The Perils of Deregulation

[marmar]

from TPMCafe:



The Perils of Deregulation
By Jeff Faux - April 16, 2008, 2:26PM



Kevin Phillips' description of the Ponzi pyramid seems about right.

I'd add that at the bottom was the growing gap between the 25 year slowdown in wages and middle class incomes and the intensified pressures of a "shop-til-we-drop" culture. I don't know how much of the story was culture and how much was inadequate incomes. But the drop in the personal savings rate from 10 percent when the Reagan era began to less than ½ of one percent today clearly reflects a working/middle class whose definition of a decent life is now beyond their monthly income - and for many, if not most, their monthly payments as well.

The most telling number in Kevin's collection of charts shows the expanding importance of finance in the economy.

The structural shift away from manufacturing to Wall Street pretty much guaranteed economic growth based on speculative bubbles. Debt is what the finance industry makes. Innovation is aimed at producing debt more efficiently. Ergo the leveraged securitization of just about everything. What is it about the Great Depression that our policymakers don't understand?

The hostility of Wall Street to regulation goes beyond the natural inclination of business not to want to be policed by government. Modern finance thrives on instability. For those on the inside, the direction of the market doesn't matter, so long as it's changing. Today's NY Times front pages tells us that hedge fund managers made billions (yes, that's a "b") last year as markets tanked.

Manufacturing requires long term horizons. Plant and equipment take years, sometimes decades, to make back the return on investment. Investors want some degree of stability. This was John Kenneth Galbraith's point about the development of the post World War II New Industrial State, in which government and business collaborated to decrease market instability in order to encourage investment.

The domination of finance has radically changed the definition of economics and economic policy. If economics is about buying a security at 11:30 in the morning and selling before 3pm, the last thing you want is government regulation. Slowing the process down by ten minutes could cost you a bundle.

As Kevin notes, it's not like Bear Stearns is the first. The punditry is "Shocked. Shocked." But we've been bailing out speculators at the same time that we have been de-regulating them. Washington now acts as enabler to Wall Street's binge drinkers. When they crash, moral hazard be damned. The Fed and the Treasury - suddenly faced, they say, with the threat a "meltdown" -- pay their tab, clean up the mess and let them belly up to the bar again. Is the 'meltdown" danger real? No one in the government,and probably no one in the world, now has enough information to know. .....(more)

The complete piece is at: http://tpmcafe.talkingpointsmemo.com/2008/04/16/the_perils_of_deregulation/

[mac2]

1. They are crooks...and very dangerous ones.

Have you read The Conspirators by Al Martin? He says, he was part of the Ponzi schemes under the Bush family. He was in Naval Intelligence. He testified before Congress.

I also heard of a book called Economic Hit Man. He worked all over the globe doing their dirty work. All the leg work to get the facts and names are known and has been done by investigative journalists like Watergate.

Why when Congress knows of these crooks they don't jail or impeach them says to me, they are part of the problem.

[marmar]

2. "Have you read The Conspirators by Al Martin?"

Not yet, but I'll check it out! :hi:

[OneBlueSky]

3. deregulation = corporate license to steal . . . always has been, always will be . . . n/t

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