A similar situation is developing in the economic arena.

As the current recession started in 2007, government policy under President Bush focused on rescuing the failing financial sector. The Obama administration picked up and amplified that policy. Several trillions in taxpayer money have now been spent by the Treasury and the Federal Reserve to bail out banks and other financial entities.

The sums spent to prop up U.S. finance dwarfed those dedicated to the real economy. The main priority has been, and still is, to keep the globalized financial system from crashing and to set it back on its feet.

This policy ignored or fudged the fact that global finance had collapsed through its own imbalances and excesses. Thus restoring the status quo ante provides no guarantee of stability. On the contrary, it reinforces and extends the risk of a relapse into crisis.

The globalization of finance has been a major tenet of U.S. economic policy for three decades. Safeguards erected against a coordinated global crash, such as the Glass-Steagall Act, have gradually been removed. Controls over capital movements and exchange rates are gone as well, eliminating all restraints on world monetary flows.

At the same time, U.S. fiscal and trade deficits have vastly increased the amount of money in circulation. This floating, unanchored and anonymous mass of money moves freely around the globe, seeking the highest returns. In the process it generates massive financial bubbles, as no asset class is large enough to absorb it.

Globalized finance has generated the Asian crisis, the dot.com bust, the U.S. mortgage disaster, and the 2008 spike in commodity prices, including oil at $148 a barrel. The latest ongoing episode is the current stock market bubble, fed and amplified by massive government cash injections and ultra-low interest rates.

The economic impact of this situation is, first, a shift from productive to speculative investment, with a bloated financial sector and a shrinking real economy; second, a series of economic dislocations caused by the boom and bust cycle, with the burden falling on the majority of the working population.

With the U.S. unemployment rate now at 10.2 percent, with another 8 percent or so under-employed, the justifications for propping up the financial sector ring increasingly hollow.

The trillions of dollars disbursed by the Federal Reserve and Treasury were meant to support bank lending capacity and restore the credit available to the real economy. Instead lending has been curtailed everywhere and the economy is flat on its back while Wall Street is looking at a banner year.

The stock market has shrugged off the rising U.S. unemployment numbers, and for good reason. With a global sandbox to play in, U.S. taxpayer money, provided at zero interest, can be much more profitably invested in Hong-Kong real estate, Brazilian stocks, or oil and copper futures than in struggling American businesses.

In other words, as long as Uncle Sam keeps shoveling money at the banks, the financial sector does not need the rest of America. The government so far appears to agree.

From the political viewpoint, as Ms. Strassel points out, the administration policy has been a disappointment. From the economic angle, it depends from who profits. For the financial industry, it is a godsend. But for the general population it is a resounding failure.

It remains now to be seen how long the stock market bubble can keep inflating when there is no economy supporting it, the government is broke, the central bank is printing money and the currency is losing value.

A realistic answer could be phrased as follows: current policy will probably be maintained for a while, but in the end it does not matter all that much.

The cheap money and stimulus exertions of the current administration have had some effect in goosing up the economy, and will probably continue to support it to some degree. How much and how long is a moot point, because whatever recovery eventually occurs will be drowned in a tsunami of taxes.

This new flood of taxation will inevitably be generated by the legislative initiatives now in the works: cap and trade legislation, national health care and unrestrained deficit spending.

Let us look at each in turn.

The cap and trade legislation is a tax on the carbon emissions resulting from the use of fossil fuels. Since fossil fuels at this time provide close to 90% of U.S. energy consumption, it is equivalent to a tax on energy. As agriculture is a major energy user, it will also translate into a tax on food.

Cap and trade, in other words, will institutionalize the food and energy price spike that occurred in 2008. As a tax it will also be highly regressive, hitting the lower income segment of the population the hardest. For both reasons it will kill consumption, which accounts seventy percent of the Gross Domestic Product, making the recession permanent.

This effect will be immediate because once the legislation becomes law both energy suppliers and energy users will have to initiate the necessary adjustments immediately, so as to be ready when the program is actually implemented. Energy prices will rise to pay for the required investments and/or financial penalties.

The same will occur once the proposed health care reform becomes law. While the system may not be implemented for several years, the taxes to support it will take effect immediately. These levies will hit businesses the hardest, in particular the small businesses which are responsible for a large percentage of employment.

Owners will reduce the number of employees to the minimum, letting workers go instead of hiring and dashing any hopes of seeing current unemployment numbers go down.

