I found myself sitting up late last night wondering how it is that the whole world (relatively speaking) can be working on the problem of our imminent financial collapse and yet not find any good solutions.

I think that one of the core problems is that the people most directly involved in the situation (the finance industry) are not interested in an equitable solution that involves addressing the core issue. They’re interested in minimizing their own losses, and even squeezing a profit out of these lean times. Everyone is still trying to hide and shuffle around bad debts rather than addressing the reality of a new economy that contains considerably less equity. As we dither, the economy is stalling out and consumers are going into hiding, no matter what the Fed does. Laws and incentive packages are being written to “keep people in their homes,” but also to give the banks a path other than foreclosure and holding on to homes that nobody will be able to buy. This acts to prop up the banks and their wealthy owners, not to address the core imbalances in the economy.

The finance industry does not, on the face of it, produce anything. It acts as a catalyst for other production, and thus enables the growth of the “real” economy. The finance industry is fundamentally a leech. Any profits in the financial sector really need to be read as “losses” for the real economy. If their catalyzing effect overcomes their leeching, then all is right with the world. When the finance industry is perceived as the primary driver of economic growth, then of course it’s not real and of course the house of cards will eventually fall.

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