THE GREAT RECESSION: Plus ca change

I was watching a 2010 documentary called Inside Job the other night. It is the story of the worldwide economic crisis of recent years, and particularly about the bad guys in the US system who made it happen. Of course, that is a very particular view, because it was happening here in Europe too, and we had our own bad guys. And it wasn’t just bad guys, as the film made clear. It was also a herd mentality.

The main point, though, was that it happened because the

financial system had been deregulated from the 1980s onwards, leading to a series of increasingly big financial crises. And in the US, despite what has happened, no-one has been prosecuted and new regulation has not been brought in to stop it happening again. I had not realised this, and it is shocking. Wall St has become too big and too powerful for legislation to be politically possible.

Well, almost. I did my research afterwards, and it seems the Dodd-Frank Bill of 2010 (too late for the documentary) was intended to produce the greatest ever reform of the financial sector. But 3 years later, less than half of it has been implemented, and according to an 11 part series in Forbes Magazine, it is not sufficient to prevent another meltdown. Key sectors have not been reformed, and there is no plan to do so in any effective way.

Eg the banks that are Too Big To Fail (creating issues of moral hazard) are now bigger and more complex than in 2008, and the retail and investment arms have not been ring-fenced, endangering ordinary customers and small businesses. The ring-fencing requires international agreement for reasons of competition, but the US is usually able to get what it wants, and Europe in this case seems quite willing. The problem with the US megabanks is worse than it ever was.

Unregulated derivatives trading also leads to crises, and there is a loophole in the new regs which would allow the megabanks to continue their trading abroad. It is being fought ferociously, and it’s not clear who will win. But the megabanks tend to.

(I read a very good book on the financial crisis, ‘How do we Fix this Mess?’ and the author, Robert Peston, was astonished in 2006 to find that the boards of banks did not understand their derivative trading arms, let alone monitor them. This was when he began to suspect a major crisis was on the way – and the BBC (for whom he is the Business Editor) tried to stop him saying so!)

Five years after the meltdown, and they are still only starting to talk about higher capital requirements for banks.

There has been no bill to reform the credit-rating agencies, who were responsible for giving AAA ratings to junk securities.

Nothing has been done to reform the mortgage providers Fanny Mae and Freddie Mac, who played a key role in the sub-prime housing crisis.

There seems to be no prospect of the regulators required to oversee any new rules being given the extra funding to do so.

So there it is, a dismal list.

Deregulation has made the financial sector vastly more profitable and therefore more powerful, so maybe it is too late to do much (though the European Parliament has passed some new financial regulations.) But to what degree is it really creating wealth, and how much is it just sucking wealth from everyone else? After all, the sector doesn’t actually MAKE anything. Sure, it enables, and that is good, it enables business ventures to get the loans and insurance they need, for example, and a host of other things. We really need this sector. Let’s not blindly knock it and demonise it, which too many people seem inclined to do. There are such people as bankers and fund managers who are good guys doing necessary jobs.

But all these extra profits of recent decades…  Before deregulation, the American economy expanded steadily for 4 decades. Since then it has continued expanding, but the gap between rich and poor has widened, there have been a series of economic crises and now, for the first time, the younger generation of Americans has lower economic expectations than its parents’ generation.

So has deregulation done anything other than undermine an economic prosperity which would have continued anyway, yes with the odd recession, but you expect that? Look at all the people who have lost out, the home-owners in the US who should never have been sold loans in the first place and who have therefore lost everything.

When Obama first became President, the money-people he appointed were all establishment high-flyers who had been intimately part of the system that led to the crash. This sent the immediate message to Wall St that nothing was going to change, and it hasn’t. Obama was first elected under a tsunami of reforming rhetoric, but one of his first acts was to show how conservative at heart he really is.

So where does this leave the astrology of the Great Recession? The Great Depression, which occurred under the last Uranus-Pluto Square, was also a result of lack of financial regulation. And there was the destruction followed by rebirth which is so characteristic of Pluto. A more regulated and therefore more stable financial system was created.

This time, however, no such Pluto rebirth seems to be happening. Yes, there is a rebirth in the sense that we seem to have climbed out of recession. But it is the same old system, so it is not a true rebirth. So next time there is a hard outer planet configuration, we can probably expect another crisis. Maybe not as big as this one. But still a crisis, caused for example by another housing bubble, the sort of thing the Fed used to lean against, any sign of ‘froth’. Watch out for the Saturn-Pluto conjunction in 6-7 years’ time. Or even Saturn square Neptune in 2 years time.

There are of course all sorts of dimensions to this Uranus-Pluto transit other than the economy. Like the ‘Arab Spring’, which could take decades to work through, and who knows which way it is going to go. Egypt being paradigmatic – desires for democracy vs desires for a theocracy vs the traditional certainties of the army in charge, with the West putting in its oar along the way according to its own interests.

But economically, it is interesting that you can have a transit of this magnitude – Uranus square Pluto, hard aspecting the Suns of nearly all the major powers (unlike the 30s)  - and you end up with the same system. At least, in the US. In Europe, we have had the Eurozone crisis, which is still to be resolved, but which was probably always about Germany being ultimately willing to save the situation but having to pretend otherwise. Moral hazard again. Angela Merkel’s masterly fudge.

We are coming up in November to the 4^th of 7 squares between Uranus and Pluto, so we are at the midpoint. The worst seems to be over, and the rest of the transit looks like it will be a working through of what has already happened.

As I say, the classic Pluto transit involves death and rebirth. But the rebirth involving a step forward usually needs some kind of consciousness brought to bear for it to happen. And this is difficult on a collective level. The US managed it with its financial regulations of the 30s. But Germany didn’t manage to move forward from the Great Depression, it just spiralled downwards.

With the current square, Europe seems to be moving forward in its currency crisis, though there is plenty of fudging left to do, and it has left Germany all-powerful. But the financial system itself that led to the crisis is still in place. OK, Europe has passed some regulations, but we can’t separate ourselves financially from the US.

So Uranus-Pluto has provided a tremendous shock to the financial system. But the ideology which led to de-regulation is still there, and for the US I guess it is tied up with its broader resistance to what it sees as ‘big government’. This in turn goes back to the rebellion against authority that occurred at its inception, and which is actually still an issue for it, expressed by the Sun-Saturn Square in the US Chart.

The thing is, you have to have government, and if the government itself isn’t doing a complete job, then others step in, in a less conscious sort of way. So you end up with big business and Wall St to a large extent ruling the US, instead of Congress doing so. (Last week there was the news that “former head of the SEC enforcement division Robert Khuzami has taken a $5 million-a-year job with Kirkland and Ellis, where he will no doubt spend a great deal of time defending Wall Street firms against SEC charges.”)

The US is at a point in the Uranus-Pluto square where it can still make choices, for the exact aspects to its Sun-Saturn will not occur until 2014-15. And then after that, some years down the line, it will have a Pluto Return, a reckoning of who holds the power in the US.

But looking more globally at the Uranus-Pluto Square, there is a death and rebirth going on, in the sense of a shift in the global balance of power away from the West and towards the BRIC countries (Brazil, Russia, India and China), particularly, for now, China.

So in that sense there is a rebirth for the West gradually coming about as Uranus-Pluto completes over the next few years – a return to prosperity in the old way, but with a key shift in of global power, pointing the way to a further diminution in the years to come. And hastened by the decadence of a system which has been wealthy for so long, that it has forgotten it needs to earn that wealth, a system which in important ways benefits the few at the expense of the underlying health of the economy.