Fifth Anniversary of the Financial Crisis

Yesterday was the fifth anniversary of the collapse of Lehman brothers.  The banks and Wall Street investment houses have recovered quite nicely but the rest of the economy is still limping along.   Finance is the life blood of the economy,  it ensures that capital flows where it is needed, unfortunately in recent times finance has become an end in itself.  Like a cancer, it has grown unchecked and has overshadowed  the rest of the economy.  This has created an economy where the the 1% who have tremendous reserves of capital thrive, while the rest of us teeter on the  threshold of perpetual financial instability.

The collapse of Lehman and the ensuing crisis, gave us an opportunity to send the cancer into remission but political will to do so was clearly absent.  So instead of ruthlessly irradiating the underlying cancer we stabilized the economy by huge infusions of tax-payer funds to the very banks and investment houses that caused the problem in the first place.   We have not dealt with the underlying problem and it is going to come back and haunt us. It is not a question of if but when.

I have blogged about the steps to  avoid the next financial crisis earlier here.  Also,  here is a list of some of the issues around the financial crisis that I am interested in and will be writing about.

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Posted on September 17, 2013, in Economy, Musings, Reflections and tagged . Bookmark the permalink. 14 Comments.

  1. Per the fridge magnet a friend got me, I would trust Wall Street far more if it was run by actual Fat Cats.

  2. Higgs Boson's Mate

    It’s ironic that in the couple of hundred years following our nation’s birth in a revolt against monarchism we’ve managed to create a new class of royals. Big business has become as unaccountable for its actions as any 18th century European monarch. The people whom we elect to hold big business at bay have themselves been co-opted by it. It’s taken Capitalism decades to achieve this state of affairs. As long as politicians remain addicted to supping at the corporate trough things will only get worse.

    • This current version of capitalism, in vogue since the Reagan administration, which owes its intellectual underpinnings to Milton Friedman and other economists from the University of Chicago has been particularly toxic.

  3. As someone aptly pointed out to me, we have regulated financial services to make sure they won ‘t make the same mistake again, but the folks who run financial services companies aren’t stupid. They aren’t looking to do the same thing twice. They are looking for new ways to “make mistakes”, where we haven’t figured out how to regulate them on it yet.

  4. Post needs moar kitteh.

    Dodd-Frank was a wee bit of a start, but what really needs to happen is separation of investment and banking. Banks need to be boring again. And small.

  5. For capitalism to work over the long haul, all the different parts of the economy need ot have a more-or-less equal say in how things work ut. A three-way balance of power between capital, workers, and government, like a stool. Back in the 1935-75 era, there were strong unions. Any outfit’s workers could choose to join any union, and then they would negotiate with their management from a position of strength. Without an agreeable contract, there would be no work done. It took two sides in agreement

    The government, far from interfering with unionization, made it a point to keep companies from f’ing about with organizors and unionists.

    That was then, and everyone made more money than they do now, even upper management. Now the republicans have put government on the other side of the power equation, keeping unions from exercising any power whatsoever, and allowing companies to fire folks who even mention the word unionize. And without that third leg of power, the whole financial enterprise is off balance.

    Then you realize that instead of the government protecting people from power-crazed CEOs, the government is in charge of holding people down so the CEOs can screw them even harder, and we go from two legs of power to one, which is balanced from time to time, but mostly just bounces around as it falls down.

    Eventually it’s gonna fall flat, without even a “dead cat bounce” [no offense to our furry overlords!] and then there won’t even be soup lines, because no one will have a dollar to give the Salvation Army. Then the CEOs will suffer, as no one will be buying their junk, and they won’t be able to put jet fuel in the Gulfstreams to flee.And if they do flee, there won’t be anything to eat when they get there.

    So I would strongly advise the “titans of finance” to get some professional economic advice, and fix the economy, because it will not be good to be on top of the world order when that consists of sitting on top of a pile of corpses. I’m not a degreed economist, but I did get A’s in the courses I did take.

    I would rite mor, but I hav a gin-n-tonic to finish. B seein’ you.

    Meow! ;-}

    • Well put. I agree with most of the points you make. I think the fall of the Soviet Union hastened the demise of labor as a power center. The fear of communism kept the worst tendencies of capitalists in check.

    • Susan K of the tech support

      This is good. I’ve seen plenty of discussion of balance of powers of Gov w/ three branches, this is the first I’ve seen it with economy. You are either mega brilliant, or I’ve been mega out-to-lunch. Or both.

      When it comes to union strength and all, I’m watching (with great interest!) the developments with the Volkswagon plant in Tennessee and introducing the German-corporate-style of joint stakeholding with running companies. This may be one outlying datapoint to your larger point, but it may be significant.

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