Diary: The Panic of '08

Here's some background clarity on the origins of the Panic of '08, for those willing to dig into the historic record: Who's to Blame for the Mess We're In? Why did this credit bubble develop? Because interest rates were low. Who kept them low? Alan Greenspan, the most powerful proponent of Ayn Rand / Milton Friedman laissez-faire economics since Phil Gramm. Greenspan also consistently declined to extend regulatory oversight to the creative new securities markets that developed in response to his cheap money policy. And why did so many traditionally conservative institutions respond by plunging headlong into reckless high-leverage derivatives and credit default swaps? Because there was no one saying they couldn't -- and because their competitors were doing it, reaping superior returns, higher stock prices, better access to capital. As Citigroup CEO Charlie Prince said, "as long as they are playing music, you have to get up and dance." That's what unregulated markets do: they raise the competitive bar while lowering ethical standards and eroding social responsibility. Deregulation -- then, now and always -- has the same predictable effect: turning a high-jump competition into a limbo contest. How low can you go? There always has to be a referee to ensure transparency and full disclosure, prevent monopoly consolidation, and punish fraud, insider trading and market manipulation. Markets self-destruct when the referee goes missing. Wise regulation = sustainable capitalism. Why do we have to keep learning the same lessons over and over again?