Yes, the banksters managed to shift their risks to everyone else and socialise their losses! Now, how can they do this again?
Waning co-operation makes next crisis more difficult to tackle[2]
The core banking system has been made safer but risks have been shifted elsewhere
A decade later, the banking system is better storm-proofed, though risks have spread elsewhere.
But some deeper political and economic consequences of the crash are only now being felt.
Following crisis-era acquisitions and a decade of growth, many "too big to fail" institutions are today even bigger.
By some measures the next crisis already looks overdue. A principal cause of the 2007-08 meltdown — an excess of debt — has become worse.
Ultra-loose monetary policy and quantitative easing were undoubtedly justified to help repair bank balance sheets and stimulate economic activity. But they magnified the debt problem. Using low interest rates to encourage investors into higher-yielding, riskier assets has inflated new bubbles. Equity markets are near record highs. Property prices… are at record multiples of inhabitants' earnings.
The Lehman collapse dealt a severe blow to trust in political and business elites, visibly unprepared for what happened. Policymakers and financial leaders earned little popular credit for averting depression. Voters perceived those who caused the crisis as having ensured they dodged the consequences, their bulging pay packets intact.
The Lehman collapse was overdue, and only dealt a severe blow to the shadow banking cartel and their sense of being all powerful. People lost trust because of how/what they did to bailout their bankster pals. Yes those gamblers, they dodged the consequences. No, indeed voters perceived correctly. Stop treating voters as ignorant imbeciles. The collective consciousness just might be more powerful than shady shadowy groups with visions of world domination.
That discontent is now felt as an "us versus them" insurgency against political and business elites. The system of liberal democracy and free market economics is seen by a sizeable minority in advanced economies as one run for the benefit of well-connected insiders.
This throws up multiple dangers. Nationalism and protectionism are, ironically, chipping away at the very system of international co-operation that helped contain the last financial crash. That could render still more grave the consequences of the next crisis.
Now that they have come out kicking & screaming yet unscathed from their previous crisis by socialising their losses and kicking the can further down the road… are they weeping tears over how they might not be able to so the same yet again? When it all blows over!
The flight to extremism, moreover, threatens to undermine the market-based democracy
"Mainstream" parties need to take inequality seriously, and address the deeper causes of disenchantment. Governments should ensure the rich are taxed fairly, and curb excesses such as runaway executive pay and corporate tax avoidance. They should invest more in public goods, services, and infrastructure, and in equipping citizens with the skills they need to cope with globalisation and rapid technological change.
If mainstream politicians can show their policies work, unlike the quack remedies peddled by political insurgents, they have a chance of wooing voters back. If not, they will be eclipsed by today’s populists — or worse ones waiting in the wings. This is the central political battle of our time. The danger is that the next financial calamity may strike before that battle has even begun to be won.
Free markets and market-based democracy are an illusion. TBTFs and other wannabe systemic players exist only because of political patronage. It is not a level-playing field anymore, i.e. no democracy! Fundamentals don't matter either, i.e. not market-based! All the hallmarks of a Casino :(
Banksters have a need to control the politicians in their pay. If not, their ivory towers and pyramid schemes could unravel very quickly indeed.
[1] Financial crisis: Are we safer now?
[2] Waning co-operation makes next crisis more difficult to tackle
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