Fiscal Cliff

[Klatuu]

The mortgage crisis, credit crisis, and a lot of other things that resulted in this recession were direct results of business gone berserk.

This is fundamentally incorrect, and is a position that only makes sense when one ignores that the action of businesses in this matter was nothing more than a response, and a fairly predictable one, to the legal and regulatory environment created by the government.

"The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics." -Thomas Sowell

Look at the market response to the reform of the CRA (Community Reinvestment Act) in '94 & '95:

Laws like the CRA (not the sole culprit, but a big one), which forced lenders to make loans to high risk borrowers, and other normative economic policies created artificial demand for credit, housing, etc., and businesses responded with practices that would have never taken place absent that environment. This has been written about ad nauseum over the past few years, and I'm not going to replicate it here, but it reduces to one simple idea:
If you make it profitable for people to lie, cheat, and steal, they will.

Unintended consequences of normative economic policy are almost always at the root of macro economic woe, and the dangers of the free market are far outweighed by the dangers of command economies. The idea that government can control something as complex as "the economy" and expecting that only the desired outcome will result is to economics what Biblical Creationism is to astrophysics, and anyone telling you differently should be accorded the same esteem as someone telling you they determined the age of the universe by counting "begats".

A couple of the hundreds of articles on this:

http://www.forbes.com/2009/10/03/co...ng-opinions-contributors-peter-schweizer.html

http://politicsandcriticalthinking.blogspot.com/2008/09/obama-fact-check-some-very-int.html

Media of discussion on this, 1hr 41min:
http://www.cato.org/events/role-community-reinvestment-act-financial-crisis


"Underlying most arguments against the free market is a lack of belief in freedom itself." ? Milton Friedman

 

[ZackDaniels]

That covers the legislation that allowed and even encouraged sub prime loans, but that doesn't answer for the explosive use of CDO's and other tools that grew up and got resold 100x over around it. It doesn't cover the paperwork aspects getting so loose that banks have a hard time foreclosing because they've lost track of the notes that prove who actually owns the home to foreclose on.

The fault is on the legislation that allowed it.
The fault is on the businesses that granted it.
The fault is on the businesses that insured it.
The fault is on the homeowners that bought more than they could afford.
The fault is on the investors that bought it without their own due diligence.
The fault is on the legislation that wasn't there to properly regulate it.

If you make it profitable for people to lie, cheat, and steal, they will.

My point was that capitalism in its purest form hasn't existed in this country in a long time. Pre great depression even, and that it would be against everybody's best interest to return to it. A statement like this seems to agree with that.

 

[tothemax93]

The fault is on the legislation that allowed it.

The buck stops here. Without the legislation, none of the rest would have happened.

 

[MtnMax/Magniac]

Dream come true . . .

 

[ZackDaniels]

The most insulting thing about that is it assumes Jay Leno should be listened to for any reason. Did he mention that in the same opening monologue structure he's had for decades or was it part of his 'look at how absolutely hilarious typos are' bit?

 

[MtnMax/Magniac]

That may not even be an actual quote from Leno, and I don't care. I think he's probably as much Democrat as anything. The message, however, holds as much truth as all the campaign rhetoric from both parties combined, and that's my reason for posting it.