast wealth. It invested in New World ventures yet was headquartered outside the U.S. in Central America to escape SEC regulations. Cornfeld was eventually jailed.

About 1970, Victor Posner pioneered leveraged buy-outs and bought and sold corporations at a fast clip. In spite of questionable character and in spite of his actions showing no apparent benefit to the economy, he was adulated as symbolizing true capitalism. In the ’80s, acquisitions and mergers became the rage while Michael Milkin and Ivan Boesky made or, more realistically, stole hundreds of millions peddling junk bonds.

In the '90s, a flood of corporations which never produced a product nor ever would, drowned the economy with IPOs, (Initial Public Offerings) and sold billions of shares to tens of millions of investors. They concentrated ever more the national investment stream into Wall Street. Hedge fund and private equity firms, limited to a few wealthy individuals and not subject to regulations, such as the Carlyle Group, the Blackstone firm and the Texas Pacific Group, among 1700 which eventually popped up, engaged in all sorts of shenanigans. They privatized public corporations, restructured them, stripped them and milked them and, after a few years or so, took them public again. All along, they gave 20 to 40! percent of the profits to managers. They leveraged borrowed money more than 30 to 35 times and partook in the emerging subprime markets while getting the support of Fed monetary policy.

Intellectual and ethical bankruptcy peaked when Bush and his appointees deregulated or did not enforce regulations sufficiently. This allowed even more fast and vast profits through products and services that did not benefit the living standard nor quality of life but did exactly the contrary! It was truly a parasitic Wall Street feast. In its wake, it left more shambles and debris strewn across the nation in the form of crummy mobile homes, slum houses, and a rusty and potholed infrastructure that has, all in all, become a global embarrassment.

The question arises what is the cure? A good start would be to use fiscal and monetary policies to penalize unproductive and destructive ventures and reward those that genuinely raise the quality and living standard for the people.