...As for making money in an unfair way - I don't see how investing in businesses is unfair, unless you think that corporations should all be owned by the state....

There are many "investments" that actually are not based on the fundamentals of the business, but rather on the behavior of the stock price and discerning some pattern in the volatility. There is no way that you can justify that this kind of "investing" is in the best interests of businesses trying to raise money in the market OR the average Joe investor trying to employ the recommended buy and hold strategy to build his retirement nest egg by participating in the stock market. It benefits people who make their money off of trading fees and hedge funds who couldn't care less about anything but making money.

I want the rules to be rewritten so that it makes the game based on actual fundamentals so that businesses can raise the money they need and long term investors can make a profit by investing in those companies. All other players are secondary, and some of them should be relegated to playing in poker tournaments. It is NOT in our nation's best interests to allow rampant speculation to drive the market.

Present circumstances are slightly different. Witches aren't real, but the destruction caused by massively leveraged derivatives based on bad mortgage loans is real. Plus plenty of people understand them, and are painfully aware of the fact that many people will keep every dollar they made from their participation in the whole fiasco. While taxpayers in general get slammed with cleaning up the mess.

That is why they are pissed.

You should be disheartened not because you live in a society where populist anger is easy to incite, but rather that you live in a society where populist anger is so often justified.

I agree that witches had no blame for the things they actually could not control (weather and such), but AIG actually created, sold, and profited from products that figure largely in the financial mess. So they played an active role in the problem. You can't equate that to the totally blameless role of an accused witch, well you can and did, but it is not valid.

Also just because millions of people had a role in the mess, doesn't mean anger towards an individual player is misplaced. But people should not try to place all the blame on one scapegoat, there is plenty to go around.

I do agree with your statement that making policy based on anger or a desire for revenge is bad and will not yield good policy. But there really are 2 separate concerns here:

1-drafting regulations so that this does not happen again. I don't think anyone should accept this statement:

...something bad (which is really a normal event and to be expected over the long run in a free market)

without asking if some well crafted regulations can make that "something" into a less severe and less frequent event.

2-publicly discussing the role of various players and calling out the greed for what it is.

Is that the legislators should not be spending their time vilifying AIG, it is not what they are supposed to be doing. Leave that job to the press (CNBC maybe?) and have the law makers actually try to craft some effective regulation.

I guess I am a fool, I want to have it all. Public spanking of the greedy, and effective laws to keep them on a short leash in the future.

He is not being judged so much because he made a lot of money. He is being judged because what he sold was worse than something of no value, it was destructive and injured other people (financially). If an MIT education isn't enough to teach someone to evaluate the product they are selling, then there is something fundamentally wrong with that product. Just because he didn't know that, doesn't entitle him to keep the money he received from selling sh*t throughout the his career.

If he were selling the cure for cancer that someone invented, that would be a little different. But he wasn't. He was selling sh*t. These products were sh*t. Nobody should profit from selling sh*t, whether they knew or not is beside the point. They were selling sh*t.

The reason the massive debt from the WWII deficits was so easily paid off is that the economy grew and servicing the debt was a small drain on the economy as a % of GDP. But how are we going to achieve the consistent growth going forward? Manufacturing? Green Jobs? The next bubble?

Even if you don't believe in global warming and it is possible for the world to continue to grow without environmental consequences, resources are getting more scarce (meaning more expensive), and not just oil.

We are also relying for the foreseeable future on the assumption that someone else will always continue to buy all the bonds to finance the national debt that allows us to recover and be ready for this future growth. After seeing housing prices tumble (which were NEVER supposed to go down on a nationwide scale), you would think people might be a little more proactive about reevaluating assumptions that form the basis of our economy. Sometimes they are wrong. China has already begun to grumble about the stability of their investments in US bonds.

How can we be sure that the growth will come?

The profit driven markets we currently use work just fine for delivering clothes and food, that's why.

How many people do you think go bankrupt because of a massive, unavoidable clothing or grocery bill that exceeds their annual income by a factor of 2 or 3?