In turn this was causing Americans to lose sight of the need for more economic discipline – both individually and nationally. Thus Americans – in order to keep up a fairly fancy lifestyle – found themselves in mounting debt … especially with the introduction of the charge and debit cards. But actually, a culture of greed was impacting even more the professional world (lawyers, doctors, corporate presidents, etc.) – where salaries were climbing annually at a rapid rate way beyond any real improvement in the services they actually provided American society.  They simply were getting very rich … because that was now considered their "entitlement" … in a society that now tended to look at every matter not as one of duty or obligation but instead as one of entitlement. THE HUGE AMERICAN TRADE IMBALANCE Part of the fancier American lifestyle was that Americans were "helping" the world's economy by buying more of what foreign manufacturers provided than what America itself sold to those same people abroad. In short, America was experiencing a huge and ever-growing deficit in the balance of trade. America was able to do this because the dollar was still very strong … constituting about 60 percent of the world's hard-currency reserves. In short, America was able to sustain this imbalance in the flow of material wealth (industrial goods and services) in favor of America … because of the strength of the dollar. THE GOVERNMENT'S OWN ECONOMIC FAILINGS The war in Iraq had been very expensive … and had earned America nothing economically in return. As a result, the war – plus America's growing love of government programs to compensate for the increasingly hard economic times many Americans were going through – ran the public debt way up … doubling the size of that debt during the eight years of the Bush presidency: from $5 trillion to $10 trillion. True, the figures describing the country's income had increased – but much of that simply due to inflation – so that the percentage of that national income owed by the government only went from 57 percent to 70 percent. But still that was a real shift in the government's economic position. But in any case, it meant that in 2008, every tax-paying American now shared about $60 thousand of that debt ... an impossible figure to sustain (but which would grow even worse over the coming years!) Of course, debt means that someone or some institution has extended some kind of "loan" to the indebted party. Indeed, about half of that debt was being covered by America's own Social Security Trust Fund … once a fairly independent source of investment for America's retirees – but now in the full grip of the American government. Consequently, there was no longer any real material wealth supporting the Trust Fund … only government IOUs. Most tragically, it had become simply another version of the 1920s Ponzi Scheme, where the fund had no real wealth to distribute to investors … except out of the money coming in from new investors – which was then distributed to prior participants as fake "payouts" supposedly coming from the investment program itself (from earnings from real economic ventures). Indeed, there was actually nothing there of real substance … except the game itself. It could be wondered why anyone beyond a government-controlled income source would ever be interested in purchasing shares of that debt. True, many Americans continued to buy government bonds … the traditional way that the government covered its debts (as, for instance in both World War One and World War Two). But looking at the fact that the government might actually have to start paying off the federal debt – had it actually done so, it would have taken all the government spending that was not already committed to a number of ongoing programs. Thus the Federal Reserve decided to go in a direction opposite that which Volcker took when he raised the interest rate to 20 percent – killing off a lot of American business in the process. Instead, the Federal Reserve kept dropping the interest rate paid on the debt that others were holding, to a point where the government was willing to pay off that debt at a rate less than 1 percent! In short, those who would want to "invest" their life savings in purchasing the bonds that originally financed that debt would now find themselves putting their money in a program that paid itself back at a rate lower than the annual inflation rate. In short, they would be throwing their money away in purchasing government bonds. So why then was it that China and Japan chose to continue to fill the role of financier behind the American debt, each country coming to hold about 20 percent of that debt? Unsurprisingly, this was not exactly done out of a spirit of kindness … but for simple economic reasons. Americans were key purchasers of the industrial production of both countries … and any American economic retreat would have damaged greatly their own industries. Besides, for China, holding such economic leverage over America played well in its growing interest in replacing America as the world's major superpower.   