5/25/15

About a month ago I wrote a post with the same name on this topic.

The crisis was 7 years ago and my formative work on it was written 4.5 years ago. So, what’s the big deal now? Why am I coming back to this topic suddenly time and time again?

First, because, as I wrote in my original 2010 post:

It is important to understand that the crisis of 2008 was bigger and harsher with horrible consequences for the world as a whole, but in particular for the pro-western capitalistic economies, for pro-Democracy regimes and free people all around the world. Tens of millions of people lost their jobs, their livelihoods, and thousands and possibly hundreds of thousands lost their lives. Anti-Democratic regimes gained power and China became dominant. All this was not just caused by “markets.” . . .

Catatonic . . . cataclysmic . . . call it what you may, but it has set back the interest of the free world for years to come and brought about recession, depression, underemployment, death, and untold desolation. We are still paying for it and it is not entirely clear that we will not need to pay much more for it.

It is clear now, six years after the events, and nearly 5 years after I wrote the above, that I was right. The election of President Obama was a direct consequence of that crisis. In no other circumstances would a complete political neophyte be elected over such (ostensibly) high caliber candidates as Hillary Clinton (in the Democratic primaries) and John McCain in the actual elections.

Then-Senator Obama was a TWO years senator when he started his bid for the White House—TWO years. Before that, he was an unknown legislator in the Illinois Senate distinguished mostly by his repeated abstention on votes (declining to vote, that is, what is known as voting “present”). His only attributes were his eloquence and the fact that he was a novice at a time when the electorate really wanted something new and had a feeling of “a pox on all your houses” as far as more established politicians were concerned.

The weakness and loss of deterrent power brought by the Obama administration to the governing of America—and, thus, to its position in the world—is now well established, and I have covered it in numerous posts over many years. The lack of optimism and confidence enshrined by his policies of class, race, and economic warfare, as well as his arrogant, aggressive, and holier than though demeanor, is also fairly accepted these days by most.

This, together with the actual financial weakness brought about by the crisis, has set back the agenda and progress of the free, democratic world decades; recovery from which will only happen with revolutionary leadership and time—all the result of the 2008 crisis.

The other reason, is that now, six years after the event, we are beginning to see a flurry of studies, books, and newspaper articles challenging the perceived wisdom (the established narrative) of what really happened in 2008. My post from a month ago was triggered by such an article, as is mentioned there, and this one is triggered by the article by Holman W. Jenkins Jr. published in the WSJ May 23, 2015 edition.

Jenkins is clearly highly intelligent and is probably considered one of the more, if not the most, sophisticated columnist on economic matters in the WSJ—which is saying a lot given that the WSJ is at the top of the world in terms of economic and political analysis. Personally, I do not like his columns. When a column is so sophisticated as to leave me unable to understand it 50% of the time, I can say modestly that it is too sophisticated by half. Therefore, it does not serve its purpose.

Having said that, this article mentions a new book by Peter Wallison of AEI on the 2008 Financial Meltdown and a Federal Reserve study; both supporting my thesis as explained in detail in my original 2010 post.

The original post is worth re-reading and I urge you to do that. In hindsight, it turns out to be accurate, comprehensive, and correct in all material respects. It is a seminal work about the reasons—the REAL reasons—for the collapse and how it could have and should have been avoided (“mitigated” is more accurate but to a level that would have prevented most of the dire consequences). It is one of my best posts.

So, it now seems that many more people (and of better pedigree in economic analysis than your humble scribe) are trying to set the record straight.

It is, of course, very important to do so.

The real question, though, is, where were all these people like Jenkins, Wallison, the New York Federal Reserve, and others at the time?

At the time when it mattered, at the time when courageous and straight talking could have avoided a significant part of the damage that has befallen the free world due to the cowardice and/or stupidity of politicians and leading businessmen?

What good does all their sophistication and pedigree do if they are AWOL when it really matters?