Forget the predatory lenders, Wall Street sharks and their government enablers: It all started with George Bailey. Yes, that George Bailey -- the hero of Frank Capra's "It's a Wonderful Life," (...) George Bailey was actually a pretty savvy businessman. And it's even easier to forget the precise nature of his business: putting the downscale families of Bedford Falls into homes they couldn't quite afford to buy. This is the substance of the great war between Bailey and Lionel Barrymore's Mr. Potter, the richest, meanest man in Bedford Falls.(...) "They had to wait and save their money before they even ought to think of a decent home. Wait? . . . Do you know how long it takes a working man to save five thousand dollars?" (...)"It's a Wonderful Life" debuted in 1946, more than a decade after Franklin D. Roosevelt's National Housing Act kicked off a half-century of federal policymaking aimed at making it dramatically easier for working-class Americans to buy and keep their homes.(...) It offered the average American something no country on Earth had ever offered its citizens before -- the promise of an equality rooted in ownership, a citizenship rooted in self-sufficiency and an entrepreneurial spirit rooted in security. Ross Douthat - Washington Post
Most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.” Nouriel Roubini - NYT
The nuclear physicist Leo Szilard once remarked that the fall of the Soviet system would eventually lead to the fall of the American system. He said that in a two-element structure the interrelationship and interdependence are such that the one cannot survive without the other.(...) Without the enemy, the machinery of power begins to race, with nothing to resist it; megalomania sets in. William Pfaff
Sen. Barack Obama has taken a commanding lead in the race for president not because of any dramatic gesture, but because of a signature political trait: his caution. The nation's economic crisis triggered Obama's sharp rise in what had been a tight race. But Obama hasn't tried to seize the kind of central, national leadership position for which Sen. John McCain grasped, and fell short. Nor has he been touting — Bill Clinton-style — a highly detailed plan for what he'll do the moment he takes office. The result is that while virtually all observers agree that he has benefited from the crisis, his allies and critics alike remain a bit hazy on what exactly he would do if he takes office Jan. 20, 2009. Ben Smith - Politico

The idea or thread that holds the above quotes together is that the legendary prosperity of the American middle class, their massive home ownership and dizzying consumption have long been based on easy credit, that with the end of the cold war, America's credit binge went out of control, that the days of easy credit have just ended with an enormous bang or thud and that if Barack Obama, probably the next president of USA, has any specific ideas about what to do about the whole thing, he is playing his cards very close to his chest, indeed.

The reference to the cold war is very relevant, in my opinion.

If a worldwide banking meltdown, such as we are experiencing right now, had occurred in the 1960s or 70s, the large soviet backed, communist parties of France and Italy, and their trade unions, would have been out in the streets in force rapidly destabilizing those countries: the reaction in Asia, Africa and Latin America might have been even more explosive. Certainly the risk of strengthening such political movements would have been a conscious restraining factor for regulators all over the capitalist world. Those parties and those unions no longer exist. At the end of the cold war, as William Pfaff writes, "without the enemy, the machinery of power begins to race, with nothing to resist it; megalomania sets in."

With this crisis the era of easy private credit is surely drawing to a close and we will see a revival of traditional, conservative, lending practices. This means, for those too young to remember, that to get money you will have to already have money. Nouriel Roubini gives a short list of things that you will find yourself paying up front for besides a house: anything you usually pay for with a credit-card, or a college education, or an automobile, etc.

As you look at the list of things that you will have to save up to buy, James Stewart's, Charles Bailey voice may echo in your ear, "Do you know how long it takes a working man to save five thousand dollars?" In 1946 you could buy a house with five thousand dollars, nowadays you can't buy very much with that sum, but it is still hard for anyone on minimum wage, or not so minimum wage, to save five thousand dollars.

A great many people are going to discover for the first time in their lives that they are poor and they are going to resent it.

Many more people than today are going to feel bitter and in Barack Obama's prescient phrase, "cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations”. As another major new voice in American politics might add, "you betcha".

With nothing to threaten it, the system has set out to destroy itself. Now the danger to our system is right wing populism not socialism. Socialism or at least some version of a Scandinavian social democracy is the only way to stabilize this situation and stability is the most truly conservative of values.

This ultra-right, Le Pen-like populist anger is going to sweep America and make an already horrible situation much worse, unless very proactive, openly social democratic, anti-poverty programs are put quickly into place: universal, free health care, grants, not loans, for higher education, government sponsored, high quality subsidized rental housing with option to buy, etc. And make no mistake, this means cutting back defense spending, closing tax havens and raising taxes on the very rich and moving the money into education, health and infrastructure... right away.

Nothing original here, the plans are already drawn up, all you have to do is translate them from Swedish.

The wing nuts are accusing Barack Obama of being a "socialist radical", oh, but were it true.

I think he should quickly announce his future cabinet choices and give a detailed outline of the legislation he aims to pass in his first hundred days.

If Obama doesn't move strongly with vigorous social democratic measures to stabilize the situation of America's seething masses of nouveaux pauvres, he will simply be fattening frogs for snakes... keeping the Oval Office chair warm for Sarah Palin or even worse in 2012.

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