Simon Johnson was the top economist at the International Monetary Fund for a while, so he definitely knows what it looks like when plutocrats destroy an economy. He's written a lengthy Atlantic story on how we are all fucked.
But these various policies-lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership-had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector.
And of course that is all because of Reagan, Clinton, Bush, Volcker, Greenspan, Rubin, and everyone who's ever been at Goldman.
So we have a terrible situation, sorta the same as Indonesia and Ukraine and Thailand, wherein the people who broke everything still hold veto power over policy, and they refuse to admit that they can't go back to like the week before the crisis when everyone still loved them because they made lots of money for a few important people.
The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.
Hah, yes, Simon Johnson has been presenting this deceptively simple-sounding "expand the FDIC process to encompass multinational financial giants" plan for a while now. It sounds so perfect! And so nice! And it will only cost $1.5 trillion! And it is questionably constitutional!
But hey, that is what the IMF (pictured, at left) would tell us to do, if we were a banana republic. They'd march in and take charge! Seize the banks! It is maybe still an impossible dream. Thankfully, Johnson is an optimist at heart:
It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and-because eastern Europe's banks are mostly owned by western European banks-justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration's current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S. Treasury is currently using to evaluate banks' balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.
Then, finally, once the country has been brought to its knees, we'll finally be able to achieve real restructuring and reform. Well, either that or Emperor Glenn Beck will just have all the bankers publicly shot.