TW: This crisis is deeper than most, the resulting change will likely and better be deeper as well. As I have said before pouting about diminished American prestige and power is not the answer, the answer is aggressive American innovation to address the debt flab and arrogance that has dominated American policy in various forms for the past 20 plus years.
From Zakaria/Newsweek:
"This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades...Since the 1980s, Americans have consumed more than they produced—and they have made up the difference by borrowing...'We've wanted lots of government, but we haven't wanted to pay for it.' So we've borrowed our way out of the problem. In 1990, the national debt stood at $3 trillion. (That sounds high, but keep reading.) By 2000, it had almost doubled, to $5.75 trillion. It is currently $10.2 trillion...
Households, for instance, should save more. Governments should put incentives in place that make such savings more likely. The U.S. government offers enormous incentives to consume (the deduction of mortgage interest being the best example), and it works. We have the biggest houses in the world, the thinnest flat-screen TVs and the most cars. If we were to tax consumption and encourage savings, that would also work...
For 20 years, the DNA of nearly every financial institution had morphed dangerously. Each time someone at the table pressed for more leverage and more risk, the next few years proved them 'right.' These people were emboldened, they were promoted and they gained control of ever more capital. Meanwhile, anyone in power who hesitated, who argued for caution, was proved 'wrong.' The cautious types were increasingly intimidated, passed over for promotion. They lost their hold on capital...
The fear on Wall Street is that a Democratic administration would overregulate. But look at who is advising Barack Obama—Buffett, Volcker, former Treasury secretaries Robert Rubin and Larry Summers. It is more likely that what will come from their efforts will be a better-regulated financial system that, while producing less-extravagant profits, will be more stable and secure...
Ever since the collapse of the Soviet Union, the United States has operated in the world with no constraints or checks on its power. This has not been good for its foreign policy. It has made Washington arrogant, lazy and careless...
We cannot noisily denounce Chinese and Arab foreign investments in America one day and then hope that they will keep buying $4 billion worth of T-bills another day. We cannot keep preaching to the world about democracy and capitalism while our own house is so wildly out of order.
It's a fundamental American belief that competition is good—in business, athletics and life. Checks and balances are James Madison's crucial mechanisms, exposing and countering abuse and arrogance and forcing discipline on people. This discipline will be painful for a country that has gotten used to having it all."
http://www.newsweek.com/id/163449
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