Conservatives and the GFC

Conservatives seem to have major problems when it comes to admitting the dangers of capitalism. They're quick to criticise the perceived decline of society, but utterly unable to acknowledge that consumer capitalism may have at least something to do with this. Some of them seem to hate immigration, but just don't get that immigration, in Australia, at least, has been necessary for the economy.

This ducking and weaving has morphed into full-blown lying with the advent of the global financial crisis (GFC). The race has been on to find a way to spin this crisis as being firstly, the fault of the US Democratic Party, and secondly, to blame the GFC more generally on government intervention, 'socialism', etc.

Now, unless you're a complete half-wit, it should be clear that the GFC had multiple causes. It was, (to use a Freudianism) 'over-determined'. Not for John Ray, who insists that the GFC was caused by Dems and poor people:

[T]he financial meltdown was caused by worthless mortgages -- mortgages that were forced on banks by such Democrat-sponsored laws as the "Community reinvestment act" and harassment of bank officials by such hard-Left organizations as ACORN. The fact of the matter is that "the cause of all this misery was the market suppression that they [Democrats] promoted so messianically".

This refrain is becoming increasingly familiar.

What Ray doesn't tell you is that the Community Reinvestment Act has been in place since 1977, and has survived several Republican administrations. Obviously, the claim that the GFC is attributable to a single political party is therefore bullshit.

Moreover, as recently as 2007, Ben Bernanke was recommending that the Act be extended by way of expansion of Fannie Mae and co. The GFC was not the by-product of excessive regulation, but rather, under-regulation. Analysts have noted that the banks may have had a whole series of reasons for engaging in 'predatory' lending practices, and the said practices were not effectively monitored by any regulatory agency. We can conclude, therefore, that simplistic claims of the nature 'regulation=GFC' are also bullshit.

I've often suspected that lefties could benefit from more knowledge on economic matters, but it appears that conservatives are outdoing everybody else when it comes to ignorance. Then again, interventions such as Ray's are not so much about economics as they are class-warfare.

A number of hard-right characters have noted, perhaps correctly, that a crisis such as the present is the ideal time to engage in bare-knuckle class warfare, and recruit a few budding fascists to the cause. See the recent BNP opportunism in England, where the latter party rode on the coat-tails of striking workers to promote their cause.

But back to the GFC. Not only did regulation not cause the crisis, the low-income US borrowers - holders of 'worthless mortgages' according to Ray - also did not cause the crisis. The poor did not securitise the loans, and sell them for profit. The poor were not speculating in the derivatives market, or allowing China to purchase US debt whilst exporting cheap goods. The poor did not instigate a range of incentives for executives to oversee sub-prime loans in the first place. The poor did not globalise the economy and financial markets. And, finally, it was not the poor who, in the wake of the dotcom collapse early in the noughties, lowered the US interest rate to stimulate growth.

I encourage others to read up on this topic. Nonsense such as Ray's will be repeated ad infinitum in the coming years. We should combat it with facts, before it sediments into 'history'. Information on this is widely available, and the views of Ray et. al. easily discredited.

And finally, for those who are genuinely concerned about the poor, and the GFC, do the right thing, and kick a lying 'conservative' in the head.