jessescrossroadscafe.blogspot.com / By Jesse / January 24, 2013
“As a dog returns to its vomit, so a fool returns to his folly.”
A reader who works in commercial real estate finance shared a warning, informed by his own private industry perspective today. This was in response to my post this morning on the Fed’s policy error of indiscriminately pumping money into an unreformed banking system, without adding safeguards and provisions for its employment in productive investment rather than wealth transfer control frauds.
It is almost tragically funny to see the economic principles learned from the Great Depression applied so blindly and haphazardly as advocated by some economists and policy makers.
It is hard to explain the realities of things to people who see the rough world of the markets through the abstractions of their theory and models.
Yes, what my acquaintance Richard Fields calls the ‘FDR framework’ would have favoured the stimulus of government work and investment programs for a depression and liquidity trap, and a certain amount of financial security to ease the pain.
But it would have never been so wilfully complacent about the underlying fraud that caused it in the first place. And austerity without reform is a form of economic suicide. FDR came right at Wall Street and the Banks with serious reform that saved capitalism from itself, and worked for a generation to hold back its darker impulses. This is a lesson that we have apparently forgotten.