Thus the main programs now being worked on in Congress will result in new taxes specifically targeting consumption and employment. To these will then be added a miscellaneous burden of taxation needed to cover the deficits currently projected into the indefinite future. Already programmed is the expiration of the Bush tax cuts, but that will not be nearly enough. More will certainly be added, possibly some version of the Value Added Tax that has already been mentioned.

The impact of the above on the economy and individual well-being will be severe.

One might consider such a scenario overly pessimistic, but it is only a linear extrapolation of policies and programs the current administration and congress appear determined to implement.

There are two main reasons why they could fail. One is a breakdown of communications and discipline within the reigning Democrat party, a failure of will in the face of the obvious consequences of their legislative goals.

The other is a wholesale taxpayer revolt.

This is not as farfetched as it may seem. The American Revolution was in great part caused by tax abuses, and the rebellious stream it embodied still runs below the surface. The increasing recourse to referendums and popular initiatives of all kind points to a growing disconnect between politicians and voters.

The political tea parties and town hall meetings of the past summer might just be steam blowing off. They can also be a portent of much deeper discontent.

Such discontent does not need outright tyranny to become prevalent. The 18^th century British government, compared to some modern states, was far from truly tyrannical. Britain already had, after all, a solid democratic tradition. Its fault was of another order.

The British lost America because the English Establishment could not countenance a challenge to its authority and to the status quo which upheld it. Our own government may suffer from a similar malady: an exaggerated belief in its own power and legitimacy, detached from the will and interests of the population. It sees itself as both self-sufficient and infallible.

The Gettysburg Address says otherwise. The American experiment still goes on, with leaders ultimately being seen as representatives of the people, not as a self-perpetuating elite.

In 1979, in what promised to be an easy military operation, the Soviet army invaded Afghanistan.

Six years later, with his forces bogged down in a costly and open-ended guerilla war, Mikhail Gorbachev gave his generals a year to win, with whatever means they needed to succeed. They failed, and the Soviet government spent the following three years extricating its forces. The Afghan failure was a major factor in the collapse of the USSR.

The Soviets had been in Afghanistan for seven years when they gave up and decided to withdraw. By now the US has been there almost a year more.

There is no intention here to establish a moral equivalence between the US and Soviet campaigns. The Red Army was brutal and ruthless, killing up to 15 percent of the Afghan population, and driving half of the remainder out of the country.

By contrast, the US went into Afghanistan to get the man who had gratuitously murdered nearly three thousands American citizens. The Afghans fought on our side against the hated Taliban. We were welcome.

Yet, from the military point of view, we have done no better than the Soviets. After nearly eight years we face a growing insurgency that is established in nearly half of the country, and reaching into the other half. We need to understand why.

Clausewitz defined war as the pursuit of policy by other means.

The means here are our military forces. They are professional, well trained, extremely well armed, and they have fought honorably and well. They cannot be blamed.

If the fault is not with the means, then the policy must be wrong. We started out with all the advantages on our side and won a quick victory. It was downhill from there. Why?

Let us go back to the Afghans for a while. They are not a nation, but a confederation of ethnic and tribal groups. They are poor. They practice various forms of Islam, which in the West are mostly considered retrograde.

Nevertheless they are a proud people and they can fight. In the 19^th century they took on the British Empire and kept it out of Afghanistan. They fought the Soviets and chased then out. They fought with us against the Taliban and won. Then we somehow lost them, and now the Taliban is back.

The reason is very simple: by our own choice, we changed from liberators to occupiers. Instead of giving Afghanistan back to its people we decided to keep and remold it to our own liking.

In a country that begs for a federal system, we set up an artificial central government with no popular support or power base. We disbanded the militias that fought for us and removed their leaders from power, and then proceeded to create our own Afghan army from scratch. We ran the place and still run it as if it belonged to us.

In other words, we left very little to the Afghans that they could call their own. We gave them freedom and democracy, but on our terms, not theirs. They don’t own it, and people will not fight to keep what they do not own.

We do, however, have one opportunity, which may well be our last chance.

The local government we so laboriously created and propped up has disqualified itself by rigging an election. This gives us a brief window to change tack, rework our policies and possibly start again.

There are still places in Afghanistan that the Taliban has not penetrated, like Bamyan province. This is where we should focus first and foremost; provide whatever economic aid is needed;  arm, train and support the locals, so they can defend what they have; promote local leaders and let them run their show. All in all, we must show that we will promote Afghan interests as they see them, rather than according to our own concepts.

