What he said …

I keep talking about the utter audacity of the political class these days and how they completely ignore everything we know about economics and finance in pursuit of self-dealing and getting political donations from the FIRE industries. I particularly hate that we’ve got this complete twisted notion of “free” trade and “free” markets thanks to a bunch of really ignorant right wingers and mouthpieces like Rush Limbaugh,  Fox News, Larry Kudlow, etc. etc. etc.. These folks are out to line their own pockets and they are pitching nonsense to low information zombies.

I also really hate to just wholesale copy and paste another blog–in this case Washington Blog at The Big Picture–but some times you just have to  let the voice of the source speak for itself and hope it stands up to the ideals of fair use. Thanks go to Fiscal Liberal for pointing  me to this list and its readable wonky links of proof.  It’s called ‘The Financial Crisis was Entirely Foreseeable’ but it might as well be labelled ‘Idiots in the Beltway are spewing memes and setting us up for a big ol’ repeat of the global financial meltdown’.  Idiots in Europe are doing likewise.  Why are they all bailing ut gambling bankers over their households and real businesses?  Where’s a politician that really knows his stuff when it comes to authentic finance and economics?

We’ve Known for Thousands of Years

We’ve known for literally thousands of years that debts need to be periodically written down, or the entire economy will collapse. And see this.

We’ve known for 1,900 years that that rampant inequality destroys societies.

We’ve known for thousands of years that debasing currencies leads to economic collapse.

We’ve known for hundreds of years that the failure to punish financial fraud destroys economies.

We’ve known for hundreds of years that monopolies and the political influence which accompanies too much power in too few hands is dangerous for free markets.

We’ve known for hundreds of years that trust is vital for a healthy economy.

We’ve known since the 1930s Great Depression that separating depository banking from speculative investment banking is key to economic stability. See this, this, this and this.

We’ve known since 1988 that quantitative easing doesn’t work to rescue an ailing economy.

We’ve known since 1993 that derivatives such as credit default swaps – if not reined in – could take down the economy. And see this.

We’ve known since 1998 that crony capitalism destroys even the strongest economies, and that economies that are capitalist in name only need major reforms to create accountability and competitive markets.

We’ve known since 2007 or earlier that lax oversight of hedge funds could blow up the economy.

And we knew before the 2008 financial crash and subsequent bailouts that:

  • The easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, and “the use of gimmicks and palliatives” by central banks hurt the economy
  • Anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts “will only make things worse”
  • Bailouts of big banks harm the economy
  • The Fed and other central banks were simply transferring risk from private banks to governments, which could lead to a sovereign debt crisis

Given the insane levels of debt, rampant inequality,  currency debasement, failure to punish financial fraud, growth of the too big to fails, repeal of Glass-Steagall, refusal to rein in derivatives, crony capitalism and other shenanigans … the financial crisis was entirely foreseeable.

Okay, so let’s just end that last part by taking out “the financial crisis was entirely foreseeable” and by replacing it with “the next big financial crisis is entirely foreseeable and getting more likely every day”.   If you need any proof of further inevitability just listen to ANY Republican these days and most of the Democratic Caucus.  They are resplendent with VooDoo Economics and Finance believers and enablers. It’s just like with climate science and evolution.   An entire group of people who embrace ideology over reality just can’t seem to get out of the flat earth theories.  Watching the Republican debates alone has been like watching the march of ignorance personified.  I’m waiting for them to start announcing the earth is only a few thousand years old, gravity doesn’t exist or need to because god’s hand holds us in place, and 1 + 1 is really 3. If only the media would act like the set of fact checkers they could be instead of mouthpieces for corporate interests we might actually be able to get through to a few zombies and bring them back to life.  Until then, get ready for the next big one.


6 Comments on “What he said …”

  1. northwestrain says:

    The goose than laid the golden egg is going to be dead soon.

    Without customers (the goose) to buy stuff — and generally that would be the middle class — the upper 1% is going down as well.

    That list is absolutely right on target.

    • ralphb says:

      The 0.1% may not go down. They’ll just own everything and the rest of the world will be their serfs. That seems to be their thinking.

  2. quixote says:

    Excellent post. And the links in the Washington Blog piece are like an essential reference library of econ history so you don’t have to repeat it!

  3. peggysue22 says:

    I think it is audacity and hubris in the political class to trot along with the criminal financial lobbyists, claim all reform is Marxist in nature. They feather their nests, while the rest of the country bleeds. Eric Cantor had the audacity to block the insider trading bill. Needs more study, he claimed. This double-faced weasel should be run out of DC, toute suite. More study?? Who is he kidding?

    This whole shebang is just more of ‘don’t trust your lying eyes’ and a rewrite of history. The appalling thing is so many Americans are jumping on the train as the way to go. Nothing like cheering for your own suicide.

    Great piece, Dak! We need to staple it to people’s foreheads.