Government regulations come always after big crises. Are bankers next to split following the auditors?

Abstract

When things are good nobody asks why. When things are too good to be true, only a few realise that it is true. When things finally turn bad everybody finds out that the emperor has no clothes on. Then, promising politicians take over the crisis to save the world. Is this process just human nature where the system works always in favour of the ruling class, or well-educated humans is a must for a true democracy? In any case, society would be better-off when informed, rather than ignorant. In this short note, we offer an explanation for the current persisting mediocre growth rate mainly in the US. At the centre of our analysis and explanation for the above matter lie the persisting structural distortions found in the US banking industry. We focus on the investment banking system in particular as we are considering it as the absolutely principal factor that circulates and allocates capital in the globe. We show why and how this system malfunctions, we focus on the conflicts of interest and we finally offer both an explanation and a way out of the current Wall Street institutional distortions, which we consider of critical importance for bringing back the US as well as the western economy as a whole, back on track. In addition, our view also offers an indirect explanation about the inability of the Western economies to succeed high growth rates, reducing government debt and unemployment at the same time. It is in fact the inability to substantially reform the banking system, leaving it substantially operating as before, that drags down the economy to inadequate growth rates, despite repetitive programs of Quantitative Easing (QE) by the FED in the US or "backdoor QE" in Europe.