Our current political dialogue, particularly among conservatives and the tea party, is highly concerned that President Obama has become the tipping point that is sending America down the path of socialism. And while he maybe partially responsible remaking America into a socialist country, I would suggest that a massive tipping point actually occurred in 1999. In fact, the socialist tipping point of 1999 might more accurately be called an avalanche.
Am I exaggerating? Judge for yourself.
So just a little reminder of how we define socialism. It’s redistribution of wealth. But more, it’s redistribution by the agency of government. And it’s redistribution based not on productive value given, but rather it’s an arbitrary gift of government.
Before we get to 1999, let’s review the last few years since the beginning of the Great Recession. It started as a real estate bubble which popped. And since the popping of the bubble the Federal Reserve has been fighting a 5-alarm deflation fire by infusing massive amounts of money into the banking system through every mechanism available to it.
Now as the money is infused into the banking system, it is then supposed to disperse through the entire economy through low interest loans. But something odd has been happening in the process. Massive amounts of money have been going somewhere, but not into the real economy. Even now, the “Velocity of Money” is declining to abysmally low levels. And since “Velocity of Money” is a measure of money being exchanged by us, the regular people in the country, this means the real economy is still deflating.
So where are these massive amounts of money going? Have you noticed Wall Street this year? Record highs are back in the stock market. Do you know why? Essentially free money given to Wall Street banks, and no incentive to loan it. So guess where the money goes. Not to loans, it goes into speculation, It goes into the stock market. It makes everyone who is well off feel like they are much more well off. But no new value is actually added to the economy.
Now I’m really not blaming the Federal Reserve for what’s happened. They’re trying to do the job congress and the President ought to be doing. They’re trying to get this economy back on it’s feet. But the real effect is that wealth with very little risk, wealth with little value added, wealth as a massive gift is being given to the already very wealthy.
The real effect is we have created…Socialism for the Wealthy.
While it is true that Obama has continued to expand Socialism for the Wealthy. He did not start us on this path. No, the credit for our New Socialist State goes to…
Bill Clinton, Newt Gingrich, and the Republican congress of 1999.
Surprised? I thought these guys were the great capitalists!
But in fact, 1999 is the year that Glass-Steagall was repealed. This changed the entire structure of the banking industry, and with it the entire structure of our economy. You see Glass-Steagall separated our banks into two types, the Wall Street investment bank. And then the majority of our banks were boring old, Jimmy Stewart like savings and loans. They existed for…well savings and loans. And back when banks were structured this way, the Federal Reserve actually could stimulate the real economy by providing low interest “loans” to these banks.
So there you have it. The first step back from Socialist America is to repair the damage that supposed capitalist conservatives have done to our system.