Krugman (Yes, Again) On Why The Busts Keep Getting Bigger

Is today’s financial crisis, which wrought chaos in 2008-2009, a singularly catastrophic event, without precedent and unlikely to happen again? Or is there a recurring pattern of such events, not only observable earlier in our nation’s memory and liable to happen again, but also built into the fabric of America’s approach to regulation (or nonregulation) of financial markets? In a book review by Paul Krugman and Robin Wells of Jeff Madrick’s Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (search for it at your own public library or local bookseller; I’m not going to send business to the A-word), the authors answer those questions emphatically No and Yes: not only is 2008-2009 not the first time we’ve seen this sort of event, but there is indeed a pattern, and absent something that resembles genuine regulation of financial markets more than the insubstantial fictions advanced by both political parties these days (as sacred text by congressional Republicans, and as an attempt to disguise cowardice as bipartisanship by a Democratic presidential administration), it will happen again… and again… quite possibly to the point of total financial collapse:

You get the picture. The great financial crisis of 2008–2009, whose consequences still blight our economy, is sometimes portrayed as a “black swan” or a “100-year flood”—that is, as an extraordinary event that nobody could have predicted. But it was, in fact, just the most recent installment in a recurrent pattern of financial overreach, taxpayer bailout, and subsequent Wall Street ingratitude. And all indications are that the pattern is set to continue.

Get ready for a rough ride, especially if you are young or old, or unemployed, or lost your mortgage, or never had much money in the first place… in other words, if you are a member of any of the subpopulations of American society who did better under saner economic times (and yes, there were such times; I remember them).

Obviously America must somehow change course. The under-regulated financial craziness may result in short-term wealth for its practitioners, but even that is unsustainable (not that you could ever convince an ideological Republican of that). Unless we all want to end up broke, hungry and homeless, there had better be some changes. But I see no changes forthcoming from President Hopey-Changey, nor, certainly, are there any emerging from his crack-brained opponents. The path to sustainable financial stability should be clear to anyone who has read an accurate economic history of the 1920s, 1930s and 1940s… but obviously it isn’t. If anyone can suggest a viable path from here to sanity, I’m willing to listen. (No libertarians or free-market worshipers need apply. Offer void where inhibited.)


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