The financial markets have collapsed. The real estate market has collapsed. The auto industry is collapsing. We are already in the longest and deepest recession in nearly 30 years, and there is no end in sight. The entire world is suffering financial turmoil at least as bad as America, if not worse.

Something this big didn't fall from the sky unexpectedly. There were plenty of people who predicted it.
Hell, even I predicted it three years ago and I have little formal training in economics.

There is plenty of evidence to suggest that the political and financial leaders knew that something like this was coming, and yet no one did anything to prevent it. It's concrete proof of a complete failure of leadership across the globe, but especially in America.
It's also evidence of a more systemic problem in our society.

There were lots of people who predicted this disaster. To take one at random, the Peter Schiff clips below are a good example.

That the people on FOX and CNBC ignored the warnings is not a surprise. Their job is to sell Wall Street's products, not to inform the public. In fact, as the credit crunch hit Peter Schiff stopped being invited to appear on FOX and CNBC as much.
If you want to get an idea of how many people ignored the warnings, just do a Google search for "slow down but no recession". It returned 828,000 hits, including Bush denying we were headed for a recession in February of this year.

But that isn't who I'm concerned with. I'm more interested in the actual major players. For instance, this quote by CitiGroup CEO Chuck Prince is very revealing. He said this about the excesses in the credit markets only one month before the credit crunch hit:

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
“At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way. I don’t think we’re at that point.”

This attitude displays a complete lack of concern about future consequences. How do you run one of the largest businesses in the world and not care about the consequences for what you know are likely bad decisions?!? What sort of environment exists on Wall Street that rewards this attitude?
An attitude where everyone is out for themselves. An attitude of unrestrained greed where the only thing that matters is to grab whatever you can while you can.

This is the culture that is being encouraged with these massive bailouts that require no sacrifice on the part of the bankers.

And what was the federal government doing during all this? Why they were caving to pressure from the same people that would need to be bailed out just a year later.

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.

The administration's blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy.

The warnings were everywhere. All the insiders knew a crash was coming, and yet they not only failed to do anything to prevent, but fought and defeated anyone who tried to prevent it.
At some point you have to think that this wasn't an unfortunate accident, but was actually something very sinister.

Things that make you go "Hmmmm"

Coincidence #1)
Ben Bernanke took over the role of Federal Reserve Chairman on February 1, 2006. What is interesting is his primary qualification for the job.

having devoted much of his career to studying the causes of the Great Depression, Bernanke was the academic expert on how to prevent financial crises from spinning out of control and threatening the general economy. One line from his “Essays on the Great Depression” sounds especially prescient today: “To the extent that bank panics interfere with normal flows of credit, they may affect the performance of the real economy.”

Doesn't it seem a little too coincidental that a scholar of the Great Depression would get appointed to Fed Chief right before we are threatened with another Great Depression?
And if that isn't a little too coincidental, consider his 2002 speech entitled "Deflation: Making Sure "It" Doesn't Happen Here." Which brings up the point that so far Bernanke has failed.

Coincidence #2)
What would you say about an industry that gives easy credit to anyone and everyone who can fog a mirror, and then when everyone has borrowed everything they possibly can, they change the rules? You would say that it sounded like a scam, wouldn't you?
That's exactly what happened when the misnamed Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005. The entire financial market participated in this scam. They sucked in the trusting, the ignorant, and the greedy, and then tried to lock them into their debts at usury rates.
What I find most interesting is how close to the very top in the credit bubble that this law was passed. Nationwide the housing market peaked about the time this law went into effect. That seems a little too coincidental, doesn't it? It seems like the leaders of the financial system knew what was about to happen, doesn't it?

Putting it all together

What all this reveals is a system-wide failure at every level: self-regulation, government regulation, political leadership, media oversight, and central banking.
This isn't just a matter of replacing a few people at the top and then getting the economy moving again. The entire system is broken. You don't just slap a new coat of paint on it and pretend that everything is OK.

#1) The culture on Wall Street cares about nothing beyond the next quarter, and raking in the maximum amount of bonuses. It is impossible for an industry to regulate itself with that attitude. It's a disaster waiting to happen. And I'm not even addressing here the lying, deceit, fraud, and outright theft that Wall Street lives and breaths.

#2) To say that government regulation failed is only half the story, because it already had one hand tied behind its back by its political masters. Much of its tools were gutted between 1999 and 2001. Without the political willpower behind it government regulation will always fail.

#3) The failure is Washington politics is the most extreme and is at the root of all our problems today. You can't fix that by simply replacing the president and who controls Congress. The entire system that elects these people is corrupt to the core. A tear-down is in order here.

#4) The news media has been a joke ever since the Fairness Doctrine was revoked during the Reagan Administration. As long as the news media is just another business model then it will remain a tool of Wall Street and Washington.

#5) The Federal Reserve is the place where the two biggest failures meet - Washington politics and Wall Street. The Fed was completely aware of what was happening and what was about to happen, and still did nothing to prevent it. Because of this failure the entire purpose of the Federal Reserve must be called into question.
Once this easily predictable crisis hit how does the Federal Reserve act? By throwing immense amounts of taxpayer money at it. Hell, I could do better than that! Congress couldn't do worse than that!