Sir, I would take it as a great favor if you would call me Dave.
Let us consider our political leaders for a moment. Who are they? How do they get in office? How do they remain? In essence, they are people who look good on television and say various things that focus groups tell them are popular. They must raise large sums of money to fund future campaigns, and they must placate those who influence groups of voters.
From this, much follows. The need for money makes them susceptible to influence. Do people contribute hundreds of thousands of dollars to candidates because of their dedication to good government, however defined? That seems unlikely. Can money persuade an officeholder to modify his or her position? Can it change votes? Clearly, both individuals and organizations believe this to be the case, else they would not support the expense of such efforts.
We might, perhaps, also wish to look at the voters. Let us engage in a bit of whimsy for a moment. Suppose Sarah Palin, when asked about the economic crises, had furrowed her brow for an instant, leaned forward, and started talking about the details and particulars of economic theory, banking, international trade, and the various structured investment vehicles involved. After a brief pause to catch her breath, she leans forward, fixes the interviewer with her gaze, and discusses the implicit assumptions used in the statistical models used, and points out the flaws involved. She then might lean back and outline the impact on global GDP, bank capitalization, and the capital formation function of the investment banking industry. Even if it were broadcast, how many would watch? How many would understand? And - would she be admired for such in-depth knowledge, or dismissed as an egg-head?
We accept sound bites and slogans instead of educating ourselves on the important matters of our day, and then demanding (through our vote) that our leaders address issues with depth and seriousness. Our discussion here has better interaction and greater depth than did the recent political debates. What does this say about the quality of discourse the voters tolerate?
Let us look hard at our voting. On the upcoming ballot, in my location, voters will have the opportunity to vote for Chief Justice of the State Supreme court. An important position, certainly. How many will study the candidates and their positions? How many will make an informed, intelligent decision? For lesser offices, will the voters look deeply into the candidates? If the answer is no - and it often is - what sort of leadership can we expect?
The financial sector, in my opinion, represents a variety of trade-offs. One trade-off is economic pain. We have a lot of bad debts, and hence a lot of bad securities based on those debts. If we take our bitter medicine and write off the losses with no bailouts, then we will see quite a lot of economic pain. That will include failed banks, bankrupt businesses, evicted (former) homeowners, and substantially increased unemployment. On the positive side, we avoid increasing our national debt, we let those who made poor choices experience the consequences of making those decisions, and we clear out the problems quickly. I question whether our politicians or the voters will accept such a course. I suspect we would see calls for socialism that would make Lenin blush.
The other choice, bailouts, may mitigate the consequences. We will see some of the various effects mentioned, but (perhaps) to a lesser degree. In addition, the politicians can say they are "doing something", which is useful in dealing with voters. The price may include increased inflation, increased debt, and increased taxes. Those who made poor decisions will escape the consequences, so the same behavior will crop up in a different form. The public, since it perceives less pain, will be less inclined to demand government solutions.
Now Detonics brings up a good point about plutocracy, and it is worth some serious reflection. First, a poll (of limited size), done by a Wall Street Journal blogger, suggests that most (three-fourths) of the rich (defined as between one and ten million dollars net worth) support a conservative approach, and hence will vote for Senator McCain. But two-thirds of the super-rich (those with over 100 million dollars net worth) support Obama. Perhaps money and trust funds will insulate the super-rich; however, I suspect that the real reason is that the increases in inflation will help them. If one owns a lot - property, stocks, precious metals, or what-have-you, then inflation increases the value of your holdings over time. However, if one has little more than a pay stub and a rent receipt, inflation is devastating. So...we have a category of super-rich, and a category for Joe six-pack. Which category fits Secretary Paulson best? Which group writes big checks to politicians? Which, then, will be protected by the politicians?
There is a second point we might consider about a possible plutocracy. Politics requires a great deal of money as well as ample free time. A person working two jobs at a low wage is highly unlikely to enter a political contest, and still less likely to win. Most of our political leaders are well off. They own assets that will protect them from inflation. They own stocks. They do not live on a modest wage or a limited fixed income. Will they vote in terms of their self-interest? I suspect so.
More pointedly - if the dollar declines and gasoline goes to $10 per gallon, who does it hurt, and how much? And, if they have the knowledge or staff to guide them, can they invest to profit from such action? (Yes, they can profit.)
You ask what we can do to change our path. I'm tempted to offer a cryptic answer - everything, and nothing.
Everything in the sense what we could all do as Defender suggests and communicate with our elected leaders, along with intelligent voting. In addition, we can work to change policy. Quite seriously, there is an excellent book on how to influence political policy and create real changes - the title is Policy Studies for Educational Leaders: An Introduction, by Frances C. Fowler. It focuses on educational policy, but can be expanded to any area. It's well-written, easy to read, and deeply revealing. It's a bit pricey, so you might wish to ask your library if they can get a copy through interlibrary loan. As active-duty military, you may not be able to use the methods provided - that does not mean you cannot learn them. The book shows how ordinary people can go from reactive to proactive - how we could actually shape policy and legislation over time. No, it is not easy, and yes, it would take time and effort to do so - but it is possible. The book tells how. (By the way - the book does not involve sedition. It is not radical. It is a mainstream discussion of how to enter into the policy-making process.)
So, with time, effort, and energy, we could turn things around. In a few years, we could find ourselves on a much better path.
But I also said nothing, didn't I? The problem is not that we cannot act, but rather that we will not act. We are comfortable. Most of us have plenty (or too much) to eat, have reasonably nice houses and cars, possess more entertainments than we can possibly attend to, and enjoy abundant free time. Our lives would be the envy of the rich from a century ago, and of the royalty of three centuries past. The task of change requires that a satisfied people stir themselves to get off the couch, turn off the TV, and start educating themselves on serious matters and working toward change.
Therein lies the great problem. Will it take WW III to change our national attitude? Not necessarily. It will require substantial discomfort (pain) for a majority of the population, such that they choose to reform themselves. Until the environment changes, they will choose to remain as they are.
I think we can be confident the financial and geopolitical environment will change. There are a number of converging possibilities, and unless our leadership and population do a lot of things right, we will experience significant adversity. When that happens (I do not use the term "if"), people will be shaken from complacency, and they will seek solutions. (Of course, that's just my opinion. Others see a far brighter, more affluent future.)
And that is where you - you personally - come in, along with many members of this online community. I recognize there are constraints imposed by service, so please do not take anything I mention as suggesting any violation of those constraints. That said, you know how to lead. You have skills in working with and through people. There will come a time (in my opinion) when those around you will look to you for guidance, for direction - and, perhaps, even for protection. With wise leadership, they can move to a better path. Perhaps formally; or, perhaps informally, behind the scenes, with a few words - you can be one of those leaders. I hope you choose to do so.