The last few weeks of political developments around the American-European financial system make us feel like we are back in the USSR. During the final years of communism’s decline, Soviet bureaucrats argued for futile tweaks to laws that would crack down on speculators and close “loopholes” – all in the vain hope they could keep the unproductive system of incentives intact. The US, UK and key European countries are now making the same errors. Rather than recognising the dangerous systemic failures in our financial system, their leaders are proposing bandages that can – at best – only postpone another, possibly much larger, meltdown.
There is growing recognition that our financial system is running a doomsday cycle. Whenever it fails, we rely on lax money and fiscal policies to bail it out. This response teaches the financial sector a simple lesson: take large gambles to get paid handsomely, and don’t worry about the costs – they will be paid by taxpayers (through fiscal bail-outs), savers (through interest rates cut to zero), and many workers (through lost jobs). Our financial system is thus resurrected to gamble again – and to fail again. Such cycles have been manifest at least since the 1970s and they are getting larger. This danger has even been recognised at the Bank of England, where Andrew Haldane, responsible for financial stability, recently published an eloquent critique of what he calls our “doom loop”.
Read the whole article for a scathing analysis of how delusional and corruptly screwed up us is.
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YES!
Big banks (at least in the US and UK) don’t carry an equity cushion, so governments end up bailing them out. They should be required to carry a cushion and not rely solely on “sophisticated risk management” strategies.
Bank executives should be liable for losses just as they personally profit from profits. This should extend into previous pay and bonuses. Right now they have no personal exposure.
Stop the revolving door from Fed to Banks. A break period of years should be normal.
How do you view the article? The site says I’ve already viewed my 1 free article per month 🙁
“Soviet bureaucrats argued for futile tweaks to laws that would crack down on speculators…”
What ‘speculators’? The analogy is false, so no, it is hardly like the USSR at all. The end result is the only thing that could be similar (but it will not).
Roman Empire, know that’s another story.
The solution? Let banks do whatever they want that doesn’t involving breaking a moral law (lying, stealing, murdering, rape, etc.). Then, when a bank fails, don’t save it. So easy.
# 7
Oops, now not know.
Actually, for quite some time I’ve believed that we’re just a huge banana republic, but one so wealthy that massive looting can take place trough crony “capitalism” without the serfs noticing. My belief was confirmed in this excellent article:
Introduction:
The Quiet Coup
May 2009 Atlantic
“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.”
The US started the slide back in the 1990s.
The US will not go the way of Rome, moreover it will go like the former superpowers of UK, France and Spain.
We will first become like the UK. A marginal nation that works in coalition with the real powers. (China and India as time goes along) Then slowly fade like Spain and France to become just an annoying voice. Finally into to Austria to become a quaint place to spend a holiday and think of all they used to do.
Russia has already slid into the UK post and is fast approaching France’s annoying little twits phrase. The days of the nuclear giants are over. Faster, sleeker predators have come in. Until they bloat and die as well and be taken over by Brazil and a unified Korea.
Cursor_
The USSR with it’s demise demonstrated that putting most of the nation’s resources in public hands spells disaster. The USA with it’s demise will demonstrate that putting most of the nation’s resources in private hands spells disaster. Hopefully Europe will find the magic point in between that avoids the disaster to be found at the extremes. Emigrate while you still can.
Wait, if the bailouts are considered bad, why did the Republicrats push them so hard?
jbenson2@6, your posts is the sort of brain dead crap that has us in the place we are today. In case you have forgotten, this meltdown began after eight years of Dubya, eight years of Clinton and twelve years of Regan/Bush, conservatives (regardless of party label) all. And Obama is another one just like them.
This isn’t socalism and it isn’t communism. It’s crony capitalism cum neo-feudalism. Both parties serve the same master and the “differences” between them are designed to divide us so that we don’t pay attention to what is going on. Each wants no more than to gain power so that they can divvy up the spoils among their corporate masters and political benefactors. No more. No less.
#8 sothgard said
“The solution? Let banks do whatever they want that doesn’t involving breaking a moral law (lying, stealing, murdering, rape, etc.). Then, when a bank fails, don’t save it. So easy.”
