Even worse, when an someone actually does their job to protect us correctly the powers in charge instead of acting on the facts and protecting us choose instead to persecute the investigator and hound them from the service of their country instead of prosecuting the crooks. For example, take the case of the short career of Brooksley Born who foresaw the derivative market scandal whose collapse was one of the leading causes of our current financial mess. A decade before the collapse there was plenty of warning of the impending disaster as documented by PBS :Frontline. Instead of commending her and heeding her warning she was ignominiously chased from office.

And congress has gotten into the act as well. By, for example, pressuring regulators for years to allow risky loans then when the house collapses crying crocodile tears while scrambling to blame everyone but themselves. I can remember congressional hearings where Fannie Mae regulators were raked over the coals for not providing risky loans to low income families even as the housing bubble was on the verge of collapse. Not that Fannie Mae executives are blameless. Through campaign contributions and other favors they influenced congress to promote policies that were wonderful for themselves but bad for the economy.

So what was done about this disgraceful situation? Absolutely nothing! Through at least two administrations (Clinton and Bush) and multiple congresses business has proceeded as usual in Washington. Our elected “leaders” continue to fiddle and dither while the economy burns to the ground around them. I know that many Obama supporters hoped that things would be different once he became president. Alas, it’s still business as usual as our new president continues to appoint the same old insiders to regulate (shield) financial markets. The very people who created the mess are charged with cleaning it up. Indeed, it’s an old old story; first create a crisis then profit from it by “cleaning it up“. Historically this has never worked and it doesn’t seem to be working now.

Unfortunately the problem is more serious than just poor regulations or shoddy investigations. At stake is an economic collapse causing breakdown of the social fabric as unemployment rises and goods become expensive and scarce. Already California is so deep in debt (42 billion and climbing) that they have one of the lowest credit ratings of any government. No longer are they able to borrow their way out of trouble. As a result businesses (and jobs) are fleeing the state while Draconian tax measures are proposed to “fix” things and that is, as they say, only the tip of the iceberg.

On a national level the federal government can create an unlimited supply of money by “borrowing” from the federal reserve in order to “solve” the national financial crisis but this has the same effect as just printing money without sufficient backing causing at the very least inflation. You’d have thought that we would have learned the historical lessons about hyperinflation to avoid this calamity but as Dr. Batra has pointed out it seems that every generation seems destined to make the same mistakes (thereby contributing to the cyclic ups and downs in our economy).

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Tags: Economics, free trade, politics

This entry was posted on Tuesday, November 10th, 2009 at 5:11 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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