The Illusion of Prosperity Driven by Debt
Michael Hirsh, author of Capital Offense: How Washington’s Wise Men Turned America’s Future Over to Wall Street, recently appeared on Morning Joe to talk about Wall Street’s pre-crisis, decades-long encroach upon Washington that would eventually end in financial crisis.
In his estimation, the gradual takeover was about 30 years in the making. It got underway when the ideals of free market revolution were sweeping mainstream economics and all common sense of boom and bust cycles — how markets are prone to wild swings of manias and panics – was abandoned to instead funnel increasing power to financial services in hopes of ever-greater returns and economic growth.
The outcome he describes is a “hollowing out of the middle class,” where Wall Street and Washington both played key roles in creating the “illusion of prosperity” while actually force-feeding the public with debt and artificially inflating asset prices. Until finally, the duped middle class — expected to sustain the US economy and even serve as “consumer of last resort for the whole world” — ended up broke.
This insightful clip came to our attention via a Naked Capitalism post covering Hirsh’s perspective on the roots of the financial crisis.