Two September shocks will define the presidency of George W. Bush. Stunningly enough, it already seems clear that the second — the financial crisis that has only begun to unfold — may well have far greater and more lasting ramifications than the terrorist attacks of Sept. 11, 2001.
That’s because while 9/11 changed the way we view the world, the current financial crisis has changed the way the world views us. And it will also change, in some very fundamental ways, the way the world works….
The current economic debacle is far more likely to be seen by historians as a true global watershed: the end of one period and the beginning of another. The financial chaos has brought down the curtain on a wide range of basic and enduring tenets also closely linked with the Reagan era, those associated with neoliberal economics, the system that the Nobel Prize-winning economist Joseph Stiglitz has called “that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently and serve the public interest well.” Already this crisis has seen not just our enemies but even some of our closest allies wondering whether we are at the beginning of the end of both American-style capitalism and of American supremacy.
RE: “”that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently and serve the public interest well.”
Well actually — what we’ve learned [once again] is that the market is self-correcting, resources are allocated efficiently, and the public interest is served well . . . but the government decided it did not appreciate where the resources were going, how the market was self-correcting, and which publics were being served well . . . and it decided to change all of those things by nationalizing the industry.
Oh, it’s a debacle alright. We’ll now enjoy a much longer recession than we might have, because the government wanted to serve its interests — and those of its favored few — more than it wanted to serve other interests.
One would like to think this would be the end of government social engineering by interference in markets. In a sane world, that’s what we’d be talking about.
Rothkopf is a leading member of “civil society”– another global elite that would like to run the world, which considers itself superior to business and government, and which is animated by strong secular and socialist convictions. Fortunately, the sector lacks power and is unable to generate its own money.
I’ll second what Sarah said, and add the note that government was allocating massive amounts of resources before the takeover of F&F;.
“The financial chaos has brought down the curtain on [the notion that] ‘markets are self-correcting, allocate resources efficiently and serve the public interest well.'”
– – – If it were only that simple.
“Markets are self-correcting”
– – – If it were only that simple.
The real culprit in this debacle is government social engineering. The justice department leaned on the big players because of perceived discriminatory outcomes in approvals of mortgages. Rather than defend objective standards – the big players lowered the standards by which the consumer was given approval for a mortgage. Once the checks and balances were removed greed took over – builders got into cahoots with brokers to move dirt, banks offloaded bad loans by bundling them together and marketing them as investments. The system has been brought to its nears because the goverment mandated the giviing of homes to the renter class (sane capitalists would not have done so) – I fear that only the government if big enough to stop the meltdown. However, since most mortgages are not in default – once confidence is restored things should come out alright – assuming the Govt gets out of the finance business – a big if.
“Government will rescue us”
– – – If only were that simple.
How’s that bailout looking on Wall Street these days?
“The real culprit in this debacle is government social engineering. The justice department leaned on the big players because of perceived discriminatory outcomes in approvals of mortgages”
A widely propagated but fundamentally misleading argument. Lenders believed that more flexible (i.e., lower) credit standards would maximize their profits.
Since the market has never been a true “free market” in most of our lifetimes, we wouldn’t really know about its ability to self-correct. But we do know that a market without regulation becomes imbalanced very quickly.
Speaking of social engineering, for those with an interest how we became a consumption based economy please feel free to spend an hour reviewing the life and influence of Sigmund Freud’s cousin Edward Bernays. There is a documentary in six parts. “Propaganda in America-History of Public Relations” for your viewing pleasure on YouTube. I would appreciate comments if you so choose. Or if you’ve a mind, an email.
Timothy.
RE: “How’s that bailout looking on Wall Street these days?”
Precisely the way I expected. I grew far more concerned about the economy, thanks to the bailout interfering with the ability of the market to correct. I expected Wall Street to feel the same way.
edit..make that nephew rather than cousin.