"the only way to accomplish this is to get America back on the course of rising median incomes."

Robert Reich has a post that I think is correct, but not necessarily for the same reasons:

"If this isn't a Great Crash I don't know how to define one. Stocks were down another 7 percent today. Since the peak of last year, major stock indexes have dropped 47 percent. We're in range of the Great Crash of 1929."

I think that this is a Stock Market Crash, but that doesn't mean it's like 1929.

"Why is the Great Crash of 2008 happening? First, because investors are beginning to understand the enormity of the bubble economy that began to form in the late 1990s when all contraints were lifted on borrowing in order to buy everything that was assumed to be increasing in value -- starting with houses and including securities and shares of stock themselves. So-called "margin requirements," first instituted in the wake of the Great Crash of 1929, were all but abandoned, as big banks and hedge funds found ways around them."

I agree that Leveraging was the problem, and that Deleveraging is the solution. However, I believe that this financial innovation has been an ongoing process, and I would offer the S & L Crisis as proof. I don't think it's that investors are beginning to understand the enormity of the problem, so much as being surprised that government action hasn't been more effective. You see, I believe that investors had a robust view of the size and efficacy of government intervention.

"Even more important, investors are starting to fathom the emptiness of American consumers' wallets. Retail sales last Friday and Saturday -- the first days of the Christmas buying season -- were disappointing. Had retailers not discounted to the point of taking losses, sales would have been abysmal. In other words, consumers have gone on strike."

I didn't see the sales being that bad given the enormity of the fear and aversion to risk now prevalent. I would say that consumers are being prudent.

"Why have they gone on strike? Not because of the difficulty of getting credit. Most consumers can barely afford to pay the interest charges on the debt they're already carrying. Consumers have gone on strike because their earnings haven't kept up. The recovery that officially ended December, 2007 (the National Bureau of Economic Research now tells us) was the first on record in which median earnings declined, adjusted for inflation. Since then, many people have also lost their jobs or are working part time when they'd rather be working full time, or else know they're in danger of losing their jobs."

Now, there's a big debate on this, which I've posted about, and I feel that Reich's figures might be off. However, he's not incorrect about how people feel, which is more important than numbers, which are only that.

"The speculative bubble still has some air in it; asset values will continue to drop before they hit bottom. That will take at least a year, possibly two. But don't expect asset values to bounce substantially back, even then. The only way to revive Wall Street is to revive Main Street, and the only way to accomplish this is to get America back on the course of rising median incomes."

I actually feel more strongly about this than Prof. Reich. Unless and until we have a Middle Class that feels itself to be middle class and not just above destitution, there will never be a serious movement to limit government. The feeling and security of wealth is necessary for a population to cut itself loose from a social safety net, which will always have to exist for the truly needy, instead of using government to remain just above destitution.

One other thing. I agree with this strategy. I would not accept a society of gross inequalities in wealth and power, and so, as Thoreau, I believe that people will only have less government when they are prepared for it.