The Economy of the 70s and 80s

[beagle]

Goat, ask yourself why the union leaders were so opposed to secret ballots. How many valid reasons can you think of if their primary purpose was to serve their members wishes?

BTW, while the UK siblings have come to the plate, where are the US siblings with their views of the Carter vs Reagan years?

You'll be wanting to talk to Sibling Chatty. She and Ronnie were like this:

[Griffin NoName]

P.S.  Goat, at some point when I'm not feeling like Michael Caine in "Zulu" we should probably discuss your alarming predisposition to believe government statistics to 9 decimal places.

Beagle. the 9 decimal places are all Goat... no government interference here. The figures are averaged from average UK inflation rates for the years. They will be somewhat wrong as governments do not start on January 1st so some years have several months of more than one government.

Ah ! Statistics and...... Lies.

Goat, while I wasn't politically active in the 70's (my years of glory were the high point of the late 60's - you wanna know all about that?) my memory of what I thought was going on accords with Mero's whatever may or may not be found on the internet. I realise that's not very scientific, but if it wasn't like that I'm not sure where I got my impressions from. I had a brief look around for archive stuff on the SWP (formerly IS) and was surprised by how little there is. In fact, it made me realise just how less hard one has to work these days to "think" one knows what is going on.

I suspect I may have come to different conslusions than Mero though......

[The Meromorph]

I suspect I may have come to different conclusions than Mero though......

And, as all can see, mine were completely wrong! 
More than a few 'political' expectations of mine, even given some inside knowledge, have been utter and complete hogwash...
If you want predictions, I'll give them freely, if you want accurate predictions, go elsewhere! 

If you want 'war stories' such as what the CEO who destroyed British Leyland did in his previous job...    Just ask 

[Griffin NoName]

[Aggie]

More than a few 'political' expectations of mine, even given some inside knowledge, have been utter and complete hogwash...

  I can't even get entertainment predictions right.  Back in 2000 I was predicting that reality tv and Brittney Spears both had 2 years left, at the most.   

Wishful thinking.... 

[goat starer]

I am tentatively concluding that a certain level of 'political correctness' has (as usual) intruded into textbooks and universities. 

bloody hell! I thought all the Merton tutors were fascists! 

50% of the students certainly were

nice to have a good debate again though respected and much loved sibling 

[Sibling Chatty]

US during Carter and Nixon...

Ok, I was dealing with a dying spouse at the time. He was a (shudder) Republican, a big Ford supporter, where I was a Carter supporter. Carter was an inevitable, given the national distaste for the whole Nixon debacle. The nation wanted a different kind of president, they elected an outsider, then allowed the Chairman of the Federal Reserve Bank to sabotage him BIGTIME.

The Nasty Wing of the Repubs were plotting...the seeds of the PNAC, the start of the Karl Rove School of Addressing Things--all were beginning to come into play. Between GHWB wanting to be Prez and the Repub Party wanting Ronnie Ray-Gun to be PuppetPrez, the one thing they knew for sure was that Carter was too honest, too concerned for the people rather than the corporations, and HAD to be hamstrung at every moment.

Inflation went wild, multiple reasons...the first S&L scandals, the manipulation of labor by management's sending infiltrators in to disrupt, the overreaction by the Corporate Leaders to the less-than-slavish-devotion Carter showed them, all led to the interesting situation of GHWBush calling Ron Ray-Gun's proposed trickle-down crap "Voodoo Economics", which, of course it was and is.

However, because KKKarl Rove goofed up on some of his dirty tricks, Bush I lost momentum, and thus had to sell out his more 'centrist' position in the Repub Party to be Ronnie's Runnin' Mate. At that point...the price was paid, the nation was sold out to the Corporations, and we've been paying for it since then. Bill Clinton, pretending to be a Democrat, just exacerbated the situation, by the way. His 'consensus, middle of the road act only let things drift into even MORE troubled areas.

NAFTA is a death warrant for the US's manufacturing capabilities. No jobs except service sector?? Not THEIR problem. Corporate America's got their money, the hell with the rest of us.

The serfs just need to produce enough cannon fodder to fight their phony baloney wars. Those proles that are needed WILL go into the Army in order to have work, because 'skilled labor' won't be paid much more than unskilled labor. (You fire anybody that's too expensive, but you make 'em train their replacement before they go.)

The basis for the economic devastation of the US was set during RR's administration. The future PNACers were getting their corporate game plans together and preparing for the killing they've made in the last 7 or so years...not that they weren't doing well before, but it wasn't the massive rape they've perpetrated most recently.

The word "union" is almost considered an obscenity by the Right. They busted unions aplenty during the 80's. (Movies? Norma Rae, Silkwood...)

And the people they were screwing over got sucked in to supporting them on "social issues", led by the Big Religion guys, and all the gullible regular religion guys who bought into the particular brand of xenophobia they were pushing. It saddens me that people are stupid enough to betray their own best financial and social interests for the threat of something that they wouldn't think twice about if the RWNutburgurs hadn't decided to use it as a scare tactic. (And a big PHTTTB to the RCChurch for their contributions, as well as those of the assorted fundamentalist faiths.)

