Public Values

Economic crisis result of decades of deregulation

Left to their own devices, markets create crises - George Soros

George SorosCBC News: Sunday recently re-ran a short documentary about the origins of the economic crisis that provides a reminder of the dangers of letting business police itself.

The Great Wall Street Swindle "is a story about how globalization and deregulation allowed a huge speculative bubble to be built that wildly overvalued certain investments and ended up burning individuals like you and I", host Evan Solomon tells his audience. "In an effort to sustain the lucrative profits and fees that the financial industries earn from this bubble, much of it now stands accused of fraud. And if you think the Canadian economy is immune to all this, think again."

Solomon interviewed financial guru George Soros, who told him he believes we are now seeing the financial result of decades of deregulation, with the financial community now having trillions of dollars of potentially toxic investment ready to explode. "The belief that markets are best left to their own devices is a false belief," Soros told the Solomon. "Left to their own devices, markets create crises."

Solomon traces how the firewall between banks and speculation was broken down due to the deregulatory trend, which the financial industry and right-wing politicians promoted.

"After the Great Depression, banks and brokerages were forced to put aside reserves when they issued mortgages or made loans. All that started to change in the 1980s. Now when banks sell a mortgage, they take that debt and they give it to Wall Street investment houses. Bundle into funds. Sell shares. What's safer than real estate became known as mortgage-backed-investments."

The sorry outcome of the process is now well-known: millions of families losing their homes, businesses gone bust, double-digit unemployment, boarded-up malls and houses, all fueling a vicious cycle of decline with no end in sight.

The documentary can be viewed online at the link below.

Privatization vs. Public Values Frame
  Markets create opportunities. / Markets create crises.
  The marketplace is a self-sustaining entity. / Unregulated markets eat until they explode.

Links and sources
  Link to CBC Sunday documentary "The Great Wall Street Swindle"

Posted: January 09, 2009

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