In a recent interview the man who is credited with breaking the back of inflation and setting this country on a course toward fiscal sanity made the above comment attributed to him.By financial engineering, he meant the ways by which ordinary financial transcations like a mortgage or a loan was sexed up to make it look like it is a an eternal fountain of wealth and called a Derivative by exotic acronyms like CDOs,CDS,MBS and so on.This intentionally generated opacity in an otherwise simple transaction has led to the current meltdown which,Volcker has correctly frowned upon.
Less devious nations like China,Japan and India have remained true to keeping transparency of financial transactions intact,not just for the immediate parties involved but for anyone else who may later join the party.It is this maintenance of transparency for a long time that is at the basis of our problem.If that problem is not solved,as seems to be the case right now even after the bailout program, consider the economy to be ready for the toilet bowl.