* Ronald Reagan, Republicans and greedy bankers

Paul Krugman writes in today’s NYT (3/2/09) …

• How did this global debt crisis happen?
• In the mid-1990s, the emerging economies of Asia had been major importers of capital, borrowing abroad to finance their development.
• But after the Asian financial crisis of 1997-98 (which seemed like a big deal at the time but looks trivial compared with what’s happening now), these countries began protecting themselves by amassing huge war chests of foreign assets, in effect exporting capital to the rest of the world.
• The result was a world awash in cheap money, looking for somewhere to go.
• Most of that money went to the United States … (where) American bankers, empowered by a quarter-century of deregulatory zeal, led the world in finding sophisticated ways to enrich themselves by hiding risk and fooling investors.
• For a while, the inrush of capital created the illusion of wealth; But bubbles always burst sooner or later; and the saving glut is still out there.
• around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off.
• So that’s how we got into this mess. And we’re still looking for the way out.

LMW COMMENT … At the heart of what went wrong (according to Krugman, and I agree) was a lack of regulation of greedy bankers and greedy bank clients. The unrestricted capitalism and diminished government regulation of Ronald Reagan and his associates in the conservative Republican movement can claim all the credit for the mess we’re in. Would that they had any clue how to get out of it, or even the good sense to follow Barack Obama’s lead.

 

Read Krugman’s entire column at … http://www.nytimes.com/2009/03/02/opinion/02krugman.html?_r=1&ref=opinion

 

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