The Smallest Minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities. - Ayn Rand
Any opinions from anyone on why this is happening?
Liberal and socialist policies in use, coupled with a strong tendency for federally-insured (read: guaranteed to have their asses saved by Uncle Sam if they make bad decisions) banks to give loans out to people who clearly cannot repay them?
Just a guess.
Dunno...policies to entice business to act against their interests and issue loans to financially less secure people as a condition of carrying on with normal business?
Nah. Can't be.
So basically the fault is all the government's?
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But is it organic? Tested on animals?
Businesses, given that they are run by human beings (yes Markadelphia - not some sub-humanoid corporate scum), they are just as prone to sheeple-ish behavior as any other actor in the theatre of the absurd, er, I mean, economy.
Wasn't it Kipling that said something about keeping your head...
I would say, "yes."
We have an entity that insists on "regulating" an economy through two major modes:
Adjustment of an interest rate for federally-backed financial entities (all of them in some form or another, since it is the only way they can "legally" do business anymore).
Inflation or deflation of an arbitrary trade good. You call it the "dollar."
Who else would you blame for a recession?
Who else would you blame for a recession?
The business cycle well pre-dates the modern regulatory state. Arguably, the govt (read "Federal Reserve") has done a pretty fair job at avoiding the worst of what history shows us the economy is capable of. Or, perhaps we've just been lucky.
Or, to put it in yet another way: you might just as well blame the govt for the weather.
Interestingly, I recently read a 2001 paper by Paul Ormerod, "The US Business Cycle," in which he argues that the business cycle is caused by the disproportionate fraction of the economy which is comprised by the several dozen largest firms, who interact with each other such that problems in one big firm cause cascades among the others.
He says that the dampening of the business cycle that we have seen over the last century is because more of the economy is made up of small and midsize businesses than ever before.
This is all demonstrated with a computational model which is compared to the empirical data.
Anyhoo, to the extent that government policy places undue burdens on small business and gives undue advantages to large ones (which government policy certainly does), then the persistence of the business cycle is partly government's fault, aside from monetary concerns.
"But is it organic? Tested on animals?"
No, it is virtual. Isn't it obvious to you?
Are you accusing me of asking the wrong questions?
Ah, well. One reasonable answer was all I was looking for :)
"Are you accusing me of asking the wrong questions?"
Well, of course I am. If the answers haven't just popped into your cranium as if by [insert magic word here], then you simply haven't asked the right questions. That's how it works, ya see.
“The sub-prime mortgage collapse is another tale of unintended consequences. The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent ‘redlining’ denying mortgages to black borrowersby pressuring banks to make home loans in ‘low- and moderate-income neighborhoods.’ Under the act, banks were to be graded on their attentiveness to the ‘credit needs’ of ‘predominantly minority neