
Economic Lessons the U.S. Forgot - robg
http://www.nytimes.com/2009/05/17/weekinreview/17goodman.html?hp
======
ckinnan
The financial crisis was grand political theater-- namely banks, their
creditors, and derivative counterparties created a panic in order to stick
taxpayers with trillions of dollars in losses. The media and policymakers were
either in the bag or cowed by unsubstantiated fearmongering about economic
collapse. If we had instead created an orderly way for these banks to fail
(while protecting retail savers and insurance policyholders), we'd be on the
path to recovery by now-- a recovery led by responsible banks. Instead we face
massive new levels of government debt, an expansion of corrupt crony
capitalism, and likely years of stagnation. Meanwhile, the perpetrators of the
crisis-- Fannie, Freddie, AIG, Citi, Goldman-- are largely intact and now are
taking on even greater risk under the umbrella of expanded government
backstops and even direct taxpayer funding.

~~~
old-gregg
I don't know much about economics but it seems that capitalism as I (used to)
understand it, with classic supply/demand curves and rational enterprises
competing for consumer cash, was just a fantasy.

Turns out that competing (and, generally, working) is a pain in the ass - so
the smartest people have long realized that nearly everybody can't go without:

* Healthcare

* Financial system

* Legal system

They have learned, that by merging with the state it becomes much easier to
extract arbitrary sums of money for these three basic functions [that normal
governments should provide for free].

Tools for wealth extraction vary: plain-vanilla taxes, insane medical
insurance costs, insane legal expenses, or just printing money at will (i.e.
devaluing what we already have).

Hasn't an average good parent been wishing for his/hers kid to become a
(lawyer|doctor|banker) within last 20 years? WTF? These "markets" don't create
any value - we don't choose to use their services, we _must_ pay them. No
wonder these costs have been skyrocketing.

Imagine a struggling entrepreneur with a monthly $1,400/mo medical insurance
bill (because that's what they _feel_ like charging), renting a crappy
apartment for $2,000/mo (because banking system has inflated property values
to insane limits) facing $10,000 fee to obtain a patent which will cost _much_
more to defend in court anyway.

Now: if you're 18, who do you want to become after college - an entrepreneur
or one of these people who extract these sums of money from him? No wonder the
private sector has been shrinking, while government and banking system have
been growing.

Listening to the news is depressing: they keep interviewing people, keep
asking "how to pay for healthcare? how to save our banking system?" instead of
just asking simple _why?_ Why doctors need to make millions? Why do medical
equipment salesmen need to have private jets? Why 5% down-payments for 30 year
mortgages are the norm? And why our banks need to be so freakishly huge that
we're afraid they could fail?

~~~
amalcon
That last one's bugged me for a while. If small, local banks weren't permitted
to merge until such time as they were "too big to fail", there would likely be
no need to bail them out today.

There are economies of scale in banking, but they're not on the same level as
manufacturing industries and that sort of thing.

------
stcredzero
Looking at our history of financial debacles, it seems like people are
learning from them: namely the perpetrators! It's like the S&L crisis was just
a rehearsal for the recent Ponzi Scheme Economy.

------
Dilpil
How many times does the new york times need to write this story?

------
TweedHeads
Cleptocracy is the modern form of government.

Those in power don't look after the people anymore, all they want is to steal
all they can while securing their loot.

There is no financial crisis, not in the sense of a '29s depression, that was
just a smoke curtain to make everybody forget about all the Bush
administration did wrong while looting even more from the already drained
institutions and tax payers.

And they succeeded, we already forgot...

~~~
jibiki
[citation needed]