Whenever this approach has been tried, as in Khost province for a while, it worked. If we applied it across the board, we could start pulling out our troops within a year or two.

It will require us to admit our mistakes and give up some cherished, if questionable, myths. But that is a small price to pay for a real victory.

In fact, such interventions fall into several categories, each of which has different effects.

Before doing any analysis, however, it is necessary to state that government operations do not create wealth.

Every dollar the government injects into the economy is taken out of the economy through taxation or borrowing. External government spending equals taxation minus the cost of government operations, so that the economic multiplier is always less than one. And since the cost of operations rises with size, the multiplier shrinks as the government gets bigger.

While government spending as a whole costs the economy more than it contributes, some government programs can have positive effects, particularly if certain intangibles, such as social or environmental benefits, are taken into account. The positive effect is the highest for activities which take advantage of the government’s specific strengths.

The main advantage the state has over the private sector is the ability to pursue long-term strategic objectives without the need to obtain results within a short time frame, as is the case with private profits. Therefore investment by the government will be most useful when it fits within the framework of a long-term strategy.

Thus the first and most potentially profitable area for state investment will be scientific research, particularly when it involves time frames which the private sector cannot afford. Such funding of research will be most effective within a clearly defined policy framework. Current sectors where such intervention would be very beneficial would be energy supply, resource substitution, environmental science and climate change.

The next area where government spending can be beneficial involves infrastructure projects which due to size, cost and duration are not affordable for the private sector. The Tennessee Valley Authority provides a good example of such work. The advantage here is not only the financial strength of the state, but also the ability to provide social and environmental benefits which are essential but cannot be provided at a profit.

Spending relating to the above two categories can and often will have a positive impact, the impact becomes negative for the following two categories.

The first negative spending area includes subsidies. These are counterproductive, not only because they skew the operation of the private sector towards inefficiency, but also for their effect on technical progress. A subsidized technology will not evolve because it favors a safe status quo over the riskier process of discovery and development.

The last and most wasteful category of government spending covers straight cash transfers. Their effects are always negative because of the principle formulated above: cash given to Peter must first be taken from Paul, with the state first taking its cut. In addition, the flow will inevitably be from the more productive sectors of the economy, which generate more tax revenue, towards the less productive ones.

In addition, cash transfers are an inevitable and self-sustaining source of political corruption.

It is true that the state is at times obligated to provide cash as part of a safety net, aimed at mitigating the effects of economic upheaval or natural disaster. The defining criteria of a safety net operation are specificity and limited duration. A safety net operation indefinitely extended in time inevitably becomes a cash transfer program. Before this happens it must be replaced with a more productive form of state spending.

Even a cursory analysis under the above criteria shows that the current stimulus programs, including the enormously expensive rescue of the financial system, fall mostly in the two lower categories, rather than in the more productive ones. Their economic impact will therefore be mostly negative, prolonging the current downturn and preventing a true recovery.

The oil cartel must be commended for their able management of the market. 2008 saw an extraordinary price spike which contributed significantly to the global recession. It was followed in short order by a price collapse threatening to bankrupt some of the oil producers. OPEC successfully weathered both, bringing oil prices back within a range tolerable for both oil sellers and users.

But the road ahead remains tricky. The global recovery is so tentative that even a small drop in supply could strangle it, while an increase could result in a new price collapse. OPEC members are fully aware of the immense liquidity pool created by central banks, with mountains of cash ready to flow into speculation on oil futures.

With such potential even a small tightening of supply can cause another massive spike, possibly higher than last year.

And this brings us back to inflation.

According to the U.S. Federal Reserve, inflation will not be an issue for a year or two, despite the huge recent increase in money supply. The recession has created so much spare manufacturing capacity that the price of goods cannot rise. In parallel, high unemployment will prevent labor costs from increasing.

There are, however, two ways to look at inflation.

One is to see it as a rise in the cost of goods and services. The gage preferred by central bankers to measure it is the so-called core inflation, which measures the price of a basket of such items, but excludes food and energy, considered too volatile.

The low expectation for future inflation is based on this definition.

The other way to understand inflation, however, is as a reduction in the value of money and, consequently, of purchasing power. This is the definition the average consumer lives by. This person is not particularly interested in core inflation, which deals with price changes in the longer term. But he or she is highly sensitive to the cost of food and energy.

