The repeal of Glass-Steagall legalized the then already extant Citigroup amalgamation, and other so-called Universal Banks — holding companies, which could strategically control and coordinate all kinds of financial institutions, from commercial banks to insurance companies.

The housing bubble was the product of a reflexive loop between progressively relaxed mortgage underwriting standards at banks doing mortgage lending and the underwriting of mortgage-backed securities, where the banks were re-packaging and laying off their mortgages.

It is a very complicated story, which goes well beyond my ability to relate it in a comment. But, at the center is a mad rush by several relatively small institutions — former savings and loans, mostly — to find economic rents in gargantuan size and political power, once neoliberal policy had removed the barriers, which had protected much smaller, diverse institutions. Glass-Steagall and other regulations, earlier repealed, had maintained competition between smaller and diverse institutions, by giving them economic rents tied to an array of barriers. This contributed to the political independence of both politicians and various other institutions, like Fannie Mae and Freddie Mac, by allowing these actors to play one off against another.

The consolidations of the giant mortgage aggregators would corrupt the whole system, undermining the integrity of mortgage underwriting, securities underwriting, appraisals, etc.

Mainstream economics is deeply ignorant of the functions of hierarchy in the economy — “market economy” is a lie — and it is in the hierarchical functions, the control functions, where we see the breakdown in integrity take place. The shortcut way of labeling these failures, as failures of (government) regulation, are correct as far as they go, but it doesn’t help, when they leave the neoliberal conceits intact.

A very simple introduction, that you may take or leave, as you will, is one page at Zompist.

Jacobs arrives at this conclusion by considering the stagflation of the 1970s– simultaneous high unemployment and high inflation, something that was not supposed to be possible under either left-wing (Keynesian) or right-wing (monetarist) economics. They were supposed to trade off. She points out that this condition– high prices and not enough work– is normal for backward regions; Western economists mistook the fitful but constant economic boom from Smith’s time on as a permanent condition.

Thinking in terms of national economies smears over the economic facts. Once we take off these lenses, we can see that the world consists not of developed and poor nations, but of dynamic and poor regions. One of the great advantages of this point of view, in fact, is that we become aware of the backward regions in the First World, and realize that they follow the same dynamics as the Third World. These days they may be comfortable enough due to transfer payments from richer regions, but they are economically passive nonetheless.

Source

Jacobs wrote about “transactions of decline” in her later books, and the financial malaise of the US is that we’ve switched from being a productive nation to one that coddles the financial classes, has an excessive military and is quickly becoming a colony. Before 1776, we exported raw materials and imported finished goods because the British laws forced things that way at gunpoint. Today, we also export raw materials and import finished goods. In between, we became a powerful nation by importing raw materials and exporting finished goods. America is finished as a “great” nation because we’re too busy destroying the wealth that our parents and grandparents accumulated. We’re going to turn into a northern Mexico, where a tiny aristocracy controls the millions of plebes and proles.

It should also be noted that one reason the US repealed Glass-Steagall was that it was most likely prohibited by NAFTA, which, like nearly every trade agreement the US has negotiated since, included language that was interpreted to prevented signatories from restricting the size and types of products that financial corporations could participate in (there are already threats from Canadian investors to sue the US over the Volker rule in Dodd-Frank due to NAFTA). Which, of course, was negotiated by Bush I and signed by Clinton.

Tim Worstall: comparing the income of a nation in 1978 to a nation in 1600 is ridiculous. And how much of the post-war growth in developing nations is due to market liberalism, rather than a combination of retreating colonialism and corresponding growth in free markets, needs to be considered. Furthermore, much of China’s post-1978 growth came on the back of a whole bunch of industrialization and stabilization projects that occurred before then, and I think might be overlooked by your average market-liberal analysis. And much of post-1978 Chinese economics was not market liberal, it’s only post-2000 which could be described that way, and as you observe only in some sectors. China is also now being forced away from the rampant anarchist capitalism you describe, with popular anger at corruption and increasing inequality. China is even introducing social health insurance, without any fanfare or vitriol.

Your description of post-war economic growth in the developing world, and of China’s remarkable changes, is simplistic at best.

Indeed. However, I would like to point out some recent instances in which the left, thanks to its keen understanding of the global dynamics of power and money, has been able to deal severe blows to the ancien regime.

