What we now see in our financial system is what I call "Deregulatory Collapse." That's when years of heaping new regulations on old builds a rickety structure that is about to topple over. At that point a half hearted process of deregulation begins -- and then the process of deregulation is held responsible when the collapse occurs. It is a bit like blaming lung cancer on the "chemotherapy" the patient undergoes rather than thirty years of smoking cigarettes.
The Democrats blaming deregulation in this case is a mighty stretch, especially since the Bush administration tried to extend regulation to an obese Fannie and a hyperactive Freddie. But according to Congressional Democrats and their Main Stream Media coconspirators, it was the rearranging of the regulatory deck chairs on the financial titanic that caused the current inundation. And the ship officers were congressmen who were not properly consulted by the stewards.
At the
Belmont Club Richard Fernandez asks:
Who you gonna call? Who you gonna believe? Bailout anyone? A crisis creates an incredible opportunity to play partisan politics. ‘Want me out of the way? Buy me off.’
We are not going to solve our "financial meltdown" problem without recognizing what the problem is.
Central to our problem is Washington’s propensity to organize producer Cartels. Cartels exist to benefit the “partners” but are presented to outsiders as a public good. Because cartels distort market signals, purely private cartels normally collapse or are supplanted by new players in a fairly short time frame. To endure, Cartels need the participation of Government — and, of course, the political establishment. It is the participation of the ruling elite that enables a cartel to withstand market forces and act as a parasite on the larger society for an extended period. Of course when the crisis comes, it’s an eight or nine point — not a four point — shake to the foundation of society.
Cartels are hard to attack because everyone wants one of their own. They appeal to people’s need for “control.” A professional organization can cut down on “unruly” competition, protect the more inept or unlucky practitioners and gain favors from government. A Union can act as a Cartel for labor. In the long run, as Cartels spread, the cartels will even impoverish many of its own members as Society itself becomes poorer. Of course, by that time the insiders are wedded to the system.
Since most folks in a position of influence hope to profit from a cartel, they are sympathetic to blaming the free market, and will ignore the existence of a Cartel at the center of the problem. OPEC, an openly declared Cartel, raises prices? It’s the fault of the oil companies (which are part of the over all “energy international” cartel, to be sure). When Politicians stop oil companies from building a refinery, are they standing up to Big Oil? Or increasing the value of their old refineries and limiting competition?
Of course our Cartels in the US are never presented as such, and are indeed illegal without deep government involvement — which is convenient for our politicians. We have an Education Cartel that requires massive infusions of resources to produce scant positive results — which disappear as soon as our attention wanders (the resources remain, of course, and need increasing).
Fannie and Freddy were part of our Real Estate industry Cartel, along with much of our congress and much of the Federal Bureaucracy. Every twenty years or so it requires huge infusions of money to keep it staggering forward.
The solution here is to demand an end to the Cartel in return for the bailout, and a return of any money the government “clears” from the rescue effort direct to the exploited taxpayer — do not allow it to be recycled into the Cartel.
Most of all, we need to educate voters on what government organized cartels are, and how they are parasitic on society even as they are sold as being symbiotic. But first, we need to recognize them ourselves. They often are, as Adam Smith might say, Government organized conspiracies against the Public Interest — and we all hope to profit from one.
By the way, Health Care is another example of a Government organized Cartel in the US — though not yet fully emerged and “rationalized.” Once it is, it will create incentives to intensely treat well people and speed the death of the severely ill.
