Rick Perry’s asserts that Social Security is a Ponzi scheme. We should remember that. Unfortunately, our last Ponzi scheme is already hurtling downward.

If you think about it, a large part of American (and global) prosperity rests on a real Ponzi scheme: the financial system. I’m actually not being hyperbolic here. In order to make credit circulate through the economy, banks must have less money on deposit than they have out on loan. If a panic occurs, then bank runs result. That’s why central banks were created: to be the lender of last resort.

That’s just the basics. But if you push it even a little harder, then the House-of-Cards nature of the system gets even bigger. Bankers have an inherent incentive to leverage far higher than they should, and it gets worse the more they get into trouble: if everything goes belly up, they can only lose their holdings (this is especially true if there is limited liability), but if everything goes well, then they make a killing. So it is inherent within the structure of incentives for banks to take unreasonable risks. In fact, if they don’t take unreasonable risks during good times, they will lose market share, and thus their jobs: “as long as the music is playing, we’ve got to keep dancing,” Merrill Lynch CEO Stan O’Neill famously observed.

As Hyman Minsky pointed out several decades ago, the very stability of the system creates instability: as growth and credit occur, everyone’s incentive is to keep extending credit, and then hoping to get off before the whole thing crashes. This is not some pathology: it is inherent in the system.

To the extent that there is a “solution” to all of this, it is to regulate the system to prevent the risks getting out of control, e.g. leverage requirements, cordoning off sectors of the system to avoid contagion (i.e. Glass-Steagall), compensation regulation, and above all, transparency. And all those are things that Rick Perry and the Republican Party oppose: the GOP is the nation’s biggest political promoter of Ponzi schemes.

It’s almost classic Rove: attack the other guy for your own weakness. Except that Perry is too crazy/stupid/egotistical even for Rove.

In 100 years, if America lasts that long, historians will look back on this era to determine what caused someone like Perry — or a party like today’s GOP — to become major political forces. And I’m not sure that they will be able to find a rational answer.

[Cross-posted at The Reality-Based Community]

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Jonathan Zasloff is Professor of Law at the UCLA School of Law.