BIG HAT TIP to "DemReadingDU" over on SMW's site with Ozymandius for this... I'd start with "Part 3" and work upward.
HERE LINKS from DU MARKETEER SITE:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3870913&mesg_id=3871061ANYWAY! READ IT...it SOOTHS the FUROR!! But, INCREDIBLE INSIGHT! Making SENSE out of this FINANCIAL FIASCO that addresses us "little folks," and in a way we can all understand it without reading article after article by folks who have their "own agenda." Please check it out...Pick any one of the three links...it will suck you in as TRUTH!
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DemReadingDU Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Mon May-11-09 08:50 AM
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45. Satyajit Das: Lessons of the Global Financial Crisis: 3. Built to fail
Edited on Mon May-11-09 09:02 AM by DemReadingDU
5/8/09 Lessons of the Global Financial Crisis: 3. Built to fail by Satyajit Das
The key lesson of the global financial crisis (GFC) may be that the current economic order is "built to fail".
The ability to sustain high rates of economic growth, decreed by governments and central bankers, is questionable. The aggressive increase in debt globally resulted in a sharp increase in sustainable growth rates. $4 to $5 of debt was required to create $1 of growth. Approximately half the recorded growth in the US over recent years was driven by borrowing against the rising value of houses (mortgage equity withdrawals). As the level of debt in the global economy decreases, attainable growth levels also decline.
The world used debt to accelerate its consumption. Spending that would have taken place normally over a period of many years was squeezed into a relatively short period because of the availability of cheap borrowings. Business over invested misreading demand and assuming that the exaggerated growth would continue indefinitely creating significant over-capacity in many sectors.
The noveau Jeffersonian trinity - "whoever dies with the most toys wins"; "shop till you drop"; and "if it feels good, do it" – has proved to be unsustainable.
more...
http://www.eurointelligence.com/article.581+M51f2b25c833.0.htmlEdit to add Part 2 and Part 1
5/6/09 Lessons of the Global Financial Crisis: 2. Whatever it takes By Satyajit Das
The severity of the crisis was underestimated initially. Ben Bernanke, Chairman of the US Federal Reserve in March 2007 stated during Congressional Testimony: "At this juncture, the impact on the broader economy and financial markets of the problems in the sub-prime market seems likely to be contained." In April 2007 US Treasury Secretary Henry Paulson delivered an upbeat assessment of the economy: "All the signs I look at show the housing market is at or near the bottom… The U.S. economy is very healthy and robust."
The grande mal seizure of financial markets in September and October 2008, with the bankruptcy of Lehman Brothers, a large US investment bank and near collapse of AIG, the world’s largest insurance group, highlighted the seriousness of the problems. Since then national and international "committees to save the world" have implemented a bewildering and ever changing array of measures to try to stave of economic collapse.
The actions – dubbed WIT ("What it Takes") by Gordon Brown, the English Prime Minister - have been focused on trying to stabilise the financial system and maintaining growth in the real economy.
more...
http://www.eurointelligence.com/article.581+M553774d2c37.0.html5/4/09 Lessons of the Global Financial Crisis: 1. The End of Ponzi Prosperity By Satyajit Das
Ponzi Prosperity
Growth, in reality, was founded on a series of elegant Ponzi schemes.
Consumption rather than investment drove growth, particularly in the developed world. Debt fuelled consumption became the norm. In the new economy, there were three kinds of people – "the haves", "the have-nots", and "the have-not-paid-for-what-they-haves".
The consumption was financed by borrowings supplied by a deregulated financial system. Many workers’ earnings fell in inflation adjusted terms as a result of global competition and associated outsourcing and off shoring practices. The ability to borrow against the appreciation in owner occupied houses and other financial assets underpinned consumption.
Investors, central banks with large reserves, pension funds and asset managers channeling privatised retirement savings, eagerly purchased the debt. Borrowing fueled higher asset prices allowing even greater levels of borrowing against the value of the asset. This virtuous cycle – a "positive feedback loop" – fueled the "doctor feel good" economy of recent years.
"Financial engineering" replaced "real engineering" in many countries. Entire cities (London and New York) and economies (Iceland) become dominated by the rapidly growing financial services industry. In the US, financial services’ share of total corporate profits increased from 10% in the early 1980s to 40% in 2007. The stockmarket value of financial services firms increased from 6% in the early 1980s to 23% in 2007.
The reliance on financial innovation proved disastrous. In A Short History of Financial Euphoria (1994), John Kenneth Galbraith noted that: "Financial operations do not lend themselves to innovation. What is recurrently so described and celebrated is, without exception, a small variation on an established design . . . The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version."
more...
http://www.eurointelligence.com/article.581+M54f756d50c9.0.html
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