Blame Game, II

My close friend Jeff Schultz has pointed me in the direction of a recent article in The Atlantic called “The Quiet Coup” (  It was written by a former chief economist from the IMF and in a somewhat (to me) Krugman-esque vein, argues that the problems the US faces today came about because, “the elite business interests…played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive.”

Commenting on the substance of the article’s analysis is beyond the scope of this blog (and my abilities), though I will note that the “down with the system” spirit embodied in it takes me back to my college days in the late 1960s.  However, Jeff forwarded the article to me because the following section tracked with my views in an earlier post (Blame Game):


“Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better-in a “buck stops somewhere else” sort of way-on the flow of savings out of China.  Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.


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. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits-such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998-were ignored or swept aside.”


And to me this is the main point.  It’s not that credit from China was not a factor in creating our current situation.  However, at its root, this crisis was made in the USA through decisions, or lack of decisions, by Americans in the public and private sectors.  Getting our economy back on track requires facing this reality head on rather than trying to scapegoat China or others.

Explore posts in the same categories: China, Economy, Investment, Trade

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