Me, I was busy bein' poor and paying off many multiple thousands of dollars of medical bills for the late spouse...actualities of the Real world faded into a big blur of working 12-16 hours a day 6 days a week to try to afford to live and still pay the minimums they demanded on the bills. I do know that when inflation was at the worst, and prices were zooming, nobody I know got a damn raise for over 2 years...

[The Meromorph]

Without Aunty Dee Dee's inside knowledge, but with the benfit of hindsght, and a different mindset and viewpoint...
Ronald Reagan proved to the Neocons (shorthand reference for the sake of brevity), that it was perfectly possible to run the country with an empty shell for president, they had always wanted to, but never been quite sure it was actually possible.
When Ronnie turned into a vegetable, they realised just how empty that shell could be. Nancy Reagan, out of an intense and genuine loyalty to her beloved husband, concealed his vegetative state (with the active help of the Neocons, but she was the key). That is why I call her 'The Great Traitor'. She wasn't fundamentally evil, but she betrayed the USA for the sake of her husband. During that time the Neocons hatched their plan to reshape the world, in envy of the real statesmen (good and evil, mostly evil)  who had actually reshaped the world after and during WWII. Nancy at least prevented them from putting the overt portions of their plan into action, I grant her that. GHWB was enouh of a real President to limit them when they tried to act out the overt part of the plan with the whole Gulf War thing; he pulled back from occupying Iraq, but he also set the stage for the complete debacle when their new empty shell did occupy Iraq. Remember when he called for the Iraqui people to rise up and depose Saddam? And then, when they did, when the possible future leaders of Iraq, who had remained in deep cover, thought it was at last possible and came out of hiding, turned his back and Saddam slaughtered the last best hope for the People of Iraq. That's why there is no chance for Iraq for at least another generation. There are no great Iraqui leaders left, GHWB had them all killed.
Meanwhile the covert part of the Neocons' plans have continued almost unchecked. Clinton almost succeeded in changing the course of the USA, but the rot was far gone by then, and the rot rose up and swallowed him. It has continued apace, it grew significantly in strength just from bringing Clinton down. I have relatively little hope, except that I've been very wrong before.

[beagle]

How did the American Right get associated with huge deficits, and the dollar decline? Neither of those are traditional Rightist values here.
Was that the famous "Greenspan Put"? Lowering interest rates at any sign of trouble on Wall Street?

[The Meromorph]

IMO, that resulted from a marketing error...
They started labeling the Democrats as 'Tax and Spend' Democrats.
Since they were unable to give up 'pork barrel spending' they kept spending, and to pay for it, they has to borrow. Hence the deficit... 

[Sibling Zono (anon1mat0)]

But in the US the inflation was mostly a sub-product of the rise in oil prices, no? There wasn't any structural problem in the US economy then, or am I missing something?

[Sibling Chatty]

Mero's right, the Evil Bastards have been attempting this for decades.

Manipulating the economy is not a job for a man without a good crystal ball link to the future. Greenspan and others have had their little pet economic theories that they assumed would lead to the Nirvana they claim to have provided. They've used social 'issues' to alienate the working classes from their own best interests.

Zono, those "oil prices" were being manipulated. My Dad was working in the oil business at the time, doing SCR service work and installations--the huge computerized systems that actually run the drilling equipment and secure wells. He was in and out of a number of countries, working with all the big oil companies, and the 'shop talk' was that the "gubmint was manipulatin' the prices for they own good", or for the good of Corporate America anyway.

Once committed to a certain set of actions, there was no way to realize  that what they were doing was going to cause the inflation that it did. They had to ride that one out. BUT, it taught the OPEC guys something. We were (and are) vulnerable. Had it not been for the extra boost of the dot.com era, Clinton's numbers wouldn't have looked so shiny.

The tendency of any industrialized nation where power can be manipulated by large infusions of money will be toward facism, the control of the state by corporations. Corporate interests are well protected, have been well protected, and there's beenn a very successful infiltration into the national consciousness of the idea that IF the corporations are doing well, the country is. That the cops are doing well by killing off their obligations to their employees? Not THEIR problem.

The structural problem in the US economy is greed. Does ANY CEO deserve to "earn" more in one day than an employee does in a full year? Not for DOING something, mind you, just for being something (even if he's screwing up the company). And the 'real money' has been taken out of hands that produce and allowed to flow to hands that merely grasp.

http://tinyurl.com/2jg49s

Then there are companies who cook the books...Enron anyone?? And they're not the only ones.

http://tinyurl.com/uq7cl

[Griffin NoName]

Cooking books?  We seem to have a penchant for a bit more than cooking the books here.

Can someone explain what sub means - as in sub-prime - I've been hearing it applied to housing in the US on the news here and happily sort of thinking oh yeh that US thing and now they seem to be saying we are getting it over here..... is it like Big Macs or something?

