Robert J. Samuelson: (Financial) Panics ‘R’ Us!

Posted by Kendall Harmon

Up to a point, some retrenchment of the financial sector is healthy. It absorbed too much of America's talent while pursuing strategies that, in hindsight, misallocated the nation's investment capital. But there are perils to overregulation. It could dampen the normal risk-taking required for solid economic expansion.

However the debate concludes, regulation isn't a panacea against future crises. The idea of "enlightened regulators" who are vastly more perceptive than the bankers, traders and money managers they regulate is a fiction. Even in early 2007, when the problems of subprime mortgages had emerged, few regulators or economists foresaw a wider financial meltdown. They didn't see the impending chain reaction. The problem wasn't a lack of regulation; it was a lack of imagination.

So the next crisis could come from anywhere -- perhaps the follies of government, not finance. Between now and 2019, the U.S. federal debt could rise to $11 trillion , projects the Congressional Budget Office. U.S. Treasury bonds are the bedrock of the global financial system; they're considered safe and reliable. What if a glut of bonds causes investors to lose faith? What are the implications? Good questions. The seeds of the next crisis almost certainly won't be found in the debris of the last.

Read it all.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentPolitics in General

Posted June 29, 2009 at 6:00 pm [Printer Friendly] [Print w/ comments]

1. Capt. Father Warren wrote:

“Enlightened Regulators”, now there was something hilarious to cap off an otherwise crappy day.  Right up there with “Postal Service”, “Government Intelligence”, yadda, yadda, yadda.
They darn well ought to look far and wide for some “Enlightened Regulators” the bushel full to be exact.  If Cap & Trade passes the senate, Wall Street will become ground zero for one of the biggest financial trading windfalls of all time.  Will make the trading activity of Enron look like pikers.

June 29, 8:15 pm | [comment link]
2. Sick & Tired of Nuance wrote:

Buy gold.

June 29, 10:24 pm | [comment link]
3. Jeffersonian wrote:

However the debate concludes, regulation isn’t a panacea against future crises. The idea of “enlightened regulators” who are vastly more perceptive than the bankers, traders and money managers they regulate is a fiction.

Exactly.  Liberals have been braying incessantly about a lack of regulation, as if there was a library of perfect wisdom upon which they could have drawn to prevent this current situation.  There isn’t, and any regulation imposed will have assumptions at least as bad as those that spurred on fiascoes like Freddie and Fannie.

June 30, 12:14 am | [comment link]
4. tgs wrote:

#1. you’re exactly right. Cap & Trade is the next Goldman Sachs orchestrated ripoff. If these evil people are not stopped, they will simply suck America dry making us not a 3rd world country, but a 5th or 6th world country. And, remember, Goldman Sachs is just the public face of the International Financial Elite cabal.

June 30, 9:03 am | [comment link]
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