- Published on Thursday, 04 February 2016 11:55
"Every time history repeats itself, the price goes up" - Ronald Wright. History has much to teach us in trying to understand the world but we must always be aware that interpretations of history vary. The prevailing narrative is, more often than not, that of those in power.
In the case of the 2008 financial crisis, the history is pretty clear as to the causes and surprisingly well articulated in the Hollywood movie,The Big Short. The film (and the book on which it is based) exposes the criminal culture of greed which underpins the world of banking and finance and how it corrupts everything and everyone it touches. However, the role of the privately owned Federal Reserve Board (Fed) and the Securities and Exchange Commission (SEC), the regulators which presided over the sub-prime mortgage bubble and subsequent collapse, isn't mentioned within the film.
Many, in the aftermath, referred to a "failure in regulation". In the UK, where AIG (London) played a key role the Credit Default Swap (CDS) collapse, there has been a subsequent reorganisation of the regulatory structure akin to rearranging the deck chairs on the titanic.
[Incidentally, AIG was bailed out initially to the tune of $128bn; the bailout was agreed in a secret meeting involving the still current CEO of Goldman Sachs, Lloyd Blankfein, and US Treasury Secretary (and former Goldman CEO) Hank Paulson. Goldman Sachs received $13bn of that and paid their senior executives some $4.5bn in the following quarter; Blankfein subsequently claimed to be doing God's work - it's unlikely God would have approved.]
Regulators and legislators are always bolting the stable door (or not) after the horse has bolted. In other words, the unfolding economic crisis and market collapse is unlikely to be a rerun of 2008. It will be on a much larger scale but the triggers and dynamics are very different; regulators will again be powerless in the face of the financial tsunami. Their gaze is fixed on the rear-view mirror as the political economy is driving us over the cliff.
Why We Won't Have a "Lehman Moment" in the 2016 Crash by Charles Hugh Smith
What the central banks cannot do is create productive places to invest the credit they've generated in such excess, or force qualified borrowers to swallow more unproductive debt.
We can build sufficient resilience within communities to insulate people from the worst effects of the collapse of this Ponzi economy but it will never be initiated by regulators or legislators. It will only happen by people taking action within families and communities to collaborate and co-create an alternative to the corrosive, abusive and doomed political economy.