It may be one of the greatest self-delusions in history. Earlier today, President Obama signed "the most sweeping overhaul of financial regulations since the Great Depression" into law. According to the report from the Associated Press on Yahoo! News, Mr. Obama declared that, "the American people will never again be asked to foot the bill for Wall Street's mistakes." It wasn't clear that we were asked the last time. Nobody asked me, nor did anyone pay any attention to my suggestions on how to avoid the very thing Mr. Obama has now signed into law.
In any event, there are so many things wrong with the so-called "overhaul" that it's difficult to know where to begin. That being the case, we will limit ourselves to what seem to be the three most important items. Starting at the bottom (which is where increasing numbers of Americans will soon find themselves),
Three: The approach to regulation is based on the false idea that the State can command the system to do by fiat what the system should be designed to do by itself. We've made this point before, but the system should incorporate internal, systemic controls to self-regulate, not have the State or some other authority try to impose desired results. The only result of the fixed belief that the State can do everything will be that people and businesses who can hide better or have better lawyers will do exactly as they please, while the more honest or poorer will bear the cost and the blame. The "financial services industry" lauded the repeal of the Banking Act of 1933 ("Glass-Steagall") that contained such internal, systemic controls in the late 1990s, assuring the Congress that external controls in the form of governmental regulations were more than sufficient to prevent disaster. Right. The partial repeal of Glass-Steagall gave us the savings and loan meltdown. The full repeal got us the present "recession." We can hardly wait for what's next.
Two: The overhaul — such as it is — is within the framework of Keynesian economics. Unfortunately, Keynesian economics (as every reader of this blog is aware) does not reflect reality, either the reality of money, credit, banking, and finance, or the reality of human nature. The worst thing that the so-called overhaul can do is exactly what it will do: lull people into a false sense of security by convincing them that something substantive has been done.
And in the Number One spot:
There is no real protection for the consumer or anybody else in the overhaul. The idea that you can "protect" people by maintaining the present system that systematically strips people of ownership of the means of production, then the wage system jobs, and, then, finally, of welfare payments as the State goes bankrupt is hardly "protection," unless you're talking about the sort of protection offered by the local mob boss.
No, the only real protection any consumer can have is to become an owner of a meaningful capital stake sufficient to generate a secure income to be able to meet common domestic needs adequately. As William Cobbett said in one of our most overused quotes, "Freedom is not an empty sound; it is not an abstract idea; it is not a thing that nobody can feel. It means, — and it means nothing else, — the full and quiet enjoyment of your own property. If you have not this, if this be not well secured to you, you may call yourself what you will, but you are a slave. (A History of the Protestant Reformation in England and Ireland, 1827, §456)
#30#