"Paul Volcker, who had been the Fed chairman previously, had earned high marks as a central banker for bringing the US inflation rate down from 11.3% in 1979 to 3.6% in 1987. Normally such an accomplish would have earned automatic reappointment. But Volcker understood the importance of regulations, and [US President Ronald] Reagan wanted someone who would strip them away."
#JosephStiglitz, 'Freefall: Free Markets and the Sinking of the Global Economy', 2010
"... many who had observed the long expansion of the world economy during the era of deregulation concluded that unfettered markets worked - deregulation had enabled this high growth, which would be sustained. The reality was quite different. The growth was based on a mountain of debt; the foundations of this growth were shaky, to say the least. Western banks were repeatedly saved from the follies of their lending practices by bailouts ..."
#JosephStiglitz, 2010
"After each [bailout] the world continued on, much as it had before, and many concluded that the markets were working fine by themselves. But it was governments that repeatedly saved markets from their own mistakes. Those who had concluded that all was well with the market economy had made the wrong inference, but the error only became "obvious" when a crisis so large that it could not be ignored occurred [in the US]."
#JosephStiglitz, 'Freefall', 2010
> But it was governments that repeatedly saved markets from their own mistakes.
Calling them "mistakes" is IMO misleading if not outright false.
The big players (companties) that make up a big chunk of this market have definitely not been "mistakes" unknowingly. What they've been doing all the time is: do their very job, that's been given to them by society: maximize profit for shareholders. Yes, they've of course also made mistakes, but those aren't the reason for the crisis. These companies simply did what was best for maximizing profit under the given political circumstances.
@iLikeAltitude Your second paragraph is pretty much Stiglitz' argument. The only reason their mistakes didn't look like mistakes is that they guessed right that governments would bail them out. If government had followed the free market mantra, and "let the market correct", a lot of banks would have collapsed and the shareholders would have lost their shirts. Then the banks' actions would have looked like the mistakes they were.
Still, "letting things get out of hand" was (I suspect) done consciously and purposefully, because of big players knowing they were too big to fail.
Isn't doing something on purpose by definition not a mistake (from the viewpoint of the organisation that's doing something)?
Calling their deeds 'mistakes' lets these corps off too easily I say.
@iLikeAltitude Pretty much. I would say
> letting things get out of hand" was (I suspect) done consciously and purposefully, because of big players ...
... guessing correctly that they would be seen as ...
> too big to fail
Also that the dominance of neoliberal thinking on anglophone political culture would prevent governments from nationalizing the failing banks - or at least regulating them more carefully - instead of just giving them pubic money to carry on doing the same stuff.
@iLikeAltitude
> Isn't doing something on purpose by definition not a mistake
This is pretty tangential to the point I was trying to make by posting this series of quotes, which is about whether the survival of the banks through the crises is proof of markets working, or failing (clearly it's the latter). But...
@iLikeAltitude
I don't think the bankers intentionally bankrupted their banks. They just took some stupidly big risks, risks that *could* have been very profitable, but which they wouldn't have taken if they thought failing banks would be allowed to fail, or nationalized, rather than bailed out.
We're doing circles here. Admittedly I don't have any hard evidence for it, but I stand by my claim: that bankers were pretty damn sure, they were too big to fail.
But I might just be a lazy conspiracist.
@iLikeAltitude
> We're doing circles here.
Indeed. Maybe because we're not actually disagreeing on anything, yet your posts keep restating my points as if we are :)
> bankers were pretty damn sure, they were too big to fail.
Yes. Most of them won that bet, but not all. Some were nationalized or allowed to fail, so it wasn't a sure thing, and if they didn't know they were gambling, then that was a mistake :)
https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bankrupted_during_the_Great_Recession