The fantasy driving the thinking of both liberal and conservative economists alike is that the good old “free market” system could be revived, if only the correct methods are applied. It can’t. Humpty Dumpty has been sliced and diced into millions of little pieces (tranches?) and all the president’s liberals and all the president’s conservatives will never put Humpty together again. (Even if they could, the revived, re-inflated monster would very soon topple over again, with an even more resounding splat.)
Unfortunately no one in American politics today has the guts to challenge the old thinking and promote the sort of change that could turn things around in a meaningful and positive way. It’s only after the present economic collapse has lead to devastating social consequences — in other words, only after people are literally starving in the streets by the millions — that the necessary pressure will build for a completely new way of doing things, a new economics and a new politics both.
The great irony of our present situation is that nothing real has been destroyed. What’s gone up in smoke was a fantasy, an “American Dream” phony from the start. Every house whose sub-prime mortgage has been foreclosed is still standing, despite the toxic assets generated by the system that financed it. People can still live in those houses. But that will be possible only when we awaken from our “free market” dream to look around us with renewed vision.