“Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess.”
I think political partisans on one side like to point to govt intervention as the source of all the problems, and partisans from the other side like to point to the lack of govt intervention as the source of all problems.
I think we had a lot of things going on:
1. Excess savings imported into the US from China and some oil exporting countries via US trade deficits with those countries
2. Cowboy activity in the private investment world recycling the extra dollars into high risk debt disguised as AAA debt
3. Baby boomers saving virtually nothing for the last 30 years, but expecting long and luxuriant (and medically expensive) retirements on the back of nothing but asset price inflation, not the production of more goods and services over their working lifetime than they consume
A few well-timed and well-placed actions could have made a big difference. Hitting hard against the whole collapse in home loan underwriting standards would have helped. Yanking the FNM, FRE, FHA etc govt supports from housing finance would have made a real difference. It would help a lot now, too, but we seem to have the stomach only to point at symptoms, or more minor causes. We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.
