Centerblue.org

Crooks & Liars rather deridingly posts that now everyone is an economist, posting on previously inscrutable topics like “mortgage-backed securities” and “credit default swaps.”

I don’t think that’s a bad thing at all. I think it’s GREAT.

There has been a poison spreading secretly in our economy for years, false growth fueled by speculation and over-leveraging of debt. It seeped into every facet of daily life without most people’s knowledge–real estate values, stock prices, commodities, credit cards, and so on. It was all financed by foreigners eager to lend cheap money to Americans and let them continue to spend beyond their means. Americans congratulated themselves on selling ever-more-expensive houses to each other and calling it economic progress.

It was all a farce, but that wasn’t immediately apparent. Most people saw “good times” (or at least “not bad times”) and were complacent. Who cared what was going on on Wall Street as long as house and stock prices kept going up? We turned to other, more interesting (or banal) topics–from politics to American Idol and runway models.

There were people ringing the alarm bells, distinguished economists like Nouriel Roubini–but they were laughed at, dismissed as “economic Eeyores.” Nobody listened until it was too late.

Now the crisis is upon us, and people are waking up! They’re hungry for knowledge, trying to understand why their society and way of life threatens to crash down around everyone’s ears. How could the United States of America possibly witness a situation where the Treasury Secretary goes into an emergency meeting with ashen-faced Members of Congress to inform them that if they don’t pass a bailout bill there “may not be an economy on Monday“?!

Several friends have phoned or contacted me, asking me to explain what’s happening in a way a non-economist can understand. I’m no economist, but I’ve learned a lot about economics over the last few years as I read with ever-increasing alarm about what I thought to be a ticking time bomb. That reading is what led me to sell my condo in 2006 as the housing crash was just beginning.

I basically say this to my friends who have asked: an economy cannot run without trust–whether it be trust in what a dollar is worth, or trust that individuals and institutions will repay their obligations. Banks and Wall Street loaded up on mortgage instruments that they thought were good, but in fact were not. Now, nobody knows what’s good and bad out there, or who has what. Banks are looking at each other and saying “I don’t trust you to be solvent a day or a week from now because of those mortgages you might have, and will therefore not lend to you.” That brings the economy to a screeching halt, as credit (which is lending, after all) dries up. The bailout plan tries to restore trust by removing the mortage instruments clogging up the works, in the hopes that institutions will trust each other enough to lend once again.

That’s really all there is to it, and I’m happy to explain it to anyone who will listen at any level of detail they desire. It’s time that everyone knows the chicanery that has been going on, the wool that has been pulled over everyone’s eyes, the deceit of unfettered de-regulation under the guise of a false posterity.

We’re all in this together, and the more people who know and understand the truth the better.