That’s the problem. In 1886 the US Supreme Court ruled that companies have the same constitutional protections as people. The implications are that executives are not liable for questionable ethical and illegal decisions that they make.
#8 sothgard said
“The solution? Let banks do whatever they want that doesn’t involving breaking a moral law (lying, stealing, murdering, rape, etc.). Then, when a bank fails, don’t save it. So easy.”
Err well sorta.
If the failure of the institution means economic melt down because its ‘too big to fail’, then something will have to be done. So you’ve got three choices – not allow institutions that are ‘too big to fail’. Stop ‘too big to fail’ institutions from failing (presumably by regulation). If a ‘too big to fail’ institution fails – it must be kept going.
Personally I think too big to fail institutions shouldn’t exist. And then they can fail.
On the other point ‘breaking a moral law’ well that has to be encoded into regulation to make it work. So what you are really saying is you want regulation.
And as an aside – in the recent crisis, presumably ‘moral law’ was broken. So whys nobody in jail? Why are bonus bigger this year? Who are the people who have broken said ‘moral law’?
No.
Silly headline. We don’t have a central government that designs a single product. Not one of the 10s of thousands of products in this country. We have REGULATIONS, we always have, so does Canada, UK, Brazil, Japan, Spain, Italy, South Korea, etc. But Apple didn’t consult the government on how to design the click wheel for the iPod. Microsoft doesn’t ask the government if the little animated paperclip is annoying enough. Even under government ownership of stock, GM designs it’s own cars based on what it thinks consumers want (gov can set generic fuel standards, but doesn’t tell GM how wide air conditioner vents should be).
Our economy is still driven by consumer demand. When is good and bad, but very much unlike the USSR. It has it’s own sets of faults (such as greed driving nutty unrealistic housing prices past the point of any sense or realism). Our economy may fail, but it would be for entirely different issues than the USSR.
(Should have obviously said, “USSR had”. Yes, I’m that old.
#16, The answer to your question is the executive branch of the government (not just this one) failed to punish the offenders.
I’m glad there are people who get it. Especially #10 and #14.
I have been forseeing a second great depression for a while now. The things we need to do to prevent it have been tied up in subcomittees since the Republicans were in charge, and still are with the Democrats in charge.
It’s unfortunately going to take a systematic failure before we will get any real change.
Even then, the corporate controlled media is going to push to going back to the way things were, even though it is unsustainable.
I still get a kick out of all the morons who still think in therms of left and right wingers. Freakin morons.
There is a one party system in Washington, it’s not Republican or Democrat, Now that I think about you might call them Lobbicrats. They just keep the remnants of the two party system going to maintain the illusion it’s still in operation.
How’s that Healthcare bill with the left in control of the government ya bunch of sheep? It’s not the Republicans… It’s the Lobbycrats.
Eventually you run out of other peoples money.
Sorry, I’m tapped out!
Breetai, thanks for the illuminating contribution.
Actually both sides are corrupt, but they ARE different because they represent different pieces of the same malfunctioning whole. Because you presenting no solution let me do it for you: a third party that is magically immune from being bought by the same moneymen that bought the other two. Great idea!
The Right is essentially operating on the blueprint laid down by Nixon. They do their thing cohesively and adroitly. The problem is that their policies do not work.
The Left ought to be taking following the two Roosevelts. A monopoly busting and social welfare focused administration is just what we need. The problem is that all the Dems are deathly afraid of being associated with FDR, and to a lesser extent TR. They might get defunded. Babies.
Things do change, and that change overwhelmingly comes from establishment political figures. What’s needed is a politico with balls and the ability to execute.
You can now ride your fictional messianic third party hobby-horse back into the sunset.
A simple solution – throw the assholes that cause this turmoil into prison, and let them know that when they get out, the only thing they will have to their name is $100 and a cheap outfit. Give them the same treatment that drug dealers get – confiscation of property. The fact that the scope of these peoples’ willful greed, negligence, and general incompetence has gone for the most part, COMPLETELY unpunished is beyond the bounds of reason.
I go with #1.
Thanks to # 10 Winston for the link to the excellent Atlantic article. My favorite quotes from the article:
1) “Anything that is too big to fail is too big to exist.”
2) “The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.”
I think we can fix this problem by giving CEO’s a nice bonus.