Things fail. Businesses, relationships, cars, you name it. Everyone knows this, and as humans we are an adaptable species capable of learning from our failures, processing the lessons learned, and building a better system the next time around. It's only when we become ossified and refuse to accept the risk of failure, or even the possibility of failure, that we head down the path of true crisis. Lessons are no longer learned, our eyes remain closed, and instead of pulling back from what doesn't work we get stuck deeper in the mire until drowning becomes a certainty.
After the failure of communism at the end of the last century, capitalism fell under the delusional hubristic notion that it could do no wrong. But just because you win the game doesn't mean you're perfect. It just means, at this particular place and time, under this given set of circumstances, you were better than your opponent. Corporations and the wealthy seized on this victory to usher in a tide of what they consistently referred to as "financial deregulation." Sometimes it was, sometimes it wasn't, but it always benefited the established Wall Street titan class. One area where this supposed deregulation actually tightened the noose (on the middle class, of course, not the investment banks) was the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.
Initiated under Clinton and signed into law by Bush Jr., the law makes it much more difficult for individuals to file for bankruptcy. The gist of it is that lenders want to lend money without accepting the risks, and this scenario is now playing out in Europe on a grand scale. Rather than accept any loss on their gambles, investment banks and their proxies want to get back every single cent of what they put on the table. They will ruin the economies of Portugal, Ireland, Greece, Italy, the entire world in fact, rather than not be paid in full. They want the system to be gamed in their favor at every step along the way. This is what financial deregulation means -- they always win.
But, as a people, we have a tool, albeit an unwieldy and very imperfect one, to combat this inherent unfairness. It's called democracy, and its agent is our government. The world is in upheaval. There is no doubt that this century will be a wild one -- resource depletion, global climate disruption, seven billion people and counting, globalization and relocalization. As we sort out how to pick our way through this thorny briar patch, we need as much flexibility as possible. Bankruptcy, on a personal, business, and nationwide scale, is the agent of this flexibility in the financial sphere, and bankruptcy laws need to be as liberal and generous to the borrower as possible. This ensures that the lenders, the wealthy and the investment banks, actually accept their share of the risk. They are the ones getting the high rate of return on their money, and you shouldn't get to do that without a gamble. As a nation, the first step we should take is repeal BAPCPA immediately, and shake off some of this financial ossification that is draining our middle class.
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