JOURNAL: Financial Capitalism's Failure?

Here's an article from the premier financial newspaper in the world, the Financial Times, on a situation that I believe is catalyzing the current crisis (hoisted from Paul Kedrosky's blog).  

Just why is there so much debt in the Anglo-Saxon world? Bankers and regulators know well that it is in nobody’s long-term interests to have allowed borrowing to escalate to a position where the US now owes far more, as a multiple of the economy, than at the start of the Great Depression.  

The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.  The amount by which the elite has benefited is startling, and illustrates the problem with lightly regulated free markets: the rich get much richer while the rest do not get richer at all. According to Société Générale economists, the inflation-adjusted income of the highest-paid fifth of US earners has risen by 60 per cent since 1970, while it has fallen by more than 10 per cent for the rest. As was recently pointed out in the New York Review of Books, the Walton family, of Wal-Mart fame, is wealthier than the bottom third of the US population put together – about 100m people. These are staggering statistics, confirmed by measures such as the US and UK’s ever-rising Gini coefficients, which estimate income disparity. Another way of putting this is that the share of profits in gross domestic product is at a 100-year high, or was until very recently.

More GG posts that relate to this topic:

Open Decision Making.   

America's Economy and Open Decision Making.

Parasitic Predation.  

Economic Cancer. 

NOTE:  The reason I posted about this and think it is interesting is simple.  Like Kennan (the intellectual architect of Cold War's "containment" policy), it's important to recognize what really generates a long term victory in a protracted conflict.  Then, like now, real victory requires a long term improvement in the quality of life -- from incomes to wealth to societal trust to fairness -- of the maximal number of people (to slow/reverse communism in his case and to slow/reverse disorder in ours) while at the same time, blunting the kinetic advance of the collective opposition at the least possible expense/disruption to the first goal.  We appear to be failing at both of the goals required for long term victory.  Incomes and societal trust are evaporating while we spend tens of millions to kill each insurgent (of which there is an endless supply, particularly if you seek them out).