Last Friday, I was watching Christiane Amanpour online and stumbled upon one of her last interviews with former U.S. bailout cop Neil M. Barofsky, who suggests another crash is inevitable.
If you read my previous articles you will see they are perfectly aligned with his line of argumentation. But my stubbornness to write about the same topic over and over again has one simple and important aim: to create awareness of the imminent collapse if we stay put. The sub-prime mortgage crisis was just the tip of the iceberg. What Mr. Barofsky suggests is very serious and really alarming and yet, I don’t see the political capacity or the citizen will to change the actual status quo.
I’m not trying to impose any philosophical views on the matter: I’m only making a wake-up call. I’m nobody to tell you what to do. In fact, no one should impose his or her own views on you, but If you wish to witness an eye-opening revelation that exposes the top bottom American way of governing, then I suggest watching this 7-minute clip to get you acquainted with the real “visible” hands shaping your crony capitalist society towards a real economic meltdown.
The main element feeding the next collapse is the naïve pretense of knowledge about the effectiveness of the new regulatory framework ex-post financial crisis. Government officials and several acclaimed scholars believe that these new set of golden rules will help jump start the American economy again, when in fact all they are doing is lowering the fever but worsening the disease. What is even more alarming is that these intellectual “elites” truly believe they have eliminated the “too big to fail” incentives, when in fact all they did was to create a much worse “too big to jail” incentive.
Banks still have great advantages by borrowing much cheaper and by enjoying from the unbelievable complicity of the government. How exactly? There is a new order where they will not be subject at the same level of criminal law as the poor taxpayer. According to Barofsky, the Department of Justice has decided they will not and cannot indict these institutions, even when they commit crime in the future.
What? Is this a new episode of The Twilight Zone? Sadly it is not. So, what paradigm do they base this decision upon? Barofsky suggests that there is a widespread false belief that if prosecution took place, they would put the whole financial system at risk and cannot afford to create a world financial collapse.
But they are wrong. The best thing that could happen is to allow the bad investments to be liquidated once and for all. Basically, their mindset dictates that if they indict these cronies from any crime, they will not be able to bear the guilt and the consequences of bringing down the entire global economy.
If you ask me, this is the greatest irony of all, because their very decisions are the ones actually greasing the wheels to a true world collapse. Their “we know better” paradigm is the most critical problem. However, where they have it totally wrong is that they do not trust in individuals. They don’t believe in our capacity to self-organize, liquidate toxic assets and start fresh with sound money and sound foundations again.
This lack of confidence in bottom up designs and spontaneous order is to me extremely backward thinking. The lessons from history are overwhelming and prove that we cannot build a strong economy and a reliable society with a central planner bailing out a few for the “greater good.” In fact, the economic transformation of my home country is probably the best example of a paradigm based on trust for the capacity of individuals to rebuild a broken society.
What really strikes me is the ability of human kind to unlearn from past errors. The wrong path chosen by our political and intellectual elites today is so obvious I simply cannot understand we still let them get away with this. We are weakening our society with fake plastic monetary expansion and naïve regulatory constraints. It is this pretentious attitude what will break the world order.
What are the proposed solutions? Barofsky’s answer is to downsize the banks. I’d agree with him, but be careful! That should not come from top-bottom central planned policies. Human design has a terrible track when it comes to expected results. The breakdown ought to come from a bottom-up implementation. How exactly? Get rid, once and for all, from all the cronies at Wall Street and unleash the true forces of Main Street. Set them free, eliminate entrepreneurial constraints at all levels of government bureaucracy. This will give rise to a more natural and competitive market, the way it was originally defined and intended.
True competition will put these big fat financial elephants on a diet. True competition will reduce all risks of cheating the fair game. True competition will push bad incentives downwards. True competition will be the most natural way to face the “too big to jail” problem. All we need to do is start believing in the energy and creativity of individuals. Innovative solutions emanating from individuals shall prove much more efficient in the long run.