arraya and CA Renter, in response to my pointing my finger at the unwashed masses, you both correctly point out that there are supposed to be leaders who save those unwashed masses from their worst vices.
But the problem is that powerful investment bankers and central bankers and regulators really don’t have a lot of power. Maybe some smart people in power saw that a housing/debt bubble needed to be popped in 2005. And maybe some even tried, gingerly at first. But people in positions like Treasury Secretary and Fed Reserve Chairman and so on are cut to shreds by Congress if they threaten populist voters’ interests championed by politicians (regardless of party).
That’s why I think the real root problem is not poor leadership. It’s greedy voters.
Could I be persuaded otherwise? Maybe. For example, a lot of us respect Paul Volcker. But I honestly don’t know if he would have been allowed to cut off Fannie and Freddie, for example, in 2004 or 2005. I just don’t know if our political system permits us to have strong enough economic leadership to proactively avoid these “free lunch” schemes.
And, yes, arraya, most of these people in leadership positions were ‘playing dumb’. They didn’t know if there was a bubble or not, but they knew there was no percentage in questioning it too hard, and there was more gain (money and promotions etc) in going along.
