Some American politicians have seen something many financiers and economists are unwilling to see. Obama has been consistent on one theme: capitalism will survive and perhaps even triumph. But Wall Street should not assume that it will be business as usual. The culture must change. This is not simply about creating new technical fixes in the structure of incentives that alter attitude towards risk. It is about deflating the excessive prestige that finance capital had acquired over two decades. It is about recognising how finance masked, and therefore destroyed, the prospects of the real economy.

In some ways, most of the debates amongst the economists simply reinforce the politicians and popular suspicion that the lines between analytical clarity and self-serving mystification have been blurred. For instance, the government is being criticised in some circles for not restoring stability to the financial sector quickly enough. On this view, what is required is a way of separating toxic from non-toxic assets, and then recapitalising the system. But this piece of advice seems too academic, in the bad sense of the term. If it were easy to value assets, and sort out the toxic from the non-toxic, the crisis would not have arisen in the first place. What would it mean to value assets in a time of such uncertainty? Do we really know what the implications of a full revelation of the assets that actually exist might be? What is drawing the ire of common people is that the best and brightest, instead of understanding the problem, seem to display their cleverness by rehearing their own truisms. What was a talented elite has, suddenly, become a group of “sophisters, economists and calculators”, to use a phrase of Edmund Burke’s; their very abstractions making things worse.

... contd.