Part 1 Neoliberal's Caused Financial Collapse

I. Free Market Neoliberal Economic Orthodoxies Wrong
 
A. Finance does affect real economy.

B. Finance system can falter.

C. Many economist wrong because of politics. see Fake News Warning 7

II. Real Economy Trade Imbalances did not cause
the 2007-2008 FINANCIAL CRASH

A. The earlier Dotcom Bubble Crash
did not cause a banking crises because investors took the loss.

B. World trade imbalances, the Balance of Financial Terror
were not the root cause the crash.

1. U.S. negative trade balance, as many predicted,
did not cause assets and a dollar crash.

a. As of 6/18 both have appreciated.

b. See The New Financial Geopolitics:
Post-Cold War Geopolitics in a World of ‘Long and Low.’ 96 min
 

2. Loans to Greece from Germany's trade surpluses were not the problem
as France and the Benelux nations controlled the transatlantic dollar flows
needed for international trade and to maintain Exorbitant Dollar Privilege.

a. France runs a small negative trade balance.

b. South Korea currency tanked even though she had
a positive trade balance and ample dollar reserves.

C. South Korea and the WEST could not get dollars needed to fund
the substantial daily borrowing needed for international commerce.
 

III. Almost all banks were very highly leveraged
with substantial short term $ borrowing and
Euro collateral needed for daily operations

A. When Lemans $180 billion over-nigh funding needs were
not met by the International Funding Market, the entire market  crashed.
1. Worldwide credit flows stopped and ATMs would soon be empty.

2. Bad housing loans were not the problem, rolling over short term
daily funding dollar needs with poor mortgage debt as collateral
immediately would quickly crash the entire financial system.

B. Credit stopped
1. Europe's banks had become the world's hedge fund for world dollar flows.
Loans were highly leveraged borrowed in dollars with Euro denominated collateral.

2. Thatcher deregulation of London's financial system made it the hub of dollar
denominated European bank sponsored debt which flowed into and out of the U.S.

3. The U.S. eventually deregulated to loosened housing mortgage rules and
help financing of Clinton's expand minority housing Community Reinvestment Act.
Credit-default swaps created to safeguard the resulting low credit rating housing
loans were exempted from regulation by the Gramm-Leach-Bliley Act .
It repealed banking industry safeguards provided by the Glass-Steagall Act.

4. Few banks had dollar reserves to meet the needs of the banking and corporate world.
 

5. Walls Street's model of an extremely leverage wholesale
funding model running out of NY and London would crash.

IV. Is FED Involvement in a Geopolitical World Appropriate?
A. No as a sovereign debt crisis requires Euro Central Bank was the appropriate agency.
B. No as Max Plank Institute blames dysfunctional Euro participants.
C. Yes, it was a failure in the Transatlantic Dollar Flows as described by Mark Blyth.
 

C. Distribution of these profits has resulted into an increase inequality of income.

D. Trump's disrupting this process has many academics apprehensive.

Part 2 Democracy Failures Caused Latest Popularism
m
summarized from Francis Fukuyama: Democracy's Failure to Perform

I. Development of Illiberal Democracy
     A. Causes
          1. Foreign Policy Failures of Developed Democracy
              enhanced by U.S. foreign policy failures i.e. Middle East  wars
          2. Non-Liberal Democracy success, especially China
          3. Poor Liberal Democracy Performance i.e. economic
              slowness, immigration concerns, wealth accumulation
     B. Definitions, nominal
         1. States: monopoly on the legitimate use of force.
             from Max Weber States are about Power!        
         2. Rule by Law: sovereignty sets the law i.e. China

         3. Rule of Law: sovereignty responsible to same laws
             as the governed. Laws limit power.

         4. Democratic Accountability requires free political parties
             with guarantee substantive accounting and a governments
             that serves the entire population, not just the rich and the poor.
             Liberals missed this effect of their policies.

Everyone Got More, Some Just Got More More Than Others!

C. Modern Political System
1. Generate tremendous power limited by the rule of law and is democratically accountable

2. Patrimonialism: rulers own political system, resources , distribute wealth Who You Know

3. Neo-Illiberal States: look democratic, limited representation, leaders follow the money
  

D. U.S. Failures at State Building
1. Focus: Build a Liberal Democracy
2. Required focus: moving from Patrimonial State to Modern Political System

a. Iraq and Afghanistan: got the liberal democracy but did not move from
a patriarchal state. Both states moved to Oligarchy where a few wealthy people
form a  Plutocracy. Neither protect citizens or provide services to a limited population.

b. Ukraine: got a liberal democracy from the Orange Revolution of 2004-5,
but could not keep it as a second revolution needed to avoid a strong connection to Russia.
Editor's Note: Ukraine is as important to Russia's safety as Cuba is to US safety.

c. India: Very democratic but can't progress to a modern  state because it
can't fix serious problems. Elected a strong leader but he to is failing.

d. Greece: got a democracy in 1974 but developed into a Clientelism where
every election brings a new set of party connected bureaucratic.
Strong unions kept jobs for previous bureaucrats.
Had seven times the bureaucrats per person as England.
Problem: Greece does not want to change.

See Crisis of Capitalism Understood 11 min video