I happened to hit a good break point at work and had just enough time to get to the Tuesday Topics discussion in The Kate Gleason Auditorium at The Rochester Public Library (115 South Ave.) David Cay Johnston was on hand to explain The Credit Crisis: Your Wallet and Wall Street in that cheerfully confident way that only David Cay Johnston can.

He started off talking about Reaganomics and where it is some 28 years after the start. The original plan had three goals: reduce taxes, balance the budget, and deregulate industry, so he outlined a measure of past performance. Taxes have dropped for the tiny sliver of extremely rich people but not for the rest of us. The budget is profoundly not balanced. But at the core of the overall failure is that the concept of deregulation is fundamentally a myth.

His analogy to the situation is that of driving: most people on the road are generally pretty good drivers. So, to aid them in driving better, we should eliminate those expensive road signs and traffic signals. After all, most drivers are responsible, so why should we impede their progress with unnecessary regulation? Clearly the exercise leads to worse conditions. But if you take a closer look, even the act of licensing drivers is an act of regulation.

In other words, the concept of deregulation was actually one of reducing regulation, and reducing the amount of regulation opened the door for conditions for which the regulations were designed to circumvent. By operating within the confines of a system of rules, responsible action was one of following those rules.

Johnston's point was that in "deregulating", we have separated risk from responsibility. And by allowing people to make irresponsible decisions, we ended up in the mess we're in now.

Anyway, in this bail-out, the estimated value of all the sub-prime mortgages were worth about US$500B and their actual value was more like US$300B if you consider the real value of the real estate, but the government is spending 8.5 trillion dollars on the bailout — nearly 30 times more than their value … in other words, a terribly bad investment. The excess money is being used to pay for companies who owe money to Goldman Sachs — curiously enough, one of the central figures of the entire bailout.

I suspect I'm doing a very poor job explaining it. The thing I noted was that he seemed rather calm about the whole thing, whether he was talking about the bailout amount being about the same as 8 years of every American's income tax collection, or the possibility of a decade of 10% inflation. It was that kind of deep understanding that makes you know that you really don't know, and no matter what happens, you get by.