The Quiet Coup

[kristopher]

Josh Marshall recommended this at his Talking Point Memo blog http://www.talkingpointsmemo.com/
I recommend it as highly as he does. The charts speak loads and don't need elaboration by me.

The Quiet Coup
by Simon Johnson

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

<snip>

...In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel....



http://www.theatlantic.com/doc/200905/imf-advice

[tabatha]

1. Yes, all the trouble started in the 19070s and 1980s

that some people want to blame on women entering the workforce.

The problem is the corporations - not the gender of workers.

[NYC_SKP]

2. I've forgotten, what useful high quality thing does the financial sector make?

Oh yeah, it doesn't really make anything useful or high quality.

Recommended.

I love visuals; graphs and charts.

[anigbrowl]

5. It measures risk and allocates capital

This info isn't new to me actually, the Economist did a biggish story on the subject last year. The fact that the financial sector has gotten out of control in recent years doesn't mean it lacks any useful purpose. Just think of it as infrastructure for money - every country needs one, but if it gets out of control you get economic pollution and traffic jams.

[southerncrone]

6. No value-added. They simply leach off the productive.

Then take the leach & bribe another group, hop-scotching around the globe, ruining nation after nation, while destroying the planet. They are simply licensed thieves.

At least that's my take on 'em.

The old joke about how to make the world a better place would be to take all the lawyers & doctors & dump them to the bottom of the sea, left out the most despicable....the merchant bankers, worst of the bunch.

[napoleon_in_rags]

3. Wow.

When I get these little glimpses of the size and scope of things going on it kind of takes my breath away, and puts me at a loss for words.

[chill_wind]

4. K & R n/t