The Grand Illusion
Taken together, the drop in the various market indices on Wednesday and Thursday appear to be the largest two-day decline in almost a year and a half. And what supposedly triggered the sell-off and decline? The fact that the Federal Reserve indicated that it just might stop buying something like $85 billion in bonds every month. Duh!
Believing that the continuing purchase of such bonds, otherwise known by the euphemism of “quantitative easing” (or QE), would or could go on forever makes the belief in the tooth fairy, the Wizard of Oz, and moderation by the Taliban look sensible by comparison. The financial “wizards” of Wall Street, including high-paid hedge fund managers, program traders, and various other supposed financial icons had to know that such a program had to end or be throttled back. So why, if they knew this, did they go into a panic?
Because they were using the stimulus of QE to run up stocks in the short run to bolster their own bottom lines – and bonuses – and didn’t believe that Chairman Bernanke would signal an end to the artificial bull market so quickly. Ah yes, and these are the geniuses who are among the most high-paid executives/professionals in the United States. They’re also the ones who created the mess of the Great Recession… and they’re at it again.
Despite Dodd-Frank, there still is little oversight of these self-proclaimed experts, and no real significant reform of either banking or investment banking. And Congress continues to tie itself in knots over anything requiring real oversight or reform, as witness the scuttling of the legislation that made a very modest attempt at reforming farm subsidies… or the continued hassles over fixing a broken and essential non-functional immigration system… and we won’t mention, except in passing, the fact that despite overwhelming public support for requiring background checks of firearms’ purchasers, that, too, never happened.
Just how bad will things have to get before Americans start electing politicians who are more interested in solving problems than getting elected? I don’t know… but I’m definitely not holding my breath.
Mr. Modesitt,
To answer your last question, Americans will start electing politicians who are interested in solving problems just as soon as we see a Constitutional ammendment for term limits. Since we have no hope of seeing a 2/3 majority vote on that in Congress (or constitutional convention, for that matter) we might as well get used to the group we have. They aren’t going anywhere.
First off, not to be a suck-up, but I LOVE your books (except Emperess of Eternity, I just couldn’t get into it)! I have bought and read quite literally every one. I started with the Cyador series and then read frontwards and backwards (in terms of order). Geekiness aside…
I have struggled with this myself. In Canada (where I come from) we don’t have term limits. What we do have are pretty strong laws around campaign financing. Though the outcome was that it made it cheaper for companies to influence political decision making, it did at least remove some of the money involved. I suspect that with term limits, you would just get all your bad behaviour happening in the last 18 months of a senator/congressperson’s term. That is what happens presidents. Politics requires that you reward your supporters, and when you can no longer dole out punishments that will last (due to a term limit), you only have rewards. That is why in Canada PM’s stuff the senate full with patronage appointments when they first arrive (to establish their ability to reward) and when they are leaving (to ensure their last wishes are honoured). You’d likely just see more “PORK” in the laws passed by second term senators…
The other thing is that Canadians don’t mind obscenely profitable banks, but banks sort of sign a social contract when they operate in Canada. Make money, but be prudent and employ Canadians. We have pretty strict guidelines and our government has often wisely rejected the temptation of loosening banking regulations. I am guessing that the American Banking system would benefit from a good bout of butt kicking.
The US needs to re-institute the Glass-Steagall Act. It is a small step, true, but it is a place to start.
Campaign finance reform is a whole different ball of yarn (and by yarn I mean the long super stretchy stuff that can be twisted, bent, and used to create any number of things that resemble neither scarves nor socks). Since the courts have equated money with free speech, any meaningful reform is going to be impossible without constitutional amendment.
Finally, until high schools actually teach civics and (real) economics in a way that is neither partisan nor pedagogical, I hold little hope for change.