Blame it on Reagan: the new meme


Just as I was starting to link Reagan to the great monetary boom of the 80's, a book is coming out with Reagan as the culprit and Eve Smith quotes


Boom-and-bust cycles, obscene CEO salaries, blackouts, drug-company scandals, collapsing bridges, plummeting wages for working people, the flight of U.S. manufacturing abroad—these are all products of Reagan's free-market zealotry and his gutting of the public sector. Reagan pioneered the use of wedge issues like race and the war on drugs to distract America while his administration empowered corporations to lay waste to our traditional ways of life.

That's right, blame the Cowboy on that one, everyone says.
1/ It is true that deregulation set the stage. The financial markets were not to be meddled with. After years of scorn and disdain, it had become dogma that public intervention or regulation in free functioning markets would always lead to an inferior solution. What a naive view in retrospect. It seems regulation and free markets go hand in hand and dogmatic views do not make for happy endings. The opening of the monetary valves proved such a powerful political aphrodisiac. It was in fact Clinton that repealed Glass-Steagal. Remember if you tried to close monetary valves, you would die the horrible Carter political death. Yuck.

2/ But really it wasn't just Reagan. Reagan didn't manufacture and market securitization, bankers and physicists did. Reagan, was ultimately not responsible, and very probably un-aware, of the very wave of innovation that was taking place under his and Clinton watch due to the advance of IT, financial engineering and deregulation. Let's not forget that if the FED was setting the monetary agenda since the Carter days, it, itself, is susceptible to the influence of the private sector.

When a complex system shows signs of break downs, such as our credit economy, it is hard to single out one agent as the root cause. So credit is to blame, but who it made 'easy credit' so. It was the politicians, the bankers, you and me, it was our nervous system that rewards us every time we push the morphine pedal. We collectively blew this credit bubble up. The system is inter-twined, by definition of a living system. The narrative we make of the breakdown will quickly identify culprits and it will latch onto them. It is interesting that the culprit is usually the point of entry of the narrative (the politicians, or the bankers, or the people) and the other constituents can be cast as consequences or innocent bystanders.

Reagan it is! He deserves it too, the cowboy f*cked it up!

Comments

Roy Russo said…
Reagan? We're running out of people to blame.

I blame Papa Smurf. He controlled everything and wore red. Clearly, a communist!
adt43wt342 said…
Reagan != papa smurf.

He was blue and cudly... And yes, Reagan, the reaganomics, the reagalation, the public deficit spending (on military mostly, star wars) they clearly set off the first monetary bubbles of modern days. I remember reading that Star Wars was genius because it clearly outspent the Russians who could not afford such a program. well 20 years later the books are being rewritten: the US couldn't afford such deficit spending either.
Roy Russo said…
Maybe no one told the author, but it's been 20 years between Reagan leaving and Obama entering. And how are we fixing the problem? We're spending like maniacs! And what happened within that 20 year gap? We spent like maniacs!

I guess we can look farther back, but I fear we'd find ourselves blaming Roosevelt for issuing war bonds during WW2. Reaganomics didn't cause this... Freddie/Fannie-nomics caused this. ;-)

Star wars was (ultra)genius because it never worked. It was a bluff.
Army No Va said…
I blame ole Abe Lincoln and Salmon P Chase :-) ...

First mass scale deficit spending. Constitutional violations that make Bush look like an author of the Constitution (mass arrests, speech curtailment, etc...). Implemented the Henry Clay system which began the long march of expanding the Federal government dramatically. Rapid expansion of fiat money (I own 2 pieces of 1861 demand notes which were followed up with a much more massive printing of 1862-63 notes). Lots of financial innovation. Etc...

Brilliant politicians, these two, and certainly left some good things in our legacy. But a lot of what we blame Reagan or Clinton or Bush for, Lincoln out did them all, esp spending in relation to the economy.

The aftermath was the Depression of the 1870s - probably a lot like what we are moving into.
adt43wt342 said…
hehe, thanks for the history lesson Pierre. But as you say the excesses of these two were reset in the 1870 depression.

Hehe, I am LMAO watching Roy wiggle on that one. This current credit bubble has Reagan written all over it. No you can't go back to WWII as those excesses were purged in the early 50's and followed by a curve of great stability of debt. Face it, your political hero was nothing more than a monetary wizard of oz. Bubbles bubbles.
Army No Va said…
I blame them for setting precendent. Perhaps they had no choice - war and secession and all that. But as Ben Franklin said in response to the question - "What kind of government have we created?" at the signing of the Constitution. His response, "A republic, if you can keep it". We haven't kept it and its degradation started in 1861. All of these successors followed in Lincoln's and Chase's path.

I like Reagan a lot...probably the best president we've had in a long time. But he wasn't perfect either and really was just playing the script laid out for him.

We didn't spend much money on Star Wars...it was just a bluff. We've spent FAR more trying to prop up this housing bubble (the effort will fail anyway).
Roy Russo said…
This blog post is blasphemy! ;-)
adt43wt342 said…
What, saying that Reagan did nothing but bask in the monetary glory afforded by the first years of a nation's credit addiction is blasphemy.

I will say it again, Reagan was floating in monetary waters. Since Carter had stabilized the inflation problem. Reagan could take all the credit, literally and figuratively.

phew, this is fun! I could do it all day long, but I got real work now, gotta go, bye!
Roy Russo said…
Carter, que? He saw inflation and interest rates over ~18%, raised withholding taxes, slapped taxes on imports (oil included), and sat on his thumbs while Iran took our embassy and the USSR grew in prominence. The guy was an idiot (I think he still is).

Carter focused on balancing the budget... woop-dee-freaking-doo. It was political suicide. Voters don't care if the budget is balanced. They do care for all those things he neglected.

In the end, this is part of the ebb and flow of monetary policy. One administration enacts tougher oversight, the next removes it, and so the cycle goes and bubbles grow and pop.

If Reaganomics is to blame for some of this, I'd say give me the current recession over a nuke on my head any day.
adt43wt342 said…
The monetary "ebbs and flows" are on longer time scales than '2 years'. Carter took decisions that made him hugely unpopular while in office and paid off by the time the cowboy parked his horse and he started defecating on the white house lawn. If you listen to Greenspan tell the story, Carter rather than 'creating' stagflation, chose short-term stagnation to get monetary inflation under control. He did succeed and died politically. Reagan reaped the rewards. Period.
Army No Va said…
I voted for Carter in 1980, my first presidential election to vote in. I voted for him because I was making lots of money (for a college kid) on rare coins which were benefiting from inflation. Oh, and I also wanted his student loan handouts :-). But by 1984, I was campaigning for Reagan as a 1 year veteral of IBM... :-)
adt43wt342 said…
you were *campaigning* for Reagan? wow, I didn't know that of you :)
Army No Va said…
Yeah, well Reagan took away my student aid/cheap loans, so I figured I should get some back in lower taxes as I was working full time at IBM by 1984!! :-) ...

Now let me get back to my yard and finish burying my gold, silver and Confederate paper money before Pelosi gets her hands on it! Just like the old days!!

:-0
Anonymous said…
Wow - nice post - nice writing - but the words are incorrect - It's Bush's Fault, IT's Reagan's fault, it 's Newt's fault it's Sarah's fault - Democrats have run this country for most of its time - so put the blame where it needed to go - Clinton caused the subprime mortgage debacle going around calling everyone a racist that didn't give money to ppl who did not make money or could afford it - feed the ACORN community- Yes see what happens when Democrats mess with Public Schools, Socialist Programs, Tax, Spend and give to their thugs.

LOL

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