Pigeon Trials
Quite a few EP regulars have written in recently to ask whether the current upset in the financial markets marks the start of our economic collapse. Who knows? My guess would be no, despite the outstanding trillions of dollars worth of mystery derivatives and other, as yet unaddressed financial time-bombs. At the same time, I hasten to point out that the larger part of America's troubles have to do with job exports. Unemployment can't reasonably be seen as a by-product of financial heartburn. Nor can the drop in the value of the dollar. The basic structural problem remains that the U.S. buys more abroad than it sells, a situation that cannot persist indefinitely.
I doubt we'll see a spectacular crash unless and until the current account deficit begins to unwind in a rapid, unexpected, and uncontrollable way, perhaps combined with a dramatic ramping in energy prices. Meanwhile, the financial services sector gets a massive, undeserved bailout; ordinary consumers and mortgage payers get some crumbs. Thus this bubble, like the dot.com bubble, collapses, leaving the system shaken but intact. Our oligarchic swindlers will then move on to their next target.
What surprises me is that nobody in the Washington establishment, and precious few in Europe, are discussing the option of re-regulating the financial sector. It's as if the entirely predictable frauds we're seeing were some sort of act of nature, a hurricane or earthquake, that we're able only to respond to in retrospect. Utter nonsense, of course. The religion of "free markets" has thoroughly blinded most of us. Nevertheless, said absence of discussion amounts to political malpractice.
† I was going to mention Glass-Steagall but didn't. I see, however, that Paul Craig Roberts brings it up in a superb piece this morning. Well worth reading.
Posted by George Kenney on March 11, 2008 8:46 AM 
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Comments
Paul Craig Roberts is one of my favorite columnists. I am intrigued that he worked for Reagan but now writes for Counterpunch. I wonder exactly how he characterizes himself these days, politically and economically. At least he's not for knee-jerk free-trade, which means speculation and union-busting. I also enjoy reading Pat Buchanan, because he's intelligent, antiwar and skeptical of 'free trade'. He's also evolved over the years, it seems. I guess age is a blessing for those of us who know how to use it.
Posted by: benjamin777
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March 11, 2008 2:39 PM
Yes, I have lots of problems with Pat B. on things like gay rights.
However, on the war and economy he has been one of the best, and more importantly, prescient columnists around.
Posted by: daveg | March 13, 2008 3:20 AM
Today's read in the Herald Tribune: US government is drawing up plans to reregulate financial market so goes the gossip...
Posted by: waldo | March 14, 2008 11:38 PM