With a return to regulation in order that such does not recur, it is said. Rather sad really because is that not the sentiment expressed as regulation was placed following 1929 and in part resulting from the Pecora commission of 1933 -4?
In defence it must be argued that reduction of risk was now possible in a manner that it was not pre 1933. Firstly was the model designed by economic Nobel laureates and secondly the assumption of full knowledge of the market was guaranteed by the speed of new communications.
Well was it not? Did it not work a treat/ If not why not were there perverse incentives to business folk?
Under the competitive banner, transparency was replaced by business confidence and off book entries by bank(sters), though quite a bit of this occurred post 2004 even if the boom beginnings were prior to this, much says Monthly Review, adding to the available money. No before this came leverage used more and with many more variations than ever before and to an extent greater than ever rating of financial instruments was made and apparently trusted by shrewd honest and cautious bankers who of course wanted to be sure of the value of collateral.
Pigs might fly!
Apart from those who were placed in positions to oversee finance, but who failed to do so there was also the belief that tax cuts would stimulate wiping out any deficit occasioned by reduced tax take and would trickledown through the whole economy. I am not clear whether this was Reagan voodo economics or part of the neo lib philosophy. Anyway debt business government and private grew and grew and still grew funding the GDP measure in the main. Ephemeral goodies but some were made rich and the smarter got out before the crunch.
Consumption necessary for growth was financed by personal debt of workers whose wages and share of GDP were stationary of declining.
In addition professionals in and outside governments were noticeably silent. As Monthly Review puts it “With few exceptions accredited economist, as is their wont, have ignored these bizarre goings-on…” Some exceptions were Dean Baker and Ann Pettifor amongst ,I feel sure others I have not read. Rather surprising given the several previous boom/bust cycles but maybe as Harry Shutt observed there is a price in being different from the herd, something I feel sure Herman and Chomsky would accept.
Normally I would rant on about the media being less than useful in saying what is going on except for two quite recent happenings. Reading Larry Beinhart Fog Facts in which he starts by echoing what I would normally say except he has a friend familiar with the media who would point out to Beinhart that the report could be found as three lines at the bottom of page 33, which mostly was true. The media was reporting. So too Monthly Review editorial December 1985 says similarly but finds that Business Weekly had broken ranks and made serious attempt to fill the information gap, growth of transactions and debt, the excess financial transactions in view of the market activity and more.
See Monthly Review
www.monthlyreview.org/851200editors.php
Perhaps under the heading of what next consideration of how this could come about. Is it an example of Khun’s paradigm the facts that do not fit the theory not apparent or sloppy or dishonest workings/ Some guard against recurrence if only to justify, ‘never again‘. Next society is held together by many things including laws which if transgressed can disrupt society. As indeed is the present case. Normally retribution is inflicted and society maintains stability. Not apparently in this case, there is no Pecora commission merely an apparent sharing of the same bed by perpetrators and those who would correct the situation.
The G20 attempting to put the piggy (bank) back together again knowing unemployment would rise ignored the possibility of a green economy making jobs. Neglected the chance to do something about the threats of climate change, which might well have included the question of peak oil, having transportation as a major contributor to climate corrected as well as the reported accuracy of Club of Rome model Graham Turner A Comparison of the Limits to Growth with thirty Years of Reality CSIRO Sustainable ecosystems www.csiro.au suggesting economic systems will need to take cognisance of these forebodings.