A Long Time Coming
"Just as our structures and elites prefer corporate manipulation to real production, so financial manipulation comes more naturally to them than the creation of new capital"
"We run virtually uncontrolled money markets within our own borders. We permit highly leveraged buyouts. We allow takeovers to be financed by the privately initiated printing of money against the value of the target company's assets. We allow the uncontrolled printing of money through such devices as credit cards."
"Consciously or unconsciously, we began to lift restrictions and to lower standards throughout the financial sector, thus freeing the profound forces of inflation. Of course, no one was permitted to play directly with the traditional governmental inflationary tool - money supply. This and the area of wage and price increases were roped off, so to speak, and kept under obsessive public scrutiny ...
Meanwhile, every other potential inflationary area was gradually opened up to marketplace manipulation. General economic activity was drawn towards the financial sector by this explosion in ever-less regulated activities. Inventiveness concentrated itself on the creation of new, immeasurable financial abstractions - abstractions built upon abstractions - forms and levels of leverage which made the standards of 1929 seem tame by comparison"
"In this context, the traditional definitions of bank leverage no longer mean very much. ... the American merchant bank Lehman Brothers had a capital base of $270 million. It had a daily exposure of $10 billion."
"The whole process was fed by minor finance companies, which under stricter regulations would be considered marginal, if not criminal. With deregulation they became banks. And the large deposit banks, seeing the enormous paper profits made by these little speculators, leaped down into the gutter to play the same game. The overall picture is what Keynes would have called a Casino society."
"Contemporary monetarism, despite its narrow obsession with money supply and classic inflation, has produced the greatest debt levels of modern history, accompanied by onerous or impossible burdens of interest. Odder still, while the monetarists remain obsessed with the state's indebtedness, they are indifferent to unprecedented corporate and personal debt levels."
"One indication of how far things have gone is the desire of business to see government intervene each time the situation gets out of hand. The willingness of governments to do so, despite a supposed devotion to market forces, shows that they realize how dangerous the current system is. The irony of deregulation is that the more freedom business is given, the more dependent it becomes upon government as the saviour of last resort.
Financial marketplaces have never been capable of self-regulation except through catastrophe. One of our accomplishments was to regulate most of these explosions out of existence. Financial deregulation has reintroduced them."
"The current situation, in which government stands as the saviours of last resort - having abandoned many of their intermediate powers of guidance - actually breed irresponsibility. And while government intervention late in the day prevents general calamities, it also maintains the fiction that the system is healthy."
All the above quotes are from chapter 17, 'The Miracle of the Loaves' in John Ralston Saul's 'Voltaire's Bastards' - written in 1992.
But yeah, no doubt our current problems are all due to 'excess' saving by peasants in China...
I don't know about you, but I find it pretty damn depressing to realize how clearly Saul laid it all out, almost two decades ago, and here we are as clueless as ever.
Re-reading that chapter by Saul (prompted by my frustrations with the narrow technocratic mindset exhibited by all the powers that be in the face of the current situation) reminded me also that it was also the source for my recollection of Solon's reforms in clearing away the debt burden that was plaguing Athens prior to his rule.