"A Govt. Not Run by the Financial Sector": James Galbraith's Rx for Wall Street Reform

The primary support of the U.S. economy is consumer spending which is ultimately based on household income and assets In an economy dependent on consumer spending for 70% of GDP, how can GDP rise by 3.5% while personal income plummeted by 3.4%? Assuming that boost in GDP is real and not just statistical legerdemain, then where did it come from? From borrowed money, of course-- the Federal government borrowed and spent over $1.4 trillion in fiscal 2009 The primary asset in most U.S. households is a home, and home values are still dropping, foreclosures are still rising and the only force keeping the market from falling faster is the Federal government's de facto nationalization of the entire U.S. mortgage marketOf the $1.5 trillion mortgage securities issued in 2009, a mere 1% ($15 billion) have been issued by banks; 99% are backed by the government. The government owns over half the nation's $10 trillion in mortgages via its de facto ownership of Fannie Mae and Freddie Mac, and it has guaranteed virtually all the mortgages originated in the past year via FHA or VA. The residential mortgage market is now effectively owned lock, stock and barrel by the Federal government and its private "central bank," the Federal Reserve. So how have companies "surprised" with higher profits? By slashing payrolls, R&D and various accounting tricks. Actual revenue growth is missing in action. So how do you keep "surprising to the upside" after you've slashed headcount, burned R&D and turned every accounting trick in the book? You don't. A stock market rising on the hopes of an actual, real, tangible recovery in household income, home equity and creditworthiness is seeing mirages and hallucinating. The current market is propped up by government free money … yes the bulls have been riding the train … the question is at what cost to the rest of us and when does it get derailed?

Yeah, bringing back Glass-Steagall would be a good idea. And an audit of the FED should have been done a long time ago.

alas.. i agree with Galbraith.... America needs to cease operating as a cowboy state... risk taking and captitalism does not preclude responsible regulation... America should look north to Canada for an example of how regulation and capitalism can co-exist... the biggest difference between America's and Canada's system is the degree of greed.. America is the "poster child" of greed... get on the train people another $$$... chooo chooooooo

i love Pakistan.

Stopping Wall Street's parlor game is now a National Security issue. Who dare argue that the United States is stronger for what they have done? Making us weaker by destroying the economy through outsourcing and allowing trash like unfunded insurance (Credit Default Swaps) and crushing usury of it's citizens is nothing short of traitorous. Banks getting low-cost/no-cost money from the Fed is not a Right - it is a Privilege meant to serve the country, not their bloated bonuses. Taking that free money and using it to gamble rather than provide loans is criminal. Stealing from hard-working Americans, then "donating" tax-deductable to charities, is NOT charity.

You Aint Seen the big crash yet // I't's coming Fast and furious and worst than the last one // Wait Till all the Banks CEO's That Took Our Money and bought stock cheap then lured all you little Fishies Back into the market and you bought it at 10.00 a share but they bought it at 4.00 a share back in March decide to make the killing and profit Millions of $$$$ // All You little Fishies will realize it's down to 3.00 and you will loose your little Fishies A$$es

Just another academic with no real work experience, piggybacking on his Fathers' book and notoriety. What a douche bag, Monday morning quarterback. Go back to class and teach your strudents. Tech ticker, why do you keep bringing this guy back? Is this the best you can get?

hey rey... don't be jealous of us "little fishies"... even little fishies need to eat to become big fishies... the market is for the strong not for the weak sitting on the sidelines wishing ill to those who are prepared to take a risk to get ahead... we're all in a race to the bottom.... now, get on the train before it leaves holding your bag..... chooo choooooo

This is to aasi, I read your comment and people like you living in the USA and not loving the USA but the country you come from is what is destroying the USA. People who migrated here wanted to be Americans new emigrants just want our benefits. SHAME ON YOU!!!!! If you come here you should be AMERICAN first. You live here take our money and send it home to your Country good stimulus for the USA NOT.. Go back to your beloved Pakistan.

One need only ask. What came first, the workers or the bankers? The workers or the government? The workers or economists and their GDP? This country will rebound. Not because of the bankers, not because of the government and not because of the economists, they all caused the problem and only make matters worse. You know the solution, GET THE HELL AWAY FROM OUR WALLETS AND GET OUT OF THE WAY.

Agree with Ray.....Lovely isnt it? All you fishies paid the banksters to screw you and they will again and again until you demand more of your goverment servants. LOL

Yeah, what happened 2-3 years ago wasn't really the cause, it was the result. It was the result of the gutting of Glass-Steagall by republicans (Phil Gramm) and democrats (Bill Clinton) alike, with the blessing of he-who-could-do-no-wrong (Greenspan). Galbraith, like his father, is just a garden-variety 20th century liberal who never saw a single line of regulation, nor a penny of government spending he didn't approve of.

Absolutely right. Bottom line is it is all about making a country club Govt politicians look smart and favorable if the stock market is rising. Consumers pay the price. They can't control themselves and run the economy off a cliff every time, they dont care about the consequences as long as they can live for the moment and have tax payers flip the bill with bailouts and the taxing effect of high energy prices

You can stop it happening again by putting those who let it happen in prison for treason!

i jus luv it! ain't nuttin' like watchin' a bunch of nincompoops talk with their hands....

Chooo Chooo You are an incompetent Fool // Stop with your Chooo Chooo comments // I Think You Belong in ChattahooChee , FL // A Mental Institution // You are going to be 1 of the little Fishies that if you are in the Market you will get nailed and loose all the money you put into the market

I can see it now. Congress audits the Fed and says "Oh man, everything's fine!" because Congress thinks red ink is good, and black is bad. If you don' t believe that look at our national budget. When as the last time it wasn't red? I'll wait...

MARKET is headed for another huge drop..be very afraid.

Playing the "market" is a game of chance. As is poker, as is craps as is roulette. Small player always lose. I'll say that again.... " small player always lose". Of course you hear stories of "smart investors" who have done their Due Diligence and have ammassed a fortune. .....and you hear about batters that hit +.333 and prospectors that hit the "mother load" and lotto winners that hit " the jackpot". This is all to sucker the suckers into the game. Attention , people of earth......... ...... do NOT play the game.. that's right..... " do NOT play the game". There are plenty of big boys out there that will hustle and bussel their way "to the top". But without YOUR money..... and every other working man's money..... well, Oh My ! The swimming pool has just lost alot of it's water.... and alure. Big business, banks, brokerage firms, law firms, landlords.... they are all out to MAKE MONEY. Not lose it..... but MAKE IT ! ......................and they all make it from YOUR MONEY ! maybe uncle timleary was right..... turn on, tune off, drop out.

The d... democrats and the idiots who vote for them and their support of labor unions have destroyed millions of jobs and thousands of businesses. I want a balanced budget, lower taxes and liberty. I do not want more government "services".