[Sibling Zono (anon1mat0)]

Chatty, I don't want to sound like one of those 'trickle down' b**tards and I wholeheartedly agree that there is too much power, greed and manipulation at the corporate level, but even with those running, inflation had two significant peaks in the 70s. As a point of comparison, the current level of inflation still looks reasonable (so far) even with US$90+* per oil barrel. My initial reading is that the economy is more resilient now than then and with low interest rates (compared with the 80s).

The other interesting detail is that despite the waste, mismanagement and manipulation** during the past 7 years the economy is still breathing (for how long is hard to tell, though), which makes me think that there was something structural in the crisis of the 70s.

Or perhaps I am trying to find what isn't there, oil crisis plus the accelerated transition from a manufacturing economy to a service economy and political turmoil may be responsible, and now after a few crashes the markets are better prepared to take bad news.

* devaluation makes a nice trick with that number: in Euros it would be ~ €60.
** I am convinced that the current oil prices have been manipulated to increase the personal wealth of Cheney & Co, although besides the obvious wars and the investments betting for crisis there isn't much proof (at least the kind you could take to court).

Can someone explain what sub means - as in sub-prime

Not all loans are made equal, if you have someone asking for a loan and his credit history is excellent the risk is lower therefore it is likely to get approval for a (relatively) low fixed rate. If the risk is high(er) then the bank may bet that the equity will offset the risk, nevertheless granting a loan with an adjustable rate frequently with an enticing APR at the first year or two to later adjust with a vengeance. The idea was that the buyer would be able to 'move the property' (ie, sell) with profit before the higher rate kicked in. Loans were made without oversight at any level and when the realstate bubble collapsed the properties worth was lower than the loans and the debtors were/are unable to pay their loans at their adjusted rate.

What compounded the problem was that the companies provided those loans with (invested) funds from the banking sector all over the world (attracted by the adjusted rates or profits from loans renegotiation).

IOW, greedy bankers all over were all to happy to overcharge the idiots that took more loans that they were able to afford.

[beagle]

I only know what I've seen based on a couple of British documentaries, so you may have to subtract any "Aren't the Americans mad" bias.

My understanding is that these loans were marketed very agressively, lots of the "This deal is so good I'm going to courier it over to you right now and need it back within the hour" type stuff.
Also that Americans aren't used to variable rate mortgages (unlike Europe), may not get a "cooling-off" period for contracts, or the big "Your house is security for this loan and if you stop paying you'll lose it" warnings we're used to. Apparently in some places, Like Cleveland, whole areas have effectively been repossessed.
The US government and Californian state government are trying to talk lenders into prolonging the low interest period on some loans, rather than repossess properties they'll have little chance of reselling.

Others taking out loans just assumed:

House prices always go up.
Interest rates change slowly.
I'll never lose my job or face medical bills.
Consolidating loans I can't pay now over a longer period is better than defaulting now.

Also the people selling the loans were paid by quantity not quality, especially if the loans could be packaged up and sold on.  The worst loans are so-called "ninja" ones (No income, no job or assets).

As Zono says, these loans got packaged up with better quality risk and sold on round the World.

It affects us like this.

When it became obvious that the value of these sold-on loans was dubious at best, the banks paniced about who was how badly exposed, and inter bank lending dried up.
This is what did for Northern Rock. It had nothing to do directly with sub-prime, but did rely on getting large tranches of money from the wholesale money markets instead of savers.  As the inter bank rates shot up (LIBOR and EURIBOR), or inter-bank lending was just not available at all, it became clear their model couldn't still be working and the run started.
The Bank of England was initially reluctant to step in, (it's called Moral Hazard in economics, by bailing risky strategies out you encourage more risky behaviour still), but were forced to.

The way it affects us now is:

People still don't know how badly institutions are directly affected. If even Citibank has to go cap in hand to the Arabs for a bail-out, who else might be in the same boat?

Inter bank lending is still reluctant and at high rates, meaning that others institutions might be under strain (people had suspicions about Alliance and Leicester and Bradford and Bingley, until they clarified their position and said they had sufficent funding through next year).

It will be much harder to get loans.  The banks are hoarding cash to cover their own losses and in case they can't roll over contracts in the money markets.

Because of capital adequacy requirements the effect is magnified. i.e. if a bank has lost £100M that might be a billion of loans it can no longer make to small businesses.

Everbody is operating with interest rates higher that base rate, so the BoE is no longer setting the effective interest rate affecting the real world.

House prices are falling here too. At some point there might be a big shake-out of buy-to-let investors who've gone from making a few hundred every month, to losing a few hundred every month. 

Then of course there's the doomsday scenario. Liquidity dries up totally, banks fail bigger and faster than can be covered by government guarantee, and we embark on Great Depression II.  There's a big assumption that the Federal Reserve and BoE will cut interest rates to help prevent that, but what about inflation?

Another scenario is that the dollar falls so far that the high Euro cripples European trade so badly that it too fragments.  Don't think even the most ardent Eurosceptic thinks that is imminent,  though bonds from Southern Europe are having to offer higher yields than those from Germany, suggesting the markets don't believe all Euros are created equal.