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Considers the idea that the economic downturn of late 2008 being pinned on sub-prime mortgage discrepancies to be ludicrous, and insists that the true culprits, amongst others, are new financial players on Wall Street that previously didn't exist. Some of these changes include speculative arbitrage and asset-price manipulation and expansion of leverage, along with that of shadow banking within the financial world. Investment banks, following changes in the law in the mid-1970's, began engaging in prime brokerage as a means to achieve greater profits. This form of arbitrage created bubbles that aided the few and hurt the many. To add to this effect, the ability to strengthen leverage via creative yet legal manipulation of balance sheets has been employed. On the issue of shadow banking, notes the creation of unregulated banks that function purely as a tool for highly speculative arbitrage. Regulators have actually been complacent in the shift of banking assets to shadow banks that are beyond legal scrutiny. Further, there is strong evidence that investment bankers have created new bubbles just as old market bubbles were being deflated, as a means of satisfying the SEC, and that the housing bubble may well have been one of these contrived bubbles that resulted in gross over lending. Strongly denies that the blame rests with Greenspan and the Fed, but that it is purely a matter of Wall Street's meddling as a means to go around standard regulation, much as Hank Paulson succeeded at in 2004. S. Fullmer

A review essay on a book by Christopher Layne, The Peace of Illusions: American Grand Strategy from 1940 to the Present (Ithaca & London: Cornell U Press, 2006). Adapted from the source document.