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The latter's supposed to make the former work better. In fact, it operates only for itself. In the process, economies are wrecked and millions in them harmed.
Black explained how failed bankers collude with failed regulators to create and sell unwary buyers failed assets. Speculation and debt need more of it to prosper, but it's always a losing game. The greater the expansion, the harder it falls.
Ordinary people are hurt most because freed from regulation, bankers and other FIRE sector (finance, insurance, and real estate) players speculate on financial derivatives and an alphabet soup of securitized garbage.
It includes asset-backed securities (ABSs), mortgage-backed securities (MBSs), collateralized mortgage obligations (CMOs), collateralized debt obligations (CDOs), collateralized bond obligations (CBOs), credit default swaps (CDSs), and collateralized fund obligations (CFOs).
They're sliced, diced, packaged, repackaged, and sold in tranches to sophisticated and ordinary investors. Many buy it unwittingly through mutual funds, 401(k)s, pensions, and other financial products.
Investors often end up bilked. Bankers get bailed out when fraudulent schemes fail. Regulatory free markets let major players game the system through fraud, price manipulation, insider trading, misrepresentation, Ponzi schemes, false accounting, liar loans, and other deceptive practices.
Shiller to the Rescue
Defending the indefensible, he says:
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