Crisis of Distrust in the U.S.
I don’t understand or know much about economics, but now economists, financiers and (more so) politicians are demonstrating that they don’t know very much either. We’re all confused. What I do believe is that it’s not a crisis of capitalism or of democracy, but rather a definitive lapse in confidence in the financial system and in the conduct of politicians.
The downgrade of the U.S. economy from AAA to AA+ by the risk evaluator Standard & Poor’s was not an objective measurement of the economy, but rather a correct calculation of the poor performance of Republican and Democratic legislators to come to an agreement about the public debt and fiscal deficit. Barack Obama can be as disgusted as he likes with the bad grade, but he has to admit that the political system is less stable, less efficient and less predictable than before.
The citizens also agree with that assessment. One survey from The Washington Post shows that 71 percent of Americans are enraged with the political polarization and its effects on economic decisions; another 40 percent, according to CNN, don’t have confidence in the government's ability to contend with the economy. Meanwhile, the majority, in both surveys, is anxiously awaiting the 2012 election to punish legislators.
It would be wrong to lay responsibility for this problem solely on the legislators. For a while, the citizens’ loss of confidence has been directed at greedy financial systems and banks. All are also well aware that weeks after the recovery and stimulus packages prepared by Obama, the bankers and business owners of Wall Street fell back into their luxuries and hefty salaries. Still, three years out from the debacle, the banks are more effective than before, and they speculate on windfall profits in the financial markets, but they don’t encourage a productive system with loans to entrepreneurs and small businesses. Obtaining a loan, despite having impeccable endorsements, is a huge hassle.
Although the government did not get the full blame for the private debt crisis caused by the housing bubble in 2008, it didn’t know how to clamp down so that bankers would believe in the new regimen and have confidence in the public. Without the recovery stimulus dumped into the productive system, plus the public debt that had been accumulating since Bush was spending willy-nilly on three war fronts and lowering taxes for the richest, you don’t have to know much about economics to know that the current mess was a foregone conclusion.
To the bad policy decisions should be added the fact that the economy is not based solely on objective data, but on credit loans; as such, perception and speculation, as is the case now, can do more harm than low levels of employment, investment, consumption and savings. And to this should be added that, on the other side of the Atlantic, no one can help. The outraged are multiplying and not even the bailouts involving billions of euros can stop the domino effect that threatens all the countries that bathe in the Mediterranean.
The U.S. will just have to overcome this storm and take responsibility for all the wrongs it has been causing. But it also doesn’t have to concern itself; soon, when the storm calms, it will be apparent that the omens of doom were simply that. The proof is that despite the bad S&P rating, the first world power continues to be the oasis where all the investors of the world want to bet and deposit dollars. Despite its momentary weakness, the country enjoys an institutional system that is solid, transparent and much more reliable than others.
The downgrade of the U.S. economy from AAA to AA+ by the risk evaluator Standard & Poor’s was not an objective measurement of the economy, but rather a correct calculation of the poor performance of Republican and Democratic legislators to come to an agreement about the public debt and fiscal deficit. Barack Obama can be as disgusted as he likes with the bad grade, but he has to admit that the political system is less stable, less efficient and less predictable than before.
The citizens also agree with that assessment. One survey from The Washington Post shows that 71 percent of Americans are enraged with the political polarization and its effects on economic decisions; another 40 percent, according to CNN, don’t have confidence in the government's ability to contend with the economy. Meanwhile, the majority, in both surveys, is anxiously awaiting the 2012 election to punish legislators.
It would be wrong to lay responsibility for this problem solely on the legislators. For a while, the citizens’ loss of confidence has been directed at greedy financial systems and banks. All are also well aware that weeks after the recovery and stimulus packages prepared by Obama, the bankers and business owners of Wall Street fell back into their luxuries and hefty salaries. Still, three years out from the debacle, the banks are more effective than before, and they speculate on windfall profits in the financial markets, but they don’t encourage a productive system with loans to entrepreneurs and small businesses. Obtaining a loan, despite having impeccable endorsements, is a huge hassle.
Although the government did not get the full blame for the private debt crisis caused by the housing bubble in 2008, it didn’t know how to clamp down so that bankers would believe in the new regimen and have confidence in the public. Without the recovery stimulus dumped into the productive system, plus the public debt that had been accumulating since Bush was spending willy-nilly on three war fronts and lowering taxes for the richest, you don’t have to know much about economics to know that the current mess was a foregone conclusion.
To the bad policy decisions should be added the fact that the economy is not based solely on objective data, but on credit loans; as such, perception and speculation, as is the case now, can do more harm than low levels of employment, investment, consumption and savings. And to this should be added that, on the other side of the Atlantic, no one can help. The outraged are multiplying and not even the bailouts involving billions of euros can stop the domino effect that threatens all the countries that bathe in the Mediterranean.
The U.S. will just have to overcome this storm and take responsibility for all the wrongs it has been causing. But it also doesn’t have to concern itself; soon, when the storm calms, it will be apparent that the omens of doom were simply that. The proof is that despite the bad S&P rating, the first world power continues to be the oasis where all the investors of the world want to bet and deposit dollars. Despite its momentary weakness, the country enjoys an institutional system that is solid, transparent and much more reliable than others.