Many of the major banks and financial services firms that brought us to near economic oblivion have survived and prospered in the wake of the destruction they wrought. Empty foreclosed homes, jobs and livelihoods lost, promising dreams and futures sold off to highest bidder (no pun intended) – these were all the products of the attempts make gold from iron. The financial players engaged in a volatile form of alchemy, whose consequences play out in the lives of people everyday.
As more information about the period of the crash comes out we are learning more about what went on behind the scenes as the economic platform was sinking into deep water, as prosperity remained in the horizon.
It is now becoming evident that in fact the bubble served 2 purposes
1. to artificially generate increased income (funds, money), from untapped sources (the aspiring and lower middle classes), to serve as a catalyst for increased consumption through false economic expansion.
Thorough concocted financial instruments and people seeking to improve their situations, firms were able to inject funds into the economy that were truly had no basis or connection in the real world. The false funds made it appear that people possessed more money than they actually had or could sustain. As result they bought more stuff house, cars…etc. The value of these goods became grossly inflated by the presence of these false funds. When it was realized that these funds came from these same overvalued goods, there was an “emperor and his new clothes effects” and all that was put up and put on was shown to not be true and all and the economy was left exposed. We all stood naked exposed to the harsh winds that come when markets go cold.
2. In the rush to put on new clothes, certain institutions received favorable treatment as many of the competitors disappeared and they were left standing, with more land to conquer and fewer obstacles in the way. This article from the NYT illustrates how the forces behind these events operated to leave us in a situation where the strong and connected survived. Far from some kind evolution that crashes are sometime argued to be – the powers that be engaged selective selection so to speak. Choosing certain entities to rule over us all. There is nothing natural about the current state economic affairs…one can only speculate as to why…? But another question that is equally as important is who? Who are the emperors, fitting us with new clothes right now? This article provides some insight but you get the feeling that there is more.