There needs to be defaults of different nature so that the banks, in the aggregate, learn and price the risks accordingly and fine tune their systems of underwriting. That’s the trial and error of the free market. There is collateral damage and there are winners and losers.
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Wait – are you saying that anything that effects the economy is necessary? The free market was dramatically influenced by the 9/11 attacks (we got a fantastic deal on a house for that reason). By your reasoning we need attacks like 9/11 for the economy to work. Frankly I’d prefer the “trials and the errors” that you mention to be a bit less dramatic.
Finally, as PT Barnum said: You can’t cheat an honest man.