I don't understand your infatuation with the notion that so-called elites want to benefit themselves. Everybody wants to benefit himself. Or do you think the so-called elites have a monopoly on the desire for profit?
One of the oldest practices in business is to use other people's money to invest and generate profits. Is that a conspiracy? Is that practice limited to so-called elites?
You understand that the masses demand that politicians create jobs, right? How would politicians create jobs sooner than later without relying on debt?
If it weren't for all that debt fueling demand and stimulating economic growth, billions of people in developing countries would be in even more impoverished conditions. There wouldn't be remotely enough job growth to match population growth.
Politicians cooperate with the so-called elites that peddle debt because the masses demand it, one way or another. Debt provides higher standards of living that the masses demand. If there is a conspiracy, the masses are involved enthusiastically in it.
Absolutely, this is not a problem of individuals -- it's a problem where the system is dysfunctional so individuals have the incentives to impoverish and destabilize, ultimately, the world. And these incentives work most insidiously when they apply to the richest and most powerful members of society.
Not the least problem is that these people are most able to distort the picture, one way or another, and make the public think the problem lies elsewhere. I guess the real problem is the amount of trust we the public are happily giving to these people, believing in their public-mindedness, in the final analysis.
There is no question, as you point out, that debt and other financialization are required to fuel real economic growth. The question is who or what forces should drive the valuation of these financial assets. The Italian Renaissance and the Scottish "free banking" era have demonstrated that letting these asset values be determined by market forces is totally fine -- in fact, these economies enjoyed excellent growth and stability.
The problem with most other modern economies is that, with the state control of money and 'safe' debts, debt and other financial asset values are artificially promoted by the elites, so their values generally sit above what real-world conditions warrant. Furthermore, since the elites have every incentive to maximize the issuance of assets and hide bad news from the public, they not only destabilize their own system, but make any adjustment painful.
If savers were not pushed by manipulated interest rates to buy riskier assets, if they were left alone to conserve the value of their savings if they were so inclined, we would not have so many bubbles and busts. And as I mentioned in my original post, artificial asset values create artificial supply and demand in the real economy, and this is the real source of pain from a demand collapse -- and this problem is the worst in developing and poor countries. (And of course, this pain is used to justify the 'need' for centralized control, to enable the authorities to rescue demand at such times.)
So, in the end, the question is whether we want a centrally planned or a market-based system. The analogy with the difference between capitalism and socialism is spot-on. In the socialist system, the elites will have us believe that, if the state doesn't control key products such as food, God forbid, people might starve. The truth is the opposite.