In a nutshell, the prices which really impact the consumer, and particularly the U.S. consumer, are those of gasoline, beef, milk and eggs. They do so all the more if they become volatile. Prices of other items are less important because their purchase can always be delayed.

The volatility of food and fuel prices will not go away, because the gap between global supply and demand of both oil and foodstuffs has been steadily narrowing, and will close even faster if a true economic recovery occurs.

At that point the global liquidity so freely pumped up by governments will flow into commodities and almost instantly amplify any price increases caused by demand. We will then have 2008 all over again: the cost of essential items rises disproportionately, the consumer takes a major hit and retrenches, and the economic recovery goes into reverse.

After a few such episodes, the consumer will hunker down for good and deflation will set in.

In other words, there is a strong likelihood that the current policies will cause a series of narrowly focused inflationary spikes leading in the end to a deflationary situation. Because of the cognitive disconnect between the monetary authorities and the average citizen, the measures designed to fight deflation will instead result in entrenching it.

The problem lies with the almost exclusive focus of the central bankers on the financial system. In theory, the purpose of this system is to steer available funds towards productive investment opportunities. But the system has become so large and convoluted that its internal activities now trump investment in the real economy.

Speculation in oil futures is much more profitable than investment in a new oil field or refinery. The fewer refineries are built, and the fewer oil fields are developed, the more profitable speculation becomes, as it thrives on demand-supply imbalances.

If central bankers want to avoid a long and painful deflationary period, they need to understand that shoveling money into the financial system is only an initial step. What is critical is to push the money through the financial system and into productive uses.

Printing money is easy. Investing it well is the difficult part, but also the one that powers the economy.

The current occupant of the White House certainly has some leftist leanings, as do many members of the Democratic Party. But it might be more accurate to see his agenda less as a pursuit of socialism than as an extension of policies already initiated under his predecessor.

Let us review these policies, starting with foreign affairs.

As far as the Bush-initiated military conflicts are concerned, little has changed. The withdrawal from Iraq has not been accelerated and proceeds as the previous administration left it. A repeat of the Bush surge policy is being attempted in Afghanistan. Operations in Pakistan and Somalia are being pursued along previous lines.

China remains the predominant partner, with the Sino-American relationship now being extended beyond the economic realm to the strategic one. North Korea is allowed to fester so long as Beijing allows it, while Russia is being treated as a quasi-pariah, just as before.

The Bush policy of globalization remains in force. The remedy to the economic meltdown is, as previously, seen in government spending and various bail-outs rather than in investment in job-producing activity.

The primary emphasis remains on the financial sector, seen as the foundation and heart of economic activity, as opposed to the real economy. The provision of liquidity to the financial industry, at enormous cost to the taxpayer, remains the primary priority. At the same time domestic investment, which provides employment and income to the taxpayer, remains neglected.

It can certainly be argued that long-established policies cannot be changed within the space of a few months, or even a year. But the continuity between the two administrations reaches further then the above.

In domestic politics the main priority common to both is the continued increase and reach of the power of the executive branch.

Under the previous administration the doctrine of the unitary state was used to enlarge executive power in all areas relating to national security. In parallel the independence of the executive from legislative control was fostered by the generalized use of signing statements, through which the president took exception from many provisions of the bills he signed.

While the previous president used the War on Terror as the justification for increasing executive reach, the current one has relied primary on the economic crisis.

The financial meltdown has not only allowed to extract huge budget increases from a willing congress, but to extend executive reach into many sectors of the national economy. This extension has been accompanied by the creation of various offices and functions, collectively referred to under the term tsar, under exclusive White House supervision.

These offices, and the individuals who occupy them, are outside the regular cabinet structure as well as outside congressional supervision.

The development of such an extra-constitutional governing structure, erected hastily under the cover of economic urgency,  potentially leads to the creation of a parallel government hierarchy, free from constitutional checks and balances, and loyal only to the chief executive and his immediate circle.

Such a parallel hierarchy would be similar to the one erected in the Soviet Union by the Communist Party, with cells supervising government departments at all levels. The Communist Party, of course, was loyal only to the Party General Secretary, the de facto sole ruler of the USSR.

A development along similar lines in the U.S. does not necessarily signify the rising of a Marxist conspiracy, as some commentators have suggested. But it does signal a drift away from the principle of separation of powers supported by constitutional checks and balances. As such, it raises two red flags.

