Alan Greenspan was born in the 1920's and he had a larger role in this mess than anyone. The main dancer in this game was one Robert Rubin, who is a borderline boomer (Wiki: Born August 28, 1938). These guys blew the bubble along with Franklin Raines. John is right that the bubble predated the repeal of Glass-Stegal, as the bubble was put into motion in 1933. One thing that causes a repetitive credit cycle is the compound interest equation, which grows faster than the nominal GDP and the need for new debt escalates in order for the economy to run in place.
Larry Summers is a boomer, connected as the son of Robert Summers, economist at Wharton and nephew of Paul Samuelson of Nobel Economics Prize and college textbook fame. He had a huge role in this matter.
The editorialist wanted to know solutions the T-party had. The editorialist thinks that drinking another bottle of whiskey is the way one gets sober. You can only do this so many times before the Whiskey kills you. The whole thing has to deflate and one way or the other, total financial destruction of bankruptcy or the deflating destruction that will cause a lot of bankruptcies, but in the end allow the system to start anew are where we are strung. The Democratic way is the attitude that we are going over a cliff so hit the accelerator and see if the car can fly. The Republican way isn't much better. The US had a lot of collateral to burn up over the last 70 years and both parties saw we burned every bit of it. The systhetic CDO's were nothing more than invented collateral to generate even more leverage. The only collateral left is the war machine and the fact that the US has been the driver of demand and the backbone of every export economy on Earth.
Here are a couple of links that are very informative about what happened in the New Deal. One might get some understanding why the Treasury can bail out Mexico, bail out Bear and the President goes to war when he feels like it.
http://www.scribd.com/doc/15214171/War- ... -Schechter
The link to the actions of FDR along with supporting actions that allowed for moving Federal Power into the states goes to a plan devised by Rockefeller. Schroder makes the connection and has the backing of people that I wouldn't call political nuts, like the former Chief Counsel of the Federal Reserve bank of Cleveland, Walker F. Todd. One of the supporting documents is Senate Report 93-549.
http://www.scribd.com/doc/21596845/Senate-Report-93-549
A third document that I haven't read, but relates to the subject is Government by Permanent Emergency.
http://www.scribd.com/doc/23244467/Gove ... -Emergency
Murray Rothbard wrote about Wilson and the Federal Reserve. He says Wilson was convinced that the nation was going to be under the massive influence of big corporations and took actions to enable big corporations to function effectively. FDR did even more in this direction. I might note that Wilson was out of Princeton New Jersey and FDR was Governor of NY and also a World War I bureaucrat, I think Secretary of War.
My point out of all of this was that the acts of FDR and the establishment of the Federal Reserve were the power behind creating the largest financial bubble in the history of the world. A long credit cycle only goes about 70 years, none have ever gone any longer to my knowledge. The ceasing of convertibility of currency and the original act of creating a currency that leveraged the supply of gold many times created a Mecca for a huge debt bubble to occur. The next step was to develop collateral to feed the bubble and housing met the bill.
Today there are a lot of absurd financial ideas. For one, the stock market makes 9% a year forever. Only if it is priced to make 9%. A 9% bond priced to yield 3% will only yield 3% regardless of what the coupon originally was. Next is the penson plans based on the 9% return, retirements that have next to nothing in them. Next is the government can spend us t prosperity. Next, real estate never goes down and deflation is impossible with paper money.
One thing I am beginning to understand is the amount of money in accounts has very little to do with the amount of currency printed or perceived currency, as very little currency was printed in relation to the exchange of liquidity between the banks and the Fed over the securities purchased by the Fed. The real money in a bank or the system is limited by the good assets on the books of the banks. The exchange between the banks and the Fed did nothing to the balance sheet of the banks as a sum much greater than what was supposedly printed by the Fed was already owed by the banks. The Fed did nothing but change the nature of the money behind the deposits. Thus we have a systematically shrinking asset base in the banking system along with a shrinking asset base in the near banks as well. If you haven't been following it, the liquidation of commercial paper in the system has been huge over the past 3 years. The total deposits in money market accounts has decline almost $1 trillion over the past 12 months. M-2 has been falling most weeks and fell $38 billion last week. This is not money going into markets, but money assets disappearing in the form of commercial paper and most likely consumer debt. We have reached the likely end.
It is likely that had there not been some kind of bubble blown, the sluggish economy we had in the first half of the 1990's would have stayed that way. But, we wouldn't have had the fictions that have much of the middle class hopelessly stuck in the stock market and now chasing junk bond yields as investments.
I am not writing to dispel the generational theory, as I think there is a link to all the cycles and whether the chcken made the egg or the egg made the chicken is not important. A fresh credit cycle creates a prosperity that floats most ships. In the later stages one always has to swim up stream. Most boomers are lazy, but the younger generations seem to not know how to do anything but scam money. I would venture 40% of the people under 40 scarcely know how to use a screw driver and most have never mowed their own lawns.
