The recession that began in December 2007 produced a change in Americans' perception of their economic future. They moved from the tradition of hope to one of just barely hanging on. I have never seen this before. Only someone born around 1910 can recall anything like it, assuming that he recalls anything at all.
My parents were born in 1917. They were teenagers in the 1930s. The did not experience the euphoria of the roaring twenties, when the stock market soared after 1924, and there was tremendous optimism based on the new technologies or radio and air travel. The sky was literally the limit. People believed that Europe’s war debts were irrelevant, that the recession of 1921 had ended recessions, that America was the wave of the future.
By 1932, that euphoria was a thing of the distant past. Unemployment was at 20%. Prices were down at least 25%. Over 6,000 banks had failed. There was no sector of the economy that was flourishing except gold mining, which had the benefit of a price floor set by law. Then things got worse. Another 3,000 banks failed. Prices continued to decline. Unemployment rose.
That was the world in which my parents went to high school. My mother still talks about it. She remembers men in Portland, Oregon, begging for food, willing to do odd jobs just to eat. Those years scarred her. They scarred her generation, who never fully bought into the idea that prosperity is crested by personal debt. They did not fully participate in the debt-driven post-World War II boom, which relied on an extension of consumer credit. Credit worked because people saved. The end of the wartime price controls, coupled with the return of the troops to civilian life, extended the opportunities for capital. Money went into new industries. It went into housing, which was revolutionized by new techniques of mass production.
THE GOOD TIMES ROLLED
My generation knew nothing of hard times. Neither did the generation born in the late 1920s, which did not get shipped out to fight the war, and which came to adulthood in the postwar boom.
All of our lives, we have seen economic progress. Television replaced radio as the technology of the future in 1949-53. Energy was cheap. Cars were everywhere. Teenagers had their own used cars, their own records, their own subculture.
I watched “The Glenn Miller Story” last week. It was made in 1954. It holds up well. I remember seeing it at age 12. I liked it. It led to a revival of Glenn Miller record sales, nine years after his death. What struck me in watching it was that Miller and his musical peers aimed at audiences of all ages. Younger adults bought their records, but so did their parents. By 1954, when the movie was released, this had begun to change. Teenagers soon adopted music preferences that excluded their parents. This never changed back. A friend of mine went to a stage production of “The Buddy Holly Story” recently. There on the theater’s wall was a poster from one of Holly’s tours. “Tickets, $1.50. Parents get in free.” Not many parents came. The mantra of parents had begun: “Turn that thing down!”
I was reminded of all this last Saturday night, after I had I driven for over three hours to Nashville to see a show. It was a gathering of guitar pickers. It was in honor of James Burton. I have consciously followed Burton for over 40 years, but I was influenced by him for over 50 years. In 1957, Ozzie Nelson, band leader of the 1930s, brought him from Louisiana to Hollywood to back up his son Ricky, Ozzie’s answer to Elvis. It worked.
Later, Burton was the mainstay of Elvis Presley’s band. He toured with Bob Dylan. After Presley died, Emmylou Harris hired the band. It launched her career, as she said when she introduced him to the crowd. He has been there, playing backup guitar for over half a century. He played for my generation and all the ones that followed. That he came from the state whose motto is “Let the good times roll” is delightfully symbolic.
Americans have all been living in spiritual Louisiana since 1947.
My generation was the first pre-adulthood generation that had enough discretionary income to finance its own subculture: movies, music, and used cars. We could go where we wanted to. We grew up without anything resembling economic hardship.
We stayed in school until we graduated from high school. That was something new. A lot of us went to college – also new. Education was seen as the ticket to success and middle-class comfort.
The oil spill that threatens Louisiana is symbolic of the end of an era. Government regulation was supposed to make this impossible. The public has put great faith in the ability of tenured bureaucrats to make things safe for Americans. The “Federal Register” publishes 70,000 pages of small-type regulations every year. This never ends.
Supposedly, this army of regulators and libraries of pulp-paper rules are supposed to let us preserve our way of life. Then, without warning, the platform blew up. The regulatory agency that supposedly monitored all this had rubber-stamped the authorization to skip the normal testing procedures.
The head of this obscure agency resigned her position. I suspect she was asked to resign. This sent a message to senior appointees in every agency: More paperwork! No latitude! This will no doubt lead to a new era of agencies that tie up progress in reams of red tape. And so it goes.
The mortgage market was unilaterally nationalized in September 2008 on the word of a lame-duck Secretary of the Treasury. The public accepted this without a protest. The Federal Reserve System doubled the monetary base over the next few weeks. Congress passed a $700 billion bailout over the protests of voters. Then a newly elected Congress passed $787 more soon after inauguration day.
The American stock market peaked in early 2000. It has taken constant intervention by the Federal Reserve to prop up the economy. It is becoming apparent to people on Main Street that the people on Wall Street have been able to survive only because of bailouts. The idea that the economy is in a recovery phase is accompanied by assurances from most economists and most Congressmen that the economy would slide back into depression were it not for the courageous intervention of the Treasury and the Federal Reserve System. This has been the argument of every textbook in U.S. history regarding the New Deal. “Roosevelt saved capitalism from itself!” But here we are, almost eight decades removed from Roosevelt’s famous first inaugural, in which he excoriated bankers. This inaugural address is one of only three that the textbooks cite, along with Lincoln’s second and Kennedy’s famous “Ask not.” Here was the rhetoric of class warfare. Here was imagery of Jesus driving out the moneychangers.
Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
The voters in 1933 were unaware that from his defeat in 1920 as the candidate for Vice President until his inauguration as Governor of New York in 1929, that he had made his living – a very good living – as a bond salesman. He was, in short, a moneychanger. The textbooks and even multi-volume monographs on Roosevelt remain silent on this fact. Antony Sutton told the story in “Wall Street and FDR” over 30 years ago, but academia has never paid attention to that book.
So, here we are again, with a banking reform plan in front of Congress. If this bill passes, new power will be given to the Federal Reserve System. But wait! Wasn’t the Federal Reserve System set up in 1914 as the institution that would end recessions as bad as the “bankers' panic” of 1907? Wasn’t it also given the authority to establish a stable dollar? Then why have we had so many recessions? Why has the dollar declined by 95%?
Every reform gives us more of the same. Every reform promises to save capitalism from itself. It then transfers more power to the Treasury Department, which in 2008 became widely known as a wholly owned subsidiary of Goldman Sachs.
The reforms transfer more power to government regulators, or in the case of the Federal Reserve, a consortium of privately owned banks under the titular authority of a government agency. But when in 2009, a Federal judge told the Federal Reserve Board to turn over information about which institutions in the camp of the moneychangers were loaned how much money and got sweetheart of Treasury debt swaps at face value for toxic assets, the FED appealed the case. As for any suggestion that the government has the right to audit the FED, Congress has watered down that bill, as I said it would from day one. It may not be clear who is in charge here, but it is not the voters.
A SLOW AWAKENING
The Tea Party is excoriated by Democrats. It is excoriated by Republican leaders. Pundits in the shrinking mainstream media tell their viewers and readers that now is not the time for radical change.
But wait! Don’t I recall hearing something about the need for radical change – change we can believe in? Do you recall this? “Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.” Yes, yes! That was what FDR promised in his inaugural address. And we got change. How we got it! We are getting change now, too.
A funny thing happened on the way to the temple. The moneychangers bought the priesthood.
Tea Party voters have only the faintest understanding of how the political system works. They know that the political leaders have promised change, yet the crises have been getting worse. They are told that more government spending is necessary. They are also told that a trillion dollar annual deficit is required to prop up the economy.
They are beginning to think like Lois Lane in “Superman.” When Superman tells her, high above the ground towards which she had been plummeting, “Easy, miss. I’ve got you,” she responds: “You’ve got me? Who’s got you?”
Keynesians look at Federal deficits as Superman. Deficits can leap buildings in a single bound. The higher the building, the larger the required deficit.
The public in general still believes this. Voters assume that someone is in charge. They assume that those in charge know what they are doing. They defer to higher authority. They don’t want to think about economic cause and effect. They don’t want to think that they will be required to pay off these deficits. That will be someone else’s problem. The bills will never come due.
The Tea Party people have this nagging sense of fear. They do not see how these debts will ever be paid off. But many of them are dependent on the prompt payment of Social Security and Medicare. They are the ones who are dependent on the Federal government to pay its bills on time and at full value, as promised.
They see that the system is propped up on four legs: regulation, taxation, fiat money, and debt. They can see the results of regulation spreading in the Gulf of Mexico. They can see an increase in taxation coming in 2011, when the Bush-era tax cuts expire. Fiat money is being held at bay only by the terror of commercial bankers, who are not lending. Finally, Federal debt looms ahead for a decade. They know that it will extend far beyond this decade, but no one is offering official estimates.
The system is propped up by the Big Four. But faith is declining in all four.
A LOSS OF HOPE
The voting public is losing faith in political leadership. The voters do not know how to get positive change. They are not agreed on the nature of the required change. They got Clinton for two terms. All they got was entertainment: Hillary and Monica. They got Bush for two terms. They got Afghanistan, Iraq, Homeland Security (left over from Clinton’s Administration), Hank Paulson, and the worst recession since 1933.
What are they getting from Obama? They don’t know, but the majority do not like it.
Most of them know something is wrong with Social Security and Medicare. They smell a rat. There are too many politicians and economists telling them that a few minor alterations will make both programs fiscally sound. They have been told this ever since Nixon’s era. If the system is easy to fix, why is it still broken?
If the banking system was fixed by Roosevelt, why is it broken?
If the economy is in the initial stages of a recovery, why aren’t bankers lending?
If the worst of the financial crisis is over, why are short-term T-bills at less than two-tenths of a percent?
The average voter knows nothing about the details. He only knows that Main Street is not offering them the future they had expected. He has stopped saving much, yet he thought economic growth would come, no matter what. He sees that he is getting under 1% at his bank, and he concludes: “I cannot expect to save my way into a comfortable retirement.”
Americans look at their struggling adult children or grandchildren, and they conclude, “They will not have it as good as we did.” This is the first generation of Americans to conclude this. This is a change of monumental proportions.
Americans are beginning to think that their golden years will not be golden. They don’t know what to do about it, other than keep working. They are correct.
They want change they can believe in. They are losing faith.
James Burton is retired in Shreveport. He went back to where the good times roll.
Far south of Shreveport, in the Gulf, the good times are not rolling.
For millions of Americans who have never heard of him, but who spent money to buy the records and MP3s of artists who relied on him, good times are also not rolling. People are moving from hope to just barely holding on. This shift of attitude is common in Europe, too.
Jacques Barzun has lived long enough to tell us about this. He is 102. The title of his book, “From Dawn to Decadence”(2000), conveys the underlying story of the West over the last 500 years.
To rely on the Federal government to bail out a nation that has voted for the politics of envy for eighty years is to rest one’s weight on a weak reed.