Seven Deadly Sins

Robert Kuttner, co-editor of the American Prospect, writes about the 'seven deadly sins' that caused the market collapse in the US. It is difficult for a lay person to understand the mess we're in, but he explains it in such a way that it makes more sense.

Even though I predict that a lot of bad, ugly, painful, maddening things are up ahead due to the market melt-down (like high unemployment, loss of social security, worse health care crisis, education in turmoil, less wealth overall), I think that there is a silver lining in all of this. People are going to have to question the status quo and will become more aware of their unsustainable way of life: consumerism and ultra-capitalism. They will look to alternatives.
(Or America will become a police-state!)
--- T

"Why regulate? As we have seen ever since the sub-prime market blew up in the summer of 2007, government cannot stand by when a financial crash threatens to turn into a general depression -- even a government like the Bush administration that fervently believes in free markets. But if government must act to contain wider damage when large banks fail, then it is obliged to act to prevent damage from occurring in the first place. Otherwise, the result is what economists term "moral hazard"-- an invitation to take excessive risks."

"That's why, no matter how much taxpayer money the Federal Reserve and the Treasury keep pumping in, they can't turn dross back into gold. The next administration and the Congress need to return the financial economy to its historic task of supplying capital to the real economy -- of connecting investors to entrepreneurs -- and shut down the purely casino aspects of the system that have only enriched middlemen and passed along huge risks to everyone else."

"We're talking about a Roosevelt-scale counterrevolution here. But nothing less will prevent the financial collapse from cascading into Great Depression II. And the public should never again forget that this needless collapse was brought to us by free-market extremists."

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