The system will not change. The financial sector has spent over 400M lately lobbying politicians to remove teeth from any legislation that does pass. The US will continually experience asset bubbles and the best thing you can do is try to find them early and sell them when the bubble pops. Trying to change the system is impossible when citizens are competing with a much better funded enemy in our for-sale political system.

I'm not sure I agree entirely with Ms. Freeland's argument but it's not hard to see that many IBs were involved in copycat strategies and all were riding the wave when times were good (2003-2007).

However, we cannot forget that it is these same IBs that lobbied Congress for more deregulation, increased leverage limits and the ability to speculate on instruments like CDSs that have the potential for further disaster after a disaster.

"I think Marx's theory of overproduction and the incentive mechanisms which drive it is quite an accurate model, too. Perhaps thanks to the failure of the Stalinist experiment, people are too quick to ignore some of his insights?" - you have a fair point there. I think the think to remember is that whilst in theory it sounds ideal, in practice it rarely works out that way.

Is it the trading system of the capital marketeers?
The shadow-investment banking system of modern capitalism?
What exactly can be done about any of them that would result in the necessary counter-cyclical "monetary" policy that prevents the next debt-deflation cycle?
Not much.
The answer to how we can neutralize the natural tendency of the capital-marketeers from crashing the national economy is through monetary system reform.
Only by acting as Friedman recommended early on in his "Fiscal and Monetary Framework for Economic Stability", and as proposed to FDR in The Chicago Plan for Monetary Reform, can we restore the money-creation powers back to this sovereign nation - thereby ending the over-leveraging of the economy that provides the juice for this dance.
Put the people back in charge.
Of both politics and the money system.
Thanks Chrystia Freeland for the article.

"Nouriel Roubini, one of the few economists who predicted the financial meltdown, argues that jolts like the one the world experienced in 2008 aren't freak events, caused by stupid and greedy bankers; they are a natural and inevitable feature of capitalism."

In agreeing with this statement, the author misses the fact that Moody's and S&P's ratings on the Collateralized Debt Obligatons were fradulent and that AIG's position in Credit Defaut Swaps was virtually guaranteed to be backed by the community organizer from Chicago, our President. The astronomically paid bankers of JP Morgan et al have robbed the Federal Reseve and now even Huff Post is running stories that cover for them. This is not an encouraging sign.

My God,, what feeble excuses for the Wall Street thieves.

Our soccer players didn't lose the their last game, the team did. Politicians didn't fail to regulate their masters, the Senate and House failed.

I guess that by your logic the rich didn't end up with all the money, the system did. No, I think it was the rich, and they appreciate your kissing their buttocks.

What I take away from this article, is that Wall Street is filled with dancing lemmings who eat paper money instead of lettuce.

We have a lack of real leadership in this country. Everyone in business follows every trend that flows by them without sufficient scrutiny of what they are doing or the long term consequencies of their actions. It is easy to see that pushing subprime loans based on fraud and lies from unscrupulous mortgage companies , and inflated rating by the rating companies, and then betting for and against those CDO's was insane. Morally, ethically, and pragmatically insane. One utlimately knows the house of card will come tumbling down somewhere down the road. Yet all these so called brilliant geniuses fell hook line and sinker for this sham. I ask where are our real leaders???

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Mrs. Chrystia Freeland,

I am kind of happy to read your article this morning about Lewis' The Big Short. I did not like the
financial press coverage he got on CBS 60 minutes, CNBC and the likes. I did not read the book,
and I won't, because I know what is in it. What made me angree the most was this romanticizing of
irresponsible and in some cases criminal behavior. He was explaining the "naiveté" of the bankers and financiers, that they created this mess
because they believe that had found the perfect system. Some of your observations I applaud, others I am not absolutly in
agreement. Yes, the problem is systemic, but it is exactly because it feeds on human natures weaknesse, that has the outcomes we observe.
Capitalism can only work if it is constrained, and we will have to find another word to define the system we our currently in.
What needs to be addressed is the asymetries in power relationships of the players.

I fail, in all the current literture and comments about our economic system an attempt do redefine capitalism under
new hypoteses. Adam Smith had among core pillars of capitalism private property, the minimization of spillovers, a beilef in the price system, the sovereignty of the consumer. Consumers shaped markets and prices through independent and interested actions that resulted in an optimal rationing and attribution of ressources (the Invisble hand).

More recent attemps to redefine these pillars in a minimalist approach, some express modern capitalism as any economic system that allows private property, others
underline that free markets alone are the fundamental of capitalism.

What appears to be absent from consideration in their reflexions is the relationship between entrepreneurial risk and reward.
For me, this is central to the current problem we are facing. Our reward system is based on size, political power and economic power.

