Fundamental Architecture

David Brooks had some good thoughts today in his NYT column on the economic crisis. Key graphs:

At these moments, central bankers and Treasury officials leap in to try to make the traders feel better. Officials pretend they’re coming up with policy responses, but much of what they do is political theater. In reality, they’re trying to cajole, bluff and calm their audience of global money-sloshers.

This is more than a mortgage problem. We live in a world in which trillions of dollars can move instantly, but they are in the hands of human beings who are, by nature, limited in knowledge, and subject to self-deceptions and social contagions. By one count, financial crises are twice as prevalent now as they were 100 years ago.

In his astonishingly prescient book, “The World Is Curved: Hidden Dangers to the Global Economy,” David M. Smick argues that we have inherited an impressive global economic system. It, with the U.S. as the hub, has produced unprecedented levels of global prosperity. But it has now spun wildly out of control. It can’t be fixed with the shock and awe of a $700 billion rescue package, Smick says. The fundamental architecture needs to be reformed.