ProgressOhio

Some of the current economic difficulties in the US have much to do with the permissive attitude of the Reagan-Bush through Clinton years, and then Bush II. The more or less unregulated market originates with the economic philosophy inherited from Reagan/Thatcher years. It was continued with gusto by the Bush I, Clinton and Bush II administrations.

In this permissive environment we saw capital markets move money across boundaries at unprecedented levels, and by the mid-1990s the daily turnover in foreign exchange markets was over $2 trillion, well over the needs for international trade and other legitimate activities.

This money was for a good measure flowing speculatively between the various financial institutions, including those within the hedge funds. The Reagan-Bush years were continued in the Clinton years in this vein. However, the permissive money movements eventually began to hurt real economies, and we saw the Asian Financial Crisis, and the periodic financial crises the world has seen in the past decade.

What underlies this Casino version of Capitalism is the poor regulation by states. In addition, the risk assessing agents (such as Moody's) were also reliant on the major financial firms for their fees, and there were clear conflicts of interest. Beyond this with the increasingly sophisticated technology that made it hard to oversee financial activities, state power over the market had also waned.

In this light we could say that what politicians promise in the areas of managing economies, cannot be easily met.

However, there are areas of the economy that still can be overseen with some effect by the state, and crises prevented. One such area is the housing market, where most Americans of the middle class count on as their major asset. Unfortunately, the permissiveness of the financial sector had been extended to the housing market as well.
   Read More »