If capitalism is based on the concept of paying capital as a reward for its optimization of ressources. This reward system must be circum-referential.
Otherwise it is impossible to capture any optimization measure. To be circum-referential, the capital and its entrepreunarial effort must be contained
in somewhat of a space. This space must be geographic and legislative. By having consumers evolve in a set of local constraints and capital structures in another (a global non-national legislative sphere), constraints and containment appear impossible.

Recent academics, whom are rarely quoted, point out to very significant advances in understanding economic dynamism. Spulber (1999) explains that
firms shape their markets and price strategically. Away from what Adam Smith thought. Why? Because market structure has seen the evolution of intermediaries.
Technology has allowed these intermediaries to become gigantic, monopolistic or quasi on the consumer side, and monopsonic on the supplier side (Walmart, Home Depot, Target, Safeway...etc...) While scale economies allowed, in a first step of market consolidation, to pass these economies to the consumers, the long term effect see these efficiencies captured by the enterprises. This has made corporations price makers in all but a few markets, while Smith theorized on the price taking quality the formers.

Smith evolved at a time were suppliers or producers delt directly with consumers in cash or barter. Steve Keen and al. have also readressed the neo-classical and classical framework of competition, and demonstrated that the hypotesis of non-collusion between market participants is irrelevant in our modern markets, that corporations have all the tool to observe each other, that they do, that they take decisions based on those mutual observations, that they interact and quasi-collude through industry association to maximize market shaping in their advantge. The economic outcome, is that competitive markets as we understood them, and as described by neo-liberalits, do not exist. Oligopols and what we refered to as competitive markets (markets with many players) are both price makers.

The consumer has been detrone. And diminishes his political leadership. And so on...

Spulber goes further in demonstrating that an intermediary CANNOT make an economic profit with a consumer who understands and can mesure the value of the product or service he is purchasing. This has very deep reasonance in our system of beliefs. It is revolutionary, and explains the crises we currently are in.

You comment that it may be profitable and even smart to get into a bubble. It is true, but for the market leaders and makers. The bankers, the real estate agents, the mortgage initiators, etc...all benefited from this last bubble. What usualy happens, is that these leaders and makers need some people to be commited, while they can exit
first. This is what happened during the Internet bubble. And then, the bubble serves the main purpose of displacing wealth. In the recent bubble, leaders and makers had such an appetite, that they forgot to get out in time.

Bernanke blames the consumer, the ordinary american (people who purchased houses they could not afford, as we herd so many time in washington) for this bubble, and he wants to punish them. He is working in consolidating the financial system in a manner where any future bubble can only serve the leaders and makers and punish ordinary americans by allowing future bubbles to contain their destructive effects on small investors, ordinary people.

That is where Roubini falls short in his analysis, he loves free markets too much, this is where Greenspan and Bernanke stink, and this is where I would have wished you push a bit further. Pretending that their is a white swan in a bubble is a fallacy as insane as pretending that their was naivete from the leasrs and makers in the real estate bubble.

Ordinary people have no choice but to participate in bubble exactly because they get punished if they dont in the short term, but then again, they always get punished at the end.

That is why, anyone who pretends to want to fix our problems needs to stop and think our risk/reward system.

If you look at the "Tesla" nasdaq play this week, it is the perfect exemple of what is wrong with our system that is corrupt at the core.
It is impossible to know how many cars Tesla has produced, there appear to be serious electrical issues with the car, no media speaks about it.
It is probably the first time a manufacturing company gets access to capital/stock market opportunities before having made any strong proof on the market.
The medias have made it a darling because it was a Silicon Valley concern, it was to believe, if we look at the past 2 years of main stream media coverage,
that nobody else had anything going on.

The government, in its stimuly package, through the energy department, has granted a 450 million dollar loan to the company. To my knowledge, it is the only one of about 20 credible electric car project that got anything from the sort. The stock goes up 50% in 2 days before retreating. By the time you know it, the CEO will be billionaire through this venture, and before having produced anything wotrth mentioning. The media will spend the next 2 years glorifying about the companies market cap until
it is worth more then GM probably. What happened here? Wall Street has killed an industry before it was even born. Tesla is a monopole before even having anything we could call a production line; before having anything we could call an electric car for the consumer. This is corruption and I cannot get myself calling it Capitalism, it must be called something else.

Consumers need political leaders with the balls to constrained our economic system, and I have not seen these balls yet...

Anyway, sorry to bother you so much with this, but you did hit a cord; and you are in the right direction, I just hope that your insight finds support
among many of your collegues.

Thank you,

Denys Picard