7 thoughts on “It Can’t Be Said Often Enough”

  1. The Democrats always blame freedom for the crises they exploit for power. The only Republican to contradict them successfully and wholeheartedly was Reagan.

  2. I’m not sure that’s true. To my eye the most proximate cause of the breakdown was bad lending and investment decisions. The mortgage industry, from the originators to the investors, was fraudulent, delusional, stupid and euphoric. The regulatory environment probably fed this fire, but it wasn’t the source.

    The Democrat’s main problem is that fraud is already illegal and your cannot regulate away the human shortcomings. So “more regulation” won’t help.

  3. To my eye the most proximate cause of the breakdown was bad lending and investment decisions.

    Many of them caused by the moral hazard of Fannie and Freddie.

  4. The Democrats got into office because they weren’t the Republicans.

    I don’t think most voters base their votes on party loyalty, ideology, or a consistent set of principles. Many pride themselves on not having a party affiliation, a particular political ideology, or core principles of government.

    Voting for President is regarded as voting in a CEO of the United States. When times are good, whichever candidate or party is in office must be doing the right thing, when times are bad, vote the b***ds out.

    The problem with this approach is that the lags of some policies and policy changes can be longer than the election cycles, and one can set up limit cycles voting for a candidate or party based on their perceived performance in “running the economy.”

  5. I agree with Paul. Any independent voter looking at the country’s situation in 2006 or 2008 would be likely to lean towards trying something new, not because of an ideological affinity for regulation, but because changing leadership is a natural response to a bad situation.

  6. I agree with Paul. Any independent voter looking at the country’s situation in 2006 or 2008 would be likely to lean towards trying something new, not because of an ideological affinity for regulation, but because changing leadership is a natural response to a bad situation.

    I agree, too. Unfortunately, with a two-party system, a “change in leadership” can often result in going from frying pan to fire. Which is what happened.

  7. I’m not sure that’s true. To my eye the most proximate cause of the breakdown was bad lending and investment decisions. The mortgage industry, from the originators to the investors, was fraudulent, delusional, stupid and euphoric. The regulatory environment probably fed this fire, but it wasn’t the source.

    In my view, an analogy is the [url=http://en.wikipedia.org/wiki/Yellowstone_fires_of_1988]Yellowstone fires[/url] of 1988 (or the more recent [url=http://en.wikipedia.org/wiki/February_2009_Victorian_bushfires]Australian fires[/url] of this year. One can blame the fires on what sparked them (lightning, human accident, or arson). One can blame the fires on the weather (drought conditions). Or one can blame them on a government policy that lead to a huge build up in fuel for the fire.

    There will always be things that set off fires. There will always be droughts. But there isn’t always government policies in place to make the recurring problems much worse than they’d otherwise be. This is why we blame government action for the current financial crisis.

    There will always be bad business decisions and in my view, one can’t eliminate the business cycle, particularly the period of economic slow down or even recession. But the circumstances that lead up to a massive recession like the current one require government action. In our case, we had a massive pump of cheap credit from the Fed from 2001 through 2007, the protections enjoyed by Fannie Mae and Freddie Mac, a long history of bailing out “too big to fail” businesses (check out also the early bailouts, some high risk banks got a fat boost in early 2008 from taking over failed hedge funds), and even some laws to encourage bad business decisions (like strengthening the Community Reinvestment Act).

    My view is that government built up the fuel for the fire that is burning now (and probably will again once the stimulus money runs out). And they partly shielded many market participants from the negative effects of their decisions. This combination will continue to create future bubbles. The magnitude of the current and prior administrations’ bailout efforts, if continued, will probably intensify and deepen further recessions.

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