1. Brazil and others have broken the patents for AIDS drugs and produce much cheaper, generic versions. The right, despite blacklists and threats, was not able to enforce the sanctity of profits for its pharmaceuticals.

2. 100 countries banded together in clear understanding that WTO rules skew the benefits of trade and globalisation towards the old core and, thanks to studies detailing how peasants in poor countries are robbed of their livelihood due to agricultural subsidies in the US and Europe, WTO negotiations has been paralyzed for the past ten years and it has even ruled against the US .

3. In Bolivia, people understood that being charged by Bechtel for collecting their own rainwater was not a good deal, financially, and ran them out of town.

4. With clear understanding of how the IMF operates, countries have hurried to pay off their debts and vowed to never take another loan from them. Except in Europe, the IMF has become as much a zombie institution as the WTO.

5. Distinctly non-neoliberal policies, such as export restrictions and taxing of speculative foreign capitals, have been on the rise since the 2008 crisis, restricting the center’s ability to outsource the effects of its lack of understanding of finance and money to the poorer regions of the world.

Compared to Lagarde, Paulson, and Rajoy, I think the left is holding its groud quite nicely.

The French Revolution was triggered by the bankruptcy of the ancien regime, an event attributable to the ancien regime’s inability or unwillingness to adopt and maintain sensible fiscal and monetary policies and institutions. It was all there — corruption, reactionary rentiers, “shared sacrifice”, gold bugs, crackpot schemes, a consensus of enlightened opinion among the political class in favor of market liberalism, austerity. The monarch and much of the aristocracy went to the guillotine amid much talk of another world, but the Revolution was no more willing or able to solve the problem of money and finance. Napoleon rose, because his looting supplied hard currency to replace the assignats successive governments could not seem to administer, and he became Emperor, in part because he was willing to allow the clique of Swiss bankers in Paris to create a national Bank of France, an obvious step, which had been resisted since John Law and Mississippi Bubble.

We’re not going to create “another world” without money. The left really should stop with the millenial nonsense, and get serious about mastering money and finance. It is too important to leave it to right-wing hacks and thieves, propagating the myth of market liberalism.

Hmm…

Rihanna and Katy Perry and Enrique Iglesies do matter to people, therefore they matter

Rihanna and Katy Perry and Enrique Iglesies do matter to people, therefore they matter.

Tyler Oakley and districtlines T-shirts and Justin Bieber do matter to people, therefore they matter.

Zayn Malik and Nicole Scherzinger and Tulisa Contostavlos do matter to people, therefore they matter.

I think there might something wrong with the structure of this argument….

Not that I’m particularly keen to get into a semantics argument, but I was talking about concepts of justice and you have listed celebrities. I’m just going to say apples-and-oranges and leave it at that.

The housing bubble was everywhere. There was financial Tom Foolery, enabled by Reagan/Thatcher de-regulation, enough for 3 global recessions. The countries that have responded better have been the ones that responded with something other than Reagan/Thatcher stock responses.

Hmm…

Rihanna and Katy Perry and Enrique Iglesies do matter to people, therefore they matter

Tyler Oakley and districtlines T-shirts and Justin Bieber do matter to people, therefore they matter.

Zayn Malik and Nicole Scherzinger and Tulisa Contostavlos do matter to people, therefore they matter.

I think there might something wrong with the structure of this argument….

Tim, you are assuming causation – that a few million Chinese people moving from $1k a year to $6k a year necessarily required some people going from $100k to $200k. They might be “part of the same process”, as you say, but that does not mean one relies on another.

You explicitly don’t care about equality, but – and here’s the important thing – most people do. Justice and propostionality and fairness do matter to people, therefore they matter. You might not care about the people going from $100k to $200k, but can you perhaps see that it’s a perfectly reasonable and normal reaction for the person on $20k (or $10k, because a large number of actually poor people in the “rich” world do exist) to be a bit miffed that those people have got twice as much for no extra effort?

And I daresay that the millions of Chinese people now on $6k might wonder how many more of them might have got to there, but for the people at the top who apparently are now not 100 times more productive and valuable, but 200 times more productive and valuable than the schmucks right at the bottom, even though that’s unlikely to actually be true, unless they became super heroes in that time, which they clearly didn’t.

Basic human psychology baulks at basic unfairness and injustice. You don’t, but your mistake is assuming that your feelings are the objective measure.