"Reform"? Maybe we should consider getting rid of the financial market--what social desirable objective does its existence facilitate?
> Date: Sat, 29 Nov 2008 10:58:30 -0800
> From: paraconsistent at comcast.net
> To: lbo-talk at lbo-talk.org
> Subject: Re: [lbo-talk] Krugman: financial market reform *now*
>
> Shane Taylor wrote:
> > Lest We Forget
> > By PAUL KRUGMAN
> >
> > [....]
> >
> > In fact, both the crisis of 1997-98 and the bursting of the dot-com bubble probably had the perverse effect of making both investors and public officials more, not less, complacent. Because neither crisis quite lived up to our worst fears, because neither brought about another Great Depression, investors came to believe that Mr. Greenspan had the magical power to solve all problems — and so, one suspects, did Mr. Greenspan himself, who opposed all proposals for prudential regulation of the financial system.
> >
> > Now we’re in the midst of another crisis, the worst since the 1930s. For the moment, all eyes are on the immediate response to that crisis. Will the Fed’s ever more aggressive efforts to unfreeze the credit markets finally start getting somewhere? Will the Obama administration’s fiscal stimulus turn output and employment around? (I’m still not sure, by the way, whether the economic team is thinking big enough.)
> >
> > And because we’re all so worried about the current crisis, it’s hard to focus on the longer-term issues — on reining in our out-of-control financial system, so as to prevent or at least limit the next crisis. Yet the experience of the last decade suggests that we should be worrying about financial reform, above all regulating the “shadow banking system” at the heart of the current mess, sooner rather than later.
> >
> > For once the economy is on the road to recovery, the wheeler-dealers will be making easy money again — and will lobby hard against anyone who tries to limit their bottom lines. Moreover, the success of recovery efforts will come to seem preordained, even though it wasn’t, and the urgency of action will be lost.
>
> ===============
>
> Anyone else noticing the sloppy intertemporal reasoning regarding
> self-negating prophecies and the flirtation with fatalism re crises?
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