From Epicurean Dealmaker
Epicurean Dealmaker has two posts recently that I believe are instrumental in understanding both the causes of the recent financial collapse, as well as the dynamics at play regarding both the takeover of government by finance democrats and the potential road ahead. Neither is very easily condensed, since the arguments and evidence are complexly interrelated (as well as very well-written), but I can give a taste.
His first is entitled "Conventional Wisdom" and describes the mentality of finance culture, as well as the outcome of its cultural imperitives. It does this through applying Keynes' observations to recent history. A quote from that post:
"I also explained that the fast pace and high pressure of the business tend to attract individuals who do not attach great importance to deep, theoretical, or introspective thought. Rather, quickness of intellect, nice interpersonal judgment, and a certain calculating capacity akin to the ability of practiced chess players to think several moves ahead are the most valuable and prized attributes in my industry. What I did not explain was the natural corollary to these observations; namely, that due to their vocational preoccupations and intellectual predispositions, investment bankers tend to be extremely adept and quick at sussing out and acting on what is commonly known as the conventional wisdom.
This should not be surprising, either. After all, investment bankers spend all their waking hours figuring out and relaying to clients what "the market thinks" about deals, securities, and prices. Investment banks are gatekeepers to the markets, whether underwriting securities, trading financial instruments, or structuring and executing mergers and acquisitions. And what is the market itself but a gigantic, multi-tentacled, complexly interlinked engine for the real-time calculation of conventional wisdom? Figuring out, anticipating, and shaping conventional wisdom is what investment bankers do. It is the ocean in which we swim."
The second post is entitled "On Bullshit", and deals with arguments against "Too Big to Fail". The money quote:
"So you can see, Dear Reader, what was already pretty obvious to me, mere months into what would turn out to be the greatest financial panic in generations: large, integrated investment and commercial banks concentrate contagion and risk in the marketplace. Sadly, even I was too naïve to realize our crack corps of financial regulators were missing in action, and the executive managements of these financial institutions were off smoking crack in the boardroom instead of minding the store.
But the point of my previous tirade stands: large, integrated, multi-line commercial and investment banks with fingers in almost every financial pie around the globe do not reduce systemic risk in the slightest. Instead, they comprise both the source and the pathway of contagion for systemic risk and potential breakdown.
Too big to fail banks are not the solution to our problems: they are the source of them. And no amount of PR bullshit will ever change this irrefutable fact.
Put that in your pipe and smoke it, Mr. Volcker."
Please, please read these in their entirety.