On the "technocrats" running the show in Europe: There are no 'technocrats,' especially ‘genius’ technocrats. I suggest a new rule of thumb for judging a 'genius technocrat.' They have to be right at least two out of ten times. There is not a single economist in Europe, who calls himself a technocrat, that could do the equivalent of making two penalty kicks out of ten.
What we learned from the Savings & Loan crisis: George Santayana famously said that, "those who cannot remember the past are condemned to repeat it." But, even if we remember the mistakes we have made, the new policy we pick could be another mistake. Here is what we learned about the incidence of fraud leading up to the savings and loan crisis, according to the national commission that investigated the causes of that crisis:
On the danger Control Frauds pose to society: When many of these frauds occur in the same area, they hyperinflate financial bubbles, which is what causes financial crises and mass unemployment. It makes the CEOs wealthy, produces Balzac scandals, and destroys democracy.
Bill Black's Recipe for Bankers to become Billionaires: 1. Grow massively, 2. By making very poor quality loans at high rates of interest, 3. Use extreme leverage (high corporate debt), and 4. Set aside virtually no loss reserves for the massive losses that will be coming. If you do these four things, you are mathematically guaranteed to report record short-term income. Akerlof and Romer referred to it as a sure thing - it is guaranteed.
Why bankers hate free markets and effective market competition, and adore crony capitalism: If you are a banker and wish to grow your bank (lending) at 50% per year - as was happening in Iceland, Ireland and much of Europe, for example - you would have to beat your competition - as in charge a lower interest rate. But if markets are working properly, your competition will try to match your rates - and you wouldn't end up making more loans, and your income would fall. All bankers would lose. That's why banks are the biggest proponents of crony capitalism - and are the world leaders in crony capitalism.
On Economists' awful predictive abilities and lack of morality - including three individual examples: Economists tell us they want to be judged on their predictive ability. We welcome their admission because their record in prediction is pitiful. But, of course, it is precisely the fact that they have been wrong about everything important for three decades that makes them unwilling to admit their error and evermore insistent on continuing their worst policy advice. Economics is particularly awful when it gets into the concept of morality.
Black provides examples of three individuals who wield(ed) enormous influence but got everything wrong:
On what permitted the crisis to occur in Europe and the USA: The National Commission Report on the US crisis stated:
I thank Bonnie Faulkner for making the material in this presentation available through her show, Guns and Butter. If you missed Bonnie Faulkner's excellent February interview with Bill Black, I highly recommend a listen.