First we need to remember that the increased reach of the central government will further lower its efficiency. A bigger government with more extensive powers will not give us a better economy or a more efficient administration, but drifts instead towards the discredited Soviet model, which collapsed not because it was Communist, but because it was massively inefficient.

The second and more important point is that the U.S. constitution is not a quaint, antiquated document. It is one of the towering achievements of human political thought. This nation has been, through the kindness of fate and the wisdom and heroism of its early citizens, been blessed with this extraordinary code of political conduct. It behooves us not to discard it lightly for the sake of ill-guided expediency.

The immediate cause is that the respective policies of both partners are mutually incompatible.

The Americans are determined to go on printing and spending money by the boatload while the Chinese are adamant about preserving the value of their huge trove of dollar-denominated assets. There is not one square inch of common ground. As a result both parties are remaining very civil while simultaneously playing chicken as to who can intimidate the other.

There is a remote possibility that the global recession will end quickly and the old status quo restored to general satisfaction. But current reality points to massive U.S. deficits stretching far into the future and leading inexorably to the dollar depreciation the Chinese adamantly oppose.

But even the most optimistic economic scenario will at best gain only a short respite. Beyond the immediate issue of dollar value lurks the fact that key economic policies on both sides are nearing the end of their useful life.

Let us look at China first. The fiction here is that a thriving economy can be built without enriching the great mass of the population.

Aware of the collapse of the Soviet Union under the weight of its economic inefficiency, the Chinese government has created a semi-capitalist sector within its own command economy. But this sector is based on the export model, which requires other states to pay for China’s development while simultaneously creating massive financial imbalances.

Worse, it requires China to keep the bulk of its population poor in order to maintain its labor cost advantage. While some wealth has trickled down to the bottom, social and economic inequality has risen much faster. This is the very formula that has led to massive revolts and government collapses throughout Chinese history. China is not stable and getting less so.

The U.S., for its part, has bet that manufacturing and industrial activity can be replaced by finance. To that effect it has allowed its financial system to grow far beyond its original role as intermediary between providers and users of capital.

This policy has over the last decades made the U.S. financial system a world and an industry unto itself, with operations only tenuously connected to the real economy. Because of the potential of high profits resulting from speculative operations much of the investment capital needed by the real economy is siphoned into the purely financial sector.

Speculative financial operations produce both huge profits and enormous losses, making an autonomous financial industry inherently unstable. The U.S. government has chosen to ignore this fact during the current crisis, bailing the financial sector out at enormous expense, borne by taxpayers.

This by itself guarantees that the hoped for economic recovery will be deprived of the funding needed to generate economic activity and increased employment. It is thus likely that the vast and expensive rescue effort undertaken by the government will achieve little or nothing, with a severe political backlash leading to major policy changes.

If current policies on both sides are maintained, the probable outcome for the U.S.-China axis is that both partners will become increasingly dysfunctional, gradually rendering the axis irrelevant. And if the fundamental policies are changed the symbiotic relationship between the United States and China will fade, and with that the Sino-American axis will dissolve into thin air.  

In either case the much hyped relationship between the two powers and their economies has little or no future. History will most likely judge that it was a bad idea from the start.

Nor is there any reason for corporation insiders to be selling the company stock they own, as they have done throughout the month of August. If the economy is truly beginning to expand, they should instead be holding on to it for dear life.

So how real is the advertised economic recovery and where are the numbers backing it up?

In looking for such data, one first notices that positive numbers are remarkably scanty, and that what can be found is also very selective, with positive numbers emphasized over negative ones. But every economic swing, positive or negative, has a firm foundation somewhere, which can be found if one digs far enough to hit the bedrock. So let us dig.

The first of the layers to be cleared away is the one made up of forecasts and expectations. These are generally optimistic, but let it be remembered that many of the experts now predicting a sharp recovery also expected the Dow Jones to reach 16,000 by the end of 2007. The numbers they had then were much better than the current ones.

Hope springs eternal, but reality does not always follow, and predictions do not add up to hard information.

The second data layer to be removed is the one dealing with inventory replenishment. This is assumed to provide the activity bounce for the next two quarters, but it does not imply a recovery. Inventories have to be replenished eventually as long as some economic activity exists. The key is at what level. It is only after we compare the inventory level to that of previous periods that we can tell whether activity is rising or falling.

