There is great political motivation for not saying what is unpopular. A lot of mistakes were made that resulted in the economic bubble that created the basis for the Great Recession and could have been avoided with proper financial regulation.
The shadow banking system where the Wild West leverage was created for sub-prime lending occurred outside of Federal regulatory reach.
That is always how it works. The financial wizards figure their way around regulation given enough time.
It didn’t take very long, but regulation has already been turned into something bad characterized as weighing on the economic recovery.
The opposition to regulation should be clarified. There is wise regulation that has kept the trains running on the tracks, and there is stupid regulation that wastes time and fuel to keep the engine in gear, while they have set the brake.
Dodd-Frank has some of the former, but too much of the latter.
Washington seems unable to be tell the difference between the two.
It is wrong to rail against all regulation. Without some guidance the trains will run off the tracks.
That is too gray for many conservatives who have to have it either black or white.
Counting on an unregulated society or totally on the market to do the right thing will bring unmitigated disasters.
The whole point of this liturgy is to make the case how lucky we were to get through the financial crisis with our skins and, what to me is the most concerning, is to recognize that the economic risks have not all been assuaged, some have only been dampened down with means that create new risks that will have to be addressed.
The text above regarding the Great Recession was written in past tense. Not enough time has passed to be that sure of anything.
The economic recovery relapsed into recession again in the late-1930s when Congress regressed to draconian fiscal policy.
Before that the Smoot-Hawley tariffs damaged global trade. These mistakes could be mimicked in current history.
The consensus and tools to save the economy that the Feds used to save the banking system from failure could not be replicated today from a new shock or stumble in the hostile political environment that exists.
There are candidates for high office running around still blasting the government for having bailed out the banks, pledging how they would never agree do that because of their steadfast adherence to their conservative ideology.
They talk like our only real problem is big government. Were it really that simple.
These guys generate applause from adoring crowds who have no clue whatsoever what they are applauding.
We have not seen the last financial crisis. We can have a relapse or it could start overseas and globally metastasize and I will pretty much guarantee you that the Congress that we have in Washington now will make whatever bad happens much worse.
They may even start it themselves by defaulting on purpose on the federal debt. The Congress that we are likely to elect next will be dangerous.
It was politically unpopular to do the right thing during the Great Recession, and I don’t think those in Congress could stand up to that pressure again.
There are many running for office that espouse political perspectives on economics that would produce an economic disaster.
They promote protectionist trade policies, Lasse-faire regulation, draconian spending reductions, unfettered economic concentration and an end to Fed independence.
If there is another major economic crisis in the near-term before consensus becomes rational again I think that the economy will go down the tubes and Congress will make sure no one saves it.
The inflexibility of the ideologues becomes a death wish where if the economy is wounded they stomp on it to make sure that it can’t be revived.
They would just claim that it was all Obama’s fault.
Their purported morality is the hazard. No, the villains of the last economic calamity did not get their just deserts.
Yes, that is a travesty, but this idea that burning Washington down will make things right is nuts. Get over it.
Ben Bernanke was a student of the Great Depression and it is not very often that we would be so fortunate to have the right man in the right place at the right time with enough tools, but every so often it happens.
To our good fortune it just did. I am just not confident that it could happen twice.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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