Deregulation, Not State Intervention Caused Economic Meltdown.

The Economist is a great magazine with often very good analysis, but certainly not when they imply that the entire financial meltdown is the fault of the state. 

In this week's issue "Rage against the machine, Capitalism and its Critics", they conclude : 

"It is worth remembering that the epicentre of the 2008 disaster was American property, hardly a free market undistorted by government."

Seriously? And no mention of the deregulation of the banking system that caused the subprime crisis? It is rather ironic to say that "state interference" should be the root cause of the problem. If anything, it is de-regulation that created the mess and the repeal of Glass-Steagal to control speculation from the 1980 to 1999. 

For capitalism to work, it needs a market with rules that guarantee the fairness of the game. The problem is that the free market was turned into a free-for-all in the last 30 years. 

Yes, politicians have been lazy by sustaining a system of debt that was more dangerous than they understood (and the Greeks were the worst among them) but the banks share the greatest responsibility.

Look at Goldman Sachs - it is not just that they helped the Greek mask its true debt, (whose blame should lie on the Greeks) but they also bet defaults on the very debt they helped hide by acquiring credit protection on the cheap and eventually selling the swaps to the Bank of Greece. (see NYTimes or even FT)

A system that makes it legal for a bank to lie and cheat needs to be changed, especially if they are « too big to fail ». The risks the banks take have been transfered to the states. As it has been said, you privatize the benefits, and nationalize the losses. What a bonanza for the banks !