We all have to eat. But what makes the difference to the economy is whether we eat prime steak or the cheapest hamburger. Until that is known, we will not know whether we are doing well or poorly.

The third layer of data that needs to be stripped off is that associated with the government stimulus programs. Because government spending is fed by either borrowing or taxes it is a zero sum game: whatever it gives is taken away from somewhere else, even if there is a time lag between the giving and the taking.

This does not imply that make-work programs or social safety nets are bad. On the contrary, they will often feed people who otherwise would go hungry. But what is given to the unemployed is, ultimately and always, removed from the income of those who work, and would otherwise spend or invest it.

In addition, the transfer of income by the government from one group to another is not a frictionless operation. Some money will always be lost to inefficiency, fraud and the like. Thus a realistic assessment of the effect of stimulus programs needs to give them a slightly negative value: money transferred minus money lost in the process.

When the above three categories of data are stripped away, one must still deal with the selective utilization of the numbers that remain.

One could, for instance, conclude that housing sales are increasing even after the effect of government subsidies is taken away. But housing foreclosures are still increasing as well. Both affect the overall state of the housing sector, and one should not be considered in isolation from the other.

None of the above caveats are taken into consideration in the economic data currently presented to us. First, much of it is anticipatory. Second, the issue of inventory levels after the expected replenishment is not addressed. Third, government spending provides a very large part of the alleged economic upturn. Finally, integrated, complete data sets are nowhere to be found.

The question thus remains of whether the economy is in remission, critical but stable, on continuing life support, or still deteriorating. The stock market has gone as high as reasonable optimism would allow. Realism is now about to take over. 

These assertions a worth examining.

The general consensus is that the crisis was caused by an excess of liquidity, provided by the US Federal Reserve. This led to an over-expansion of credit and a bubble in US housing, with the attendant creation of complex mortgage-based securities, which investors and banks eagerly acquired.

When the bubble popped, the securities lost their market value, making many banks holding them technically insolvent. Interbank lending stopped and the financial system went into collapse.

Almost simultaneously, rampant speculation in oil prices, within this same financial system, drove the price of gasoline through the roof. This extended what was at first a financial sector problem into a crisis of the real economy.

Up to then nothing had kept U.S. consumers from spending money they did not have. But gas at four dollars a gallon did. The consumer clamped down, sending the economy into a tail spin.  Gross Domestic Product tanked and unemployment shot up. Consumer spending, which is the main driver of the U.S. economy, remains in the pits.

So how come the recession has been declared over?

It is because it is over, at least temporarily, on Wall Street.

The response of the U.S. government to the crisis has been to rescue the financial system from its mistakes with massive injections of taxpayer money, and some smoke and mirrors thrown in.

First the toxic asset problem was dealt with by changing accounting rules. Such assets no longer have to be priced at their market worth, but at whatever their holders declare the value to be. This immediately improved major bank balance sheets.

Second, the Federal Reserve has been providing banks with unlimited amounts of money at a zero interest rate, leading to easy and substantial profits. The Fed also provides a number of additional guarantees, and has promised to keep this up for a long time, so confidence is back and the stock market has rallied.

Recession over!

There is only one hitch. All of the above is strictly financial. There has been no investment whatever, other than a few corporate bail-outs, in the real economy. Jane and Joe are still scrambling to pay their mortgage and other bills while looking for a job.

Wall Street got trillions in tax money. The rest of the country got an extension in unemployment insurance.

In the end, it does not matter who gets the money, as long as it is well spent. But it is doubtful this is the case.

The current policy of excessive liquidity only repeats what was done earlier in this decade to fix the previous recession: drown the financial system in cheap cash. But this time it is done with much greater intensity and on a coordinated global scale. In all likelihood the end result will be a crisis even more severe than even the present one.

A wholesale change of priorities is urgently needed. Without it the U.S. financial sector is in danger of becoming the modern American equivalent of the 18^th century French court at Versailles: an expensive tax-funded playpen for a small, wealthy and influential minority, whose activities are less and less relevant to the country at large.

The Versailles courtiers thought themselves to be indispensable. History showed they were not. In the same vein it is probable that the U.S. financial sector, in its current form, is far less critical to the economy than it is made out to be.

Unless reform is undertaken quickly and on an all-encompassing scale, we might find this to be true in the not too distant future. Let us hope we do not find out the hard way.