Over at Naked Capitalism there is an excellent article The Global Minotaur: An Interview with Yanis Varoufakis
Yanis Varoufakis authored a book The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy. His proposal is that the current financial crisis is not the result of any one factor be it greed, the repeal of Glass-Steagall, or whatever. But that it was at least in part due to the US government’s decision to gear their monetary and financial policy to fund deficit spending to fuel economic expansion. The article is a bit of a thick read, but eyeopening. I am tempted to try and get through the book itself.
A teaser from the interview,
Greed has been around since time immemorial. Bankers have always tried to bend the rules. Financiers were on the lookout for new forms of deceptive debt since the time of the Pharaohs. Why did the post-1971 era allow greed to dominate and the financial sector to dictate its terms and conditions on the rest of the global social economy?
It all began when postwar US hegemony could no longer be based on America’s deft recycling of its surpluses to Europe and Asia. Why couldn’t it? Because its surpluses, by the end of the 1960s, had turned into deficits; the famous twin deficits (budget and balance of trade deficits). Around 1971, US authorities were drawn to an audacious strategic move: instead of tackling the nation’s burgeoning twin deficits, America’s top policy makers decided to do the opposite: to boost deficits. And who would pay for them? The rest of the world! How? By means of a permanent transfer of capital that rushed ceaselessly across the two great oceans to finance America’s twin deficits.
It is through this prism that we can contextualise the rise of financialisation, the triumph of greed, the retreat of regulators, the domination of the Anglo-Celtic growth model; all these phenomena that typified the era suddenly appear as mere by-products of the massive capital flows necessary to feed the twin deficits of the United States.