G 20 publishes Declaration
The Group of Twenty published a Declaration on November 15 at the summit meeting in Washington. It describes the cause of the crisis as follows:
3. During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.
4. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.
As to the world financial crisis, the primary culprit is our unwillingness to accept reality. President Reagan egged us on to our profligate ways and we bought into it: prosperity with no accountability.
Carter had warned us in 1980 in his state of the union speech:
Our material resources, great as they are, are limited. Our problems are too complex for simple slogans or for quick solutions. We cannot solve them without effort and sacrifice. Walter Lippmann once reminded us, “You took the good things for granted. Now you must earn them again. For every right that you cherish, you have a duty which you must fulfill. For every good which you wish to preserve, you will have to sacrifice your comfort and your ease. There is nothing for nothing any longer.”
In part because of the Iran hostage crisis, Carter had zero political capital by that time. Reagan won a landslide. Enter huge deficits, deregulation, opportunists, greed, corruption, arrogance, irresponsibility, and perverted ideologies clothed in religious garb.
There is no free lunch and there is no free shopping spree in reality. The IOU has come due.
Obama inherits this horror show and starts out with some political capital. Let’s hope he invests it wisely so that it grows, giving his administration the power to tackle effectively the environmental crisis and render fear-based politics ineffectual .
Ridge Dickey
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