Book Reviews

The Crash of 2016 by Thom Hartmann

posts: 384

Book Report: The Crash of 2016 by Thom Hartmann

A fairly quick read of 272 pages well worth the time. Mr. Hartmann details why the coming crash is inevitable. Basically, the same problems that brought on the last crash are still there with banks even bigger and the entire financial sector shot through with schemes very similar to those that crashed the economic systems of the world. He shows how the actions taken last time merely postponed the complete disaster that is fast coming.

The country has been taken over by the “royalists” or the elites who now have more power to do more damage than ever. “Lawmakers are no longer listening to their constituencies but instead to the technocrats on Wall Street and the Royalist shadow government manifested in 'think tanks' such as the Mackinac Center and ALEC.” Democracy is defamed as voters are kicked off the rolls and the “Supremes” encourage more and more domination by the very rich and by corporations. The result is one of the most corporate-friendly House of Representatives since the Gilded Age.

In a quote of Chris Hedges by Hartmann:

“We have powerful corporate interests that have commodified everything,” including human labor which means “human beings no longer have any intrinsic value in the ethics of the corporations. They are commodities to exploit until exhaustion or collapse. The same is true of the natural world-we exploit the natural world until exhaustion or collapse.”

The author then goes into what collapse looks like. Increasing debt throughout the economy is driving the crash. This is not about our national debt as is usually painted as critical to our survival. It is about overwhelming debt created mostly through financial markets far far bigger and more dangerous.

“At 1.2 quadrillion dollars the derivative market alone is roughly 21 times the size of the global GDP combined. To say that all the money in the world can't stop the derivatives market from imploding wouldn't be an exaggeration. In fact, it'd be a gross understatement.” As a math teacher I have to try to explain that number: in normal grade school form it would be 00,000,000,000,000 or 12hundred trillion

In addition to this little problem, each of the major banks shares in this huge debt. They have managed to have their individual share much more than they can possibly cover. Goldman Sachs 114 billion in total assets, 41 TRILLION in debt.
Bank of America 1.4 trillion in total assets, 41 TRILLION in debt. JP Morgan Chase total assets just over 1.8 trillion, 69 TRILLION in debt. And this is just looking at the derivative market.

There is much more here including what must be done AFTER the crash to try to prevent the cyclical nature of these problems. But I must include another attempt to give some understanding to the wealth distribution in the USA. The average American family makes $57.000 a year. That would amount to a stack of one hundred dollar bills about 2 inches tall. The one-percenters in our country make about $300,000, a stack of one hundred dollar bills about a foot high per year. But the average of the billionaires on the Forbes top 400 list is 4.2 billion. Convert that to a stack of 100 hundred dollar bills and it would rise over 2 miles into the sky making a hazard for many aircraft. Well over 10,000 feet high! I'll leave it to the reader to think about that.

posts: 384

Further comments based upon the book: “The Crash of 2016 by Hartmann”

“Rather than Billionaires paying us to use our commons, pollute our air and water, dictate our military missions, exploit our markets, and hyjack our radio and TV airwaves, its all been flipped on its head and WE end up paying THEM. We give them subsidies, generous tax breaks, free usage, and no requirement that they have to share with the rest of us, who actually own those commons, any of the wealth our commons have produced for them. So in the end they make billions off what should belong to all of us while we make squat.”

The German model of producing really quickly world leading amounts of Solar Power: In 1997 they instituted the 100,000 roofs program which mandated banks provide low cost 10 year loans to put solar panels on roofs. Renewable energy laws required power companies to buy back power from home owners at prices above the going rate so that the homeowner could pay off the loans. At the end of 10 years the power company gets to buy power back at the going rate. The power companies come out ahead because they do not have to build more expensive traditional power plants that would have required to meet increased demand. By 2007 Germany accounted for ½ of ALL of the entire world's solar production.

That one year saw 1300 megawatt of solar power brought on line across the country.” The goal had been 3000 megawatts for the first decade. Instead 8500 megawatts were added as companies got into production and the cost of solar dropped greater that ½ between 1997 to 2007 and continued dropping.

Another topic on which Hartmann spends considerable time is the concept of SPENDING versus INVESTING. Examples of the differences include military spending which results in little real economic help outside of the direct companies getting the defense contracts. This spending has little staying power for the long-term benefit of the people. Investment type spending, however, is different in that it leaves a lasting usefulness to the people and the country. The Interstate Highway system, schools, bridges, Alternate clean power, parks, and so forth are examples of Investment Spending that have long term appeal and benefits that spill over into the lives of many and bring long term benefit long-term benefit to the entire country.

Union Cab of Wisconsin is mentioned as an example of how some of the disparity in our current system could be changed. It is owned and run by the cab drivers themselves. Without having to pay owners or shareholders the company returns much more of the fare to those who actually do the work. The benefits to the people dong the work make their life much more enjoyable and the public gets better service too. This is an example of “Democracy in the workplace”.

Lastly, let me give a couple of quotes that I think are worthy of thought/action.

From Warren Buffet during his 2002 annual report to Berkshire...

“ The derivative genre is now well out of the bottle, and these investments will almost certainly multiply in variety and number until some event makes their toxicity clear...They are financial weapons of mass destruction, carrying dangers that while not latent, are potentially lethal.”

High speed trading right now allows select traders to use incredibly sophisticated automatic programs to make thousands of trades per second, keeping some of these trades for less than a second thus making millions on the fluctuations of the prices while adding NOTHING of real value to the economy but making millions for the instigators. This has already caused massive drops and rises of the markets that can also be used to reap vast wealth while putting pension funds and traditional investors at risk. A “Robin Hood” tax of significant cost for each transaction would help kill this tactic while raising money from the very people that were the main reasons the economy tanked.

And from FDR: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little.” 1937 inaugural address

Finally the END.