Matt Taibbi warns of the next financial crash

In this interview, Matt Taibbi pointed out that all the signals that warned of the 2008 financial crash are flashing red today.

A financialized economy based on borrowing.  Check.  Financial manipulation out of control.  Check.  “Too big to fail” institutions.  Check.

The response of the federal government to the 2008 financial crash was to bail out the Wall Street companies whose recklessness and fraud created the problem in the first place.

The excuse was that these financial institutions were so vital to the U.S. economy that their failure would bring down the rest of the U.S. economy.  But the bailout gave the speculators assurance that they need not fear either bankruptcy or prison.

Any company that is too big to fail or too complicated to regulate is too big and complicated to be allowed to exist.  The big Wall Street companies should be broken up so that the failure of any one of them will not jeopardize the economy. 

Instead they have been allowed to grow even bigger by mergers. The huge profits they make draws capital away from manufacturing and the rest of the real economy.  Taibbi summed up the situation very well.

He pointed out that the Federal Reserve System is conducting a more-or-less continuing bailout, pumping money into the economy by buying up assets every time the financial markets falter.

This means that, when the day of reckoning comes, it will be so big that bailouts will be impossible.

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