| MontanaHatchet said: The market will fix itself. |
Nothing fixes itself. Do cars fix themselves? Do light bulbs fix themselves?
The markets are broken because the US went on a once-in-a-lifetime debt spree. Sure, people speculated on houses and stuff, but mostly it was a small group of Wall Street bankers who went wild in the casino: financial firm debt went from 21% of GDP in 1980 to 211% of GDP in 2008 (http://www.federalreserve.gov/releases/Z1/). The debt didn't go into investment or real wages, it went into giant yachts and CDOs and investment banker bonuses. Which is Just. Plain. Crazy.
The problem is, if we let the banks fail, which they surely deserve, the whole financial system goes kaboom, wiping out honest citizens and businesses instead of the scam artists.
So we'll have to nationalize the banks. Take them over, fire all the managers, wipe out the bondholders, sort out the good assets from bad, then sell the healthy assets back to pension funds, institutional investors, etc. We're also going to have to regulate the financial system, to ensure honest, fair competition, to make sure Wall Street's gigantic, thirty-year monopoly scam never happens again.
The good news -- there is good news, believe it or not -- is that the rest of the world wasn't doing what we did. Russia, China, the EU, and Japan all have fundamentally sound economies, and the BRIC nations are growing huge middle classes. So the world will get through this mess. But we should never again allow the maniacs on Wall Street to run anything larger than a flea market.
