Although I differ considerably from Mr. Galbraith's conclusion that government must take on a larger role financing the reconstruction through the active allocation of capital, I cannot fault his call for a serious reform of the financial system as the sine qua non for a sustainable recovery. Why substitute one version of financial engineering by corrupt politicians for another?
I am pessimistic that this will happen, yet. Although the pigmen feel that they have 'won the war,' and will continue from outrage to greater outrage, until they provoke a reaction, and the people finally rise in their righteous anger.
It has not happened yet, at least successfully. Washington is under siege by an army of lobbyists with cash in hand.
But it is almost a certainty that the pigmen, who think that they have won the war, will go from outrage to outrage, until the people finally rise in their righteous anger. The pigmen cannot restrain, cannot reform themselves even when it is so obviously in their own interests. Such is the instinct of the predator class to insatiable, seemingly obsessive, self-destruction. Enough is never enough.
"Tombé de l'éternel, Satan veut l'infini. Tombé de l'Être, il veut l'Avoir. Mais le problème est insoluble à tout jamais. Car pour avoir et posséder, il faut être, et il n'est plus. Tout ce qu'il s'annexe, il le détruit. Et certes, il pourra tout avoir, puisqu'il est appelé Prince de ce Monde dans l'Évangile - mais il n'aura que ce monde-ci." Denis de Rougemont
"Having fallen from the eternal, the Evil One's desires are endless, insatiable. Having fallen from pure Being, he is driven by the desire to possess, to fill his emptiness. But the problem is insoluble, always. He is compelled to have and to hold, to possess and consume, and nothing else. All he takes, he destroys. Certainly he rules the material, as he is called the Prince of this World in the gospels - but only of the things of this world." And since material things will have an end, he is condemned to a gnawing hunger, and the wages of his pride, oblivion. The is no greater punishment for pure ego. And the knowledge of this is his torment.
"What to do? To restore the rule of law means first a rigorous audit of the banks and of the Federal Reserve. This means investigations. Representative Marcy Kaptur has proposed adding a thousand FBI agents to this task.
It means criminal referrals from the Financial Crisis Inquiry Commission, from the regulators, from Congress, and from the new management of troubled banks as they clean house. It means indictments, prosecutions, convictions, and imprisonments. The model must be the clean-up of the Savings and Loans, less than 20 years ago, when a thousand industry insiders went to prison. Bankers must be made to feel the power of the law in their bones.
How will this help the economy? The first step toward health is realism. We must first stop pretending that bad assets can be made good, that bad loans will someday be repaid, and that bad people can run good banks. Debt crises are resolved when debts are written down and gotten rid of, when the institutions that peddled bad debts are restructured and reformed, and when the people who ran the great scams have been removed. Only then will private credit start to come back, but even then the result of bank reform is more prudent banks, by definition more conservative than what we've had...
The entire host of neglected priorities of the past 30 years should be on the agenda now. That is the way—and the effective path—toward prosperity."
James K. Galbraith, Tremble Banks Tremble
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
