As a companion piece to the Amy Goodman interview on the imploding U.S. economy, I’d like to post this carefully reasoned analytical piece on the origins of the crisis by Dean Baker, our favorite progressive economist. Dean shows how cowboy financing fed into the housing bubble and allowed it to grow to proportions that would not have been possible with a well-regulated financial system. This ten-page essay tells you everything you always wanted to know about the economy but were afraid to ask (as Freud knew, money = sex). After you read this piece, you won’t wonder WTF is happening anymore, you’ll know–for better or for worse. And you’ll be able to impress your friends with your knowledge of MBS (mortgage backed securities), CDOs (collateralized debt obligations), SIVs (structured investment vehicles), and of course the infamous CDSs (credit default swaps).
I know that it’s tempting to just put your head under the covers and pretend the meltdown isn’t happening, but there are some key principles for reform of the financial system that we can all get behind. To do this effectively, however, we need to know what’s what financially speaking, and there’s no better Virgil to lead us through this inferno than Dean Baker. Dean was gracious enough to send this piece for republication here on the Ruth Group blog, so I hope you’ll take a look. It’s in easy-to-download pdf format.
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