Nailed to a Cross of Gold

The famous "cross of gold" speech by William Jennings Bryan was the cry of farmers to get out from under the oppressive thumb of bankers and Yankee hard gold policy.

Here's a bit from an article by Robert Kuttner in The American Prospect pointing out that they "austerity" cries, the inflation "worries", and fainting over the debt level in the US is the modern version of this fight between rentiers and workers:

Economic history is filled with bouts of financial euphoria followed by painful mornings after. When nations awake saddled with debts incurred to finance wars, episodes of failed speculation, or grand projects that haven’t paid off, they have two choices. Either the creditor class prevails at the expense of everyone else, or governments find ways to reduce the debt burden so that the productive power of the economy can recover.

Creditors—the rentier class in classic usage—are usually the wealthy and the powerful. Debtors, almost by definition, have scant resources or power. The “money issue” of 19thcentury America, about whether credit would be cheap or dear, was also a battle between growth and austerity.

The creditor class views anything less than full debt repayment as the collapse of economic civilization.

Go read the whole article.

Kuttner is arguing for the politicians to stop acting like tools of the bondholders and look to the interests of the whole of society:

Debt can be reduced or renounced in ways that are constructive or that add to the chaos. Inflation, for instance, is one way of eroding debt, and a risky one. There can be a calamitously abrupt default (Lehman Brothers) or a careful and beneficial restructuring (General Motors).

What amazes me is that Obama was raised by a mother who lived at times at the edge of poverty, but he acts like his "class interests" are to protect the rich. The US will have 10 million houses foreclosed in this Great Recession. That is a hell of a lot of disruption and a great drag on the economy. He could have done something to fix that by forcing banks to take equity in the houses rather than force foreclosure. But Obama sided with the rich and ignored the interests of the bottom 90%. He is siding with those who would rather bring the economy to a grinding halt rather than hit the restart switch. There is more for everybody if the economy grows, but Obama is opting (along with the idiot Republicans) to gag and handcuff the economy, force it to creep along, and keep the bottom 99% poorer so that the top 1% can collect in full on their debts. Nutty.

There are lessons to be learned but the politicians of today are as deaf as the idiot politicians of post-WWI:

History’s two great negative and positive examples of how to deal with unsustainable debt are the periods after the two world wars. At the 1919 Versailles peace conference, the creditor mentality prevailed, and Europe’s postwar recovery was aborted. Britain and France imagined they could bleed defeated Germany to pay off their own immense war debts (mostly to the United States). Britain also pursued tight money to keep its own currency valued at prewar levels, in order to protect the creditor class. The policy wrecked the German economy and kept British unemployment above 10 percent for two decades. The great critic of Britain’s folly was John Maynard Keynes, then an adviser to the British Treasury. Keynes’ 1919 book, The Economic Consequences of the Peace, prophetically warned that the policy of squeezing Germany until “the pips squeak” would cause depression and a second war.

After WWII, Keynes led the economic policy making and they emphasized recover over debt collection and you got the golden period of growth of the 1950s & 1960s, the best decades of the 20th century. But today's politicians prefer the disaster of the inter-war years. It is all just too depressing.