Regulating the economy

To be hon­est, reg­u­lat­ing the econ­o­my is most­ly over my head. Or, maybe, just bor­ing to me. Either way, when­ev­er an arti­cle men­tions deriv­a­tives two or more times, it is iffy that I will get to the end.

Still, it is an impor­tant top­ic. I’m sure some argue that the less reg­u­la­tion the bet­ter. And I can’t argue that. As long as there is enough, there should­n’t be more.

I’m guess­ing that every time an eco­nom­ic reg­u­la­tion is writ­ten, there are par­ties that imme­di­ate­ly set about find­ing a way around it. So, even though it is impor­tant for the present reg­u­la­to­ry scheme to be adjust­ed to new real­i­ties, we should nev­er assume that all con­tin­gen­cies are covered.

It seems like what we real­ly need is some­one who iden­ti­fies prob­lems and acts on them. Did­n’t most of Amer­i­ca under­stand there was a hous­ing bub­ble? Was­n’t this clear a cou­ple of years ago? Or ear­li­er? Did­n’t Fed Chair­man Greenspan com­plain of irra­tional exu­ber­ance in the stock mar­ket in 1996, four years before that recession?

In both cas­es, every­one under­stood that eco­nom­ic growth was being dri­ven by bub­bles. But no one had the polit­i­cal courage to do some­thing about it. Maybe end­ing a bub­ble inevitably leads to a reces­sion (and who wants to be respon­si­ble for that?), but I’m bet­ting end­ing the bub­ble soon­er rather than lat­er would lessen the recession.

Maybe the next round of eco­nom­ic growth will be pow­ered by an increase in pro­duc­tiv­i­ty instead of a bub­ble. You know, for a change.