How to Prevent Another Global Financial Crisis Essay

10047 WordsFeb 27, 201441 Pages
How to Prevent Another Global Financial Crisis: A Five-Year Retrospective: The Problem of the Prince and the Pauper The purpose of this paper is to analyze the global financial crisis five years after the fact and describe both the problems and the solutions (particularly from an American perspective). I analyze the CRA and its various amendments as well as the manipulation of the federal funds rate. I also look at the aggravating factors of excess consumer and government debt. In terms of solutions, I suggest a repeal of the CRA and all of its amendments and the dissolution of Fannie Mae and Freddie Mac. I also suggest a repeal of Dodd-Frank and the institution of a MarketNeutral Spending Cap (MNSC) by way of Constitutional amendment. Lastly, because of the actions of the Federal Reserve, I recommend a zero-valuation on all Collateralized Debt Obligations (CDO)s. Because the Fed has already bought most of them, the collateral damage would be minimal. Tags: CRA, federal funds rate, Fannie Mae, Freddie Mac, Dodd-Frank, Market-Neutral Spending Cap (MNSC), Zero-valuation, Collateralized Debt Obligations (CDO)s, moral hazard, Ponzi scheme, money laundering, fascist fiefdoms, economic incentives, shell game. Word Count: 9,316 AN INTRODUCTION While anarchists and socialists have long called for fundamental changes to our economic, financial, and political systems, the crisis in the Eurozone and in the United States has caused their voices to be joined by many capitalists and even a few corporatists. In her review of global political economics in her role as economics editor at The Economist, Zanny Minton Beddoes explained why increased intrastate inequality is a more important issue than ever before in light of the economic crisis and the austerity measures adopted in the Eurozone.1 While the work of Michael Pettis in Foreign Affairs2 is instructive in terms of how free

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