Former long-time Federal Reserve chairman Alan Greenspan ... and replacement nominee, Ben Bernanke (2005) THE FINANCIAL CATASTROPHE OF 2008 But ultimately it was this culture of greed at home in America that nearly toppled the American economy in the last days of the Bush II Administration. It had to do with the huge American housing market. The debt-addicted American world found that the home-construction industry was not keeping up with a growing demand of debt-consumed Americans (huge college loans, for instance) to move anyway on the American dream of home ownership. But there was also a bit of urgency driving this dream … as the price of housing had virtually doubled in the recent years and thus panicked purchasers felt that it was necessary to take on the home-owning challenge before the housing market got even worse for them. No one is able to purchase an expensive home on the basis of a cash payment … but instead is going to have to enlist the services of a bank willing to extend to a purchaser a loan (mortgage) – usually 30 years in duration as a payback matter – to cover the cost of the home. Of course banks are supposedly not stupid … and are supposed to look closely at the financial situation of a potential mortgage purchaser – to make certain that the purchaser is in the position economically to repay that loan on a steady basis. But at this point, the financial world seemed more interested in running up its business numbers (a matter of corporate prestige) than going at the matter with its traditional wisdom. A big part of this was that mortgage banks would have found their businesses slowing up greatly – because a serious consideration of the financial position of these already over-extended debtors would have lost them a lot of business. Relatively speaking it was harder and harder to find customers not already fully loaded up with debt – hardly in a position to take on more. Thus these huge banking organizations began to extend "subprime" mortgages to "subprime" purchasers … a very foolish thing to do. But at first this all seemed to go very well. Banks found themselves in business running at high speed. Then the bottom fell out of the dreamy enterprise. Contractors raced to get into the highly lucrative housing market … producing a housing boom of enormous magnitude. In fact the building boom was so great that soon recently-constructed houses were sitting there waiting for a purchaser. Some got sold, many did not. So, the contractors did what the market demanded: they lowered the prices of their finished home – until (like the oil market of the early 1980s) they found themselves in competition to corner the market with ever-lower-priced homes. But recent mortgage buyers were now finding that their mortgages were running at a higher rate than the cost of new housing – inviting many of them to sell in order to purchase a cheaper home. But this merely put even more houses on the over-saturated housing market. Many therefore simply "bankrupted" themselves to get out of the mortgage obligation altogether. Now the banks found themselves in trouble as panic hit the mortgage industry. And Wall Street was watching events closely, quickly losing confidence in a number of major banking corporations … and began to sell, sell, sell. At this point the two largest mortgage companies Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation) - not really federally owned companies, but federally backed – found themselves facing bankruptcy (their stock had lost 90 percent of its value by August of 2008). But so too were the huge mortgage corporations Bear Stearns and Lehman Brothers. Ultimately, Congress decided to bail out Fannie Mae and Freddie Mac ($100 billion of taxpayers' money) … slowing up – but not stopping completely – the panic. The huge financial firm J.P. Morgan was able to buy and thus save Bear Stearns … but Lehman Brothers could find no backing and simply collapsed. Likewise, Washington Mutual, America's largest savings and loan bank also collapsed. And America's largest insurance company, AIG (American International Group) nearly did so … its stock dropping from $70 a share down to $1.25 a share. It was saved only when the Federal Reserve stepped in and offered AIG an $85 billion bailout – increased the following year of Obama's first year in the White House to $180 billion. In short, the U.S. government found itself owning 80 percent of this huge insurance company. And AIG would then have to start selling off its subsidiaries in order to begin repayment of that huge debt.   2006 – Housing prices begin to drop for the first time in eleven years People are now hard pressed to find buyers for the houses they cannot continue to afford A protest in front of the Lehman Brothers headquarters in New York Lehman Brothers CEO Richard Fuld heckled by protesters upon leaving Capitol Hill – October 2008 BUSH'S TROUBLED ASSETS RELIEF PROGRAM (TARP) Indeed, Bush took economic control, getting Congress to authorize a $700 billion TARP (Troubled Assets Relief Program) to purchase parts or the whole of troubled American financial corporations … in order to calm the Wall Street panic that was ripping American corporations apart. But even at that, now the American automobile industry found itself in the same panic mode. Not only were houses now sitting unsold, so were cars facing the same problem: people were too frightened to take up a car loan. Thus the American "Big Three" (Ford, General Motors and Chrysler) were finding themselves in deep trouble at the same time as the housing market. In 2008, although the production capacity of the Big Three was 17 million cars a year, that year they produced only 10 million cars – a drop in their production rate by 45 percent of what it had been in 2007. Thus the labor force had to be cut back, worsening the unemployment picture … and the solvency of the Big Three themselves unable to come even close to meeting their operational costs. Here too, Congress had to step in to save these major American corporations from total destruction – even though both General Motors and Chrysler were forced to declare bankruptcy … in order to begin some kind of a rebuilding program.   September 29, 2008 – Treasury Secretary Hank Paulson (with Federal Reserve chief Bernanke at his side) begs Congress to authorize the $700 billion corporate bail-out package (the "Paulson Plan").  Congress's first answer was a "no" ... which immediately plunged the Dow 778 points – the worst single-day loss in the history of the New York's Wall Street stock market (at that point). Bankers (who were literally forced to take the government bailout) appearing before Congress – February 2009:  CEOs Lloyd Blankfein (Goldman Sachs), Jamie Dimon (JP Morgan Chase), Robert Kelly (Bank of New York Mellon), Vikram Pandit (Citigroup), John Stumpf (Wells Fargo).  Other banks  targeted for the Government's $125 billion stock purchase of their' preferred stock were State Street, Bank of America, Merrill Lynch, and Morgan Stanley Another car dealer having to go out of business SECULARISM PUSHES CHRISTIANITY INTO FURTHER RETREAT Middle America was also finding itself facing a huge loss in another area of its traditional social world: the federal courts forcing an even deeper retreat of America from its Christian social-cultural legacy … actively substituting Secularism as America's moral-spiritual underpinning. The Boomers were now the leaders of the adult world and – with the help of the ACLU – as dedicated as ever to seeing the Christian cultural roots of their parents (and, for that matter, nearly all Americans before them) dug up and replaced by fully Secular social-moral foundations. One particular individual would bring case after case to court – trying through different challenges to erase the Christian legacy from the public scene. Most notable was his Newdow v. U.S. Congress (2000-2004) case in which he tried to get the "under God" portion removed from the U.S. Pledge of Allegiance. He got a bit ahead of himself and, though he got the ever-Liberal 9th Circuit Court (covering Hawaii and the American West) to support him, he failed when the case advanced to the Supreme Court … though he would bring more cases to court in pressing forward (2005-2010). Things proved to be more successful for the American Left when the ACLU jumped into a case, Kitzmiller v. Dover Area School District (2005) when parents were outraged that a paragraph had been issued by the school board of Dover, Pennsylvania, to teachers to be read at the beginning of the 2004 school year – stating that students might want to explore the book Of Pandas and People … as a way of discovering that there were other explanations of Evolution than Darwin's. District Court Judge John Jones helped determine the outcome of the hearings by the way he called (or didn't call) specific individuals to speak on the matter. Thus not only did the decision go against the school board about this paragraph, Jones imposed a $1 million fine on the school board for "the breathtaking inanity of the Board's decision" (Jones' own words). Jones (and the ACLU) made it clear that "science" not "religion" were the only matters to involve themselves in the education of America's youth. The impoverished (and soon outvoted) Board carried the matter no further forward. Jones's decision thus stood as a ruling across the country. But also, he didn't get the Supreme Court appointment that he seemed to be angling for. Once again, the federal courts were telling Americans what it was – and was not – that they were to rest their worldview, their faith in life, on. Such matters were to be purely Material or Secular. Christianity, the worldview that had carried America forward through countless generations, was now forbidden in America's public life, especially in the training of rising American generations ... thanks to the ACLU – and those clever lawyers in black robes.   Newdow speaking at the Atheist Alliance International Convention in Long Beach, California, 2008 Judge John Jones III The reaction of Time Magazine The TV program NOVA Go on to the next section:  Meanwhile the World Has Its Own Issues   Miles H. Hodges