The first paragraph is another attempt to try and separate the good of markets from today's crisis, by blaming something apparently unrelated : the monetary policy run by central banks (coincidentally, a government body).
As if lax monetary policies were not part of the same ideological corpus that sees wage inflation as evil (forced by evil reactionary collectives grubbily fighting for privileges and cutting into corporate profits, urgh) and asset price inflation as good (growth and prosperity spreading and properly valued by free markets).
As if massive debt, made possible by low interest rates, had not been the easiest way to hide to populations too brain-washed or too worried by making ends meet to notice that their incomes were stagnant.
As if Greenspan's ultra-low interest rates and Bush massive tax cuts to the rich had not been simultaneous and coordinated.
The second reason to hesitate is that bold re-regulation could damage the very economies it is designed to protect. At times like this, the temptation is for tighter controls to rein in risk-takers, so that those regular, painful crashes could be avoided. It is an honourable aim, but a mistaken one.
And thus we come back to the claim that markets worked until the "stumble", and will work again, and it would be a horrible error to stop that. The boom should not be blamed for the bust. Why not? Just because. Booms are great - are you against prosperity, or what?
Finance is a brain for matching labour to capital, for allowing savers and borrowers to defer consumption or bring it forward, for enabling people to share, and trade, risks. The smarter the system is, the better it will do that. A poorly functioning system will back wasteful schemes and shun worthy ones, trap people in the present, heap risk on them and slow economic growth. This puts finance in a dilemma. A sophisticated and innovative financial system is susceptible to destructive booms; but a simple, tightly regulated one will condemn an economy to grow slowly.
Note how,the problem is about a 'poorly functioning' system, not about how it parasited society by encroaching on everything and imposing its value system on the real economy (that which has no market value has no value) and then on all social behavior. Finance can be small and innovative while remaining a tool, rather than the sole driver and judge of human activity. But that's probably a debate the Economist would rather avoid...
And, again, the comparison is not between a stable economy with slow growth with a booming-and-busting one, but between that stable one and the boom times only of the finance-driven version. How convenient. Keep the profits and dump the losses into the ether. If only life were so simple for the rest of us...
the system is stacked against [regulators]. They are paid less than those they oversee. They know less, they may be less able, they think like the financial herd, and they are shackled by politics. In an open economy, business can escape a regulatory squeeze in one country by skipping offshore. Once a bubble is inflating many factors conspire to discourage a regulator from pricking it.
Pure and simple concern trolling, tinged with more barely concealed contempt. Regulators are paid less (which means, of course, that they are worth less, ie that they must be less smart or less hard-working); they are stifled by politics (something that never happens in the private sector), and they are just following the herd (ditto). Stupid bureaucrats, what do you expect?
And business is global anyway, so they are powerless - a subtle way to make us think that such globalisation is inevitable, and was not made possbile in place precisely by government policies that can be reversed.
It is quite a sight to see the Economist lamenting about the powerlessness of regulators after having explained year after year that deregulation was the way, that trade barriers, capital controls and taxes were bad, that ever-increasing corporate profits was the best sign of prosperity and the best way to get growth, and that record incomes by financiers were a just reward for their hard work and creativity. They argued that regulators should be made powerless, and now they argue that this current powerlessness is the reason to not do anything? The chutzpah is quite breathtaking, when you actually think about it.
