I've read the best article yet on the American economic crisis and what it means for the world (incidentally, so far, Australia is weathering the storm with good economic fundamentals). The article is How did it get to this, America shatters and, once you get past the anti-American rhetoric, it actually makes some good points. All I want to say is: (1) the GOP ideology of tax cuts, tax cuts, tax cuts is not what you do during times of war. Every civilization I know of raises taxes during time of war in order to avoid bankrupting the country with debt! (2) The great preachers of free market non-interventionist economics have finally seen the chickens come home to roost. Some government intervention and regulation in a free market economy might actually be a good thing and we now have 700 billion pieces of proof why this is so. (3) While the world economic environment will change with this, I doubt if it means the ultimate decline of America's economic power since it is too big and too rich to go down just yet. If you don't believe me, check out the endowments of Harvard University and Princeton Theological Seminary. (4) Whinge about American hegemony and imperialism all ya like, but I can't help but think that America has tried, in ideal at least, to be a benevolent nation. I cannot help but prefer American hegemony to a hegemonic Russia or China (ask people in those countries what they think on it before you mock me as a yanky sycophant on that one!). (5) When I think of the US finanical meltdown I think of Revelation 18.9-17 where the kings and merchants of the earth are literally beside themselves with grief that the economic boom of Babylon has come to an end. America is not God's anointed servant to bring capitalism and democracy to the world, but nor is she the whore of Babylon either. America is just another pagan nation with many good Christian folk. As Christians we should not put our trust in any one nation since nations rise and fall but the Kingdom of God endures forever.
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6 comments:
Good points, but one thing I want to point out is that the finanical market wasn't unaffected by government intervention. GSEs Fannie and Freddie actually encouraged the risk taking that was taken since banks themselves wouldn't bear the brunt of the loans they would make. This crisis is an example of how the market can mess things up severely when the government tries to "improve" things.
Echoing Owen, point #2 is incorrect. I don't believe in unbridled markets any more than unbridled government, but regulation itself was a key problem.
The Clinton administration wanted to increase ownership. They compelled financial institutions, through regulation, to lower their lending standards and that set the whole ball rolling. See this New York Times from 1999 warning that was just happened would happen: Fannie Mae Eases Credit To Aid Mortgage Lending Also, see this article from five years ago, New Agency Proposed to Oversee Freddie Mac and Fannie Mae, in which it is Bush and Republicans seeking regulation and Democrats opposing it.
There may be issues with conservatives being overly zealous to deregulate but this meltdown did not stem from deregulation. It was from bad regulations initiated by Democrats.
I messed up the link to the first article. I'll try again:
Fannie Mae Eases Credit To Aid Mortgage Lending
"(2) The great preachers of free market non-interventionist economics have finally seen the chickens come home to roost. Some government intervention and regulation in a free market economy might actually be a good thing and we now have 700 billion pieces of proof why this is so."
Mike,
The world has not seen pure capitalism in a while, so it is not to blame for the current crisis here in the states.
Blake
Australia is whethering the storm? The Australian dollar acts even more like a yo-yo (spelling?) than the Moscow stock exchange.
I'm in agreement with most of the comments here. The problem wasn't deregulation, it was bad regulation. I think the point is that what is needed isn't more regulation — it's good regulation.
This situation didn't arise from the housing market being under-regulated. It arose from bad regulations. People often times confuse more regulation for good regulation, and the two aren't the same.
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