http://dailybail.com/home/there-are-no-words-to-describe-the-following-part-ii.HTML

I am honored that my reply chafed enough to warrant an answer.

While I agree that the world has gotten faster, every administration seeks to solve the problems the prior administration created. In this case, one can make one of two arguments: a) that the Bush administration failed to see the errors of the prior administration and/or to fix them; b) changes in market dynamics (individual investors with short attention spans and even less research) combined with regulatory changes since the mid-90′s made this mess.

The boom-and-bust cycle of the United States economy has always been a result of factors: the tug-of-war between two parties complete with (by definition, non-compromising) dogma, and unnecessary burdens of patchwork regulations, poorly written, poorly understood, and poorly enforced.

If Libertarians were right, Canada would have completely imploded, but it didn’t. If the ‘regulate everything’ people (liberals? progressives? what are they supposed to be called now) were right, they’d need to look no farther than Germany, whose economy has been considered the “tail light” of the EU economy for seven years out of the last ten, competitive with only France and the UK for the lowest growth numbers.

Regulation will not save anybody unless it bans them from investing stupidly, which has been tried in a number of countries with mixed success. I don’t see that happening.

You’re arguing to protect people from bets placed with their eyes closed, which no amount of regulation would have controlled.

You will have noticed my original comment about Clinton also being complicit in this deregulatory fiasco; and, in fact, his administration was indeed key in removing some of the Glass-Steagall protections that we will now, once again, be re-instating.

But your comment “it seems to me that changes to a set of economic rules take much longer than five years” seems mis-stated and wrong: mis-stated, because Bush had nearly 7 years in office before everything started to unwind, at the end of 2007; and wrong, because this was plenty of time to really mess things up. Indeed, most of the mischief we have uncovered to date happened during that seven years, including the terrific international fraud in swaps, still the most dangerous remaining problem to be fixed.

While the banks paid their $1B (confirmed to me by the lobbyist involved) to get Glass-Steagall repealed starting at the end of the Clinton administration, nearly all of the subsequent misbehavior you allude to (actual mergers, AIG going off the rails into derivatives beyond their market value) happened on Bush’s watch – or rather, the lack of it.

Since a great deal of the problem came because instruments intended to decrease risk actually increased it, this was really an error of omission (regulars refusing to regulate) rather than commission (passing ill-considered laws with unintended consequences).

In other words, it is possible to forgive those who thought the laws would work, but not those who watched them not working, and who did nothing.

This isn’t about being mean, or finger pointing. It really is about describing a massive fraud accurately. Now, if only a single person had been charged with something illegal –

Contrary to your assertions, and apparently your beliefs, the Bush Jr. administration set another record: that of addition of lines to the Federal Register, in which laws are published. That’s right – the one you blame for deregulating everything added more rules than anyone else.

Now, I doubt I can overwhelm others’ dogma with basic common sense and evidence, but it seems to me that changes to a set of economic rules take much longer than five years to have any sort of effect on an economy measured in billions of dollars. So I put forth that much of the deregulation, like allowing banks and investment agencies to merge with one another and insurers like AIG was done before Bush Jr.’s time.

But hey, don’t let me stop your finger-pointing.

What do you think one trillion dollars in bailout money will do? Good? One would argue that yet another New Deal would have the same effect as the last one: extension of the misery. More recently, Japan’s “Lost Decade” was another poster child of what happens when government kills business in the process of “safeguarding” it.

What Next For The Global Crisis?
by Simon Johnson

There are two views of the global financial crisis and – more importantly – of what comes next. The first is shared by almost all officials and underpins government thinking in the United States, the remainder of the G7, Western Europe, and beyond. The second is quite unofficial – no government official has yet been found anywhere near this position. Yet versions of this unofficial view have a great deal of support and may even be gaining traction over time as events unfold.

http://baselinescenario.com/2009/06/22/what-next-for-the-global-crisis/

http://news.bbc.co.uk/1/hi/business/8103746.stm