To mistake credit default swaps, subprime mortgages, easy loan approvals, and all the rest with the fundaments of the crisis is to fail to ask why markets for these things suddenly materialized out of nowhere from 2003 to 2008. It would be news if these things had developed outside of major dollar devaluation. But since they in fact developed in the face of major dollar devaluation, the real story cannot be the financial sector’s accommodation of the new dollar weakness, but rather the fact and origins of that weakness itself.
Surely one of the reasons that public officials have been keen to scattershot blame for the crisis across the real sector is cover. The government in its role of guarantor of the currency caused this crisis, and the crisis turned out to be a major one. So we hear from public officials that it was lack of regulation, the rise of income inequality, Ronald Reagan’s tax cuts of thirty years ago (!) that cased the crisis, in that these things either put the cause of the crisis in the ex-governmental portion of the economy or find government’s culpability in the ancient past. One of the reasons we got Dodd-Frank is to help make the rhetorical case that government was not responsible for this crisis.
Real leadership requires calling things as they are and taking responsibility for past actions. In this election year, and as our great economy still only pokes along, it is time to get serious and admit that the major economic arms of the federal government, the Federal Reserve and the Treasury, mismanaged the currency, and concede that because of it the nation had to endure not only the mildness of the 2003-07 boom, but the brutal Great Recession as well.