Nickolai

From 1945 to the early 1970's income of all income levels rose in tandem with the increase in tandem with poductivity and prospeerity was broadly shared then a strange thing happened. productivity and worker wages began to diverage. starting in the 1970's income gushed to the top ---to the richest 1 percent or so amoung us. Tax cut's for the welthy, de-regulation, globalization, antiunion policies, reduced social programs, and the declining value of the minimum wage all accelerated that process. The productivity bonus went to the investor classs. instead of to the workers. where it had gone from 1945 to 1973.
Some of that capital went to productive investments. But eventually it ran out of moderate-risk investment opertunitiees in the real economy. It became surplus capital when it could no longer find stable investments to make in the real economy.
The problem of surplus capital that couldnt find a home was solved by the derivitive industry. The CDO-type investments offered higher rates of return, supposedly at little risk. The casino was open for buisness.
Through the magic of fantasy- finance derivitives, these funds were recycled to cover risky consumer and corporatre debt, and to creatre instruments that were leveraged again and again upon these debts. All of this was enourmously profitable for the financial firms that arranged, sold, and traded these products. It also made hundereds of billions of dollars available both for housing and credit card debt and for additional fantasy-finance betting. The surplus capital fueled the housing boom via derivitives, and it led to a vast expansion of the financial sector.
Meanwhile, working families had to work harder and longer to make ends meet, more and more families needed two wage earners. More families increased their debt loads.
The bubble burst because that's what bubbles do. At some point marginal buyers could no longer buy enough houses or pay for the ones they had bought. Too many builders built too many houses because the boom had accelerated prices.. American workers with stagnating real wages had reached their debt limits and could no longer fuel the boom.
When the housing bubble burst, the entire fantasy finance edifice that had been built upon it collapsed as well. Investors and banks all over the globe were loaded with toxic derivitives based on risky mortgages that had crashed in value. The risk had supposedly been engineered out of these derivitives, but it hadn't. Many financial institutions central to the economy became insolvent or nearly so. The banking system froze. The stock market crashed. The global economy tanked.
Immeadiatly following the crash entities such as The Heritage foundation, American enterprise Institute, the US chamber of Comerce began blaming Jimmy Carter Bill Clinton and the CRA for the debacle But recently Bank Of America reached a settlement of almost 3 billion dollars to Freddie Mac and Fannie May for the fraudluent mortgages sold to them by Country Wide Financial.
Goldman Sachs cobbled together CDO's filled with liar loans garranteed to fail, sold them to investors to be as safe as Federal Treasuries, collectred the fees and then took out derivitive bets with AIG, betting the CDO's would fail. Collected 13 billion dollars in winnings paid for with taxpayer funds bailing out AIG. Hedge fund Manager John Paulson picked up a cool 5 billion profit on the same bunch of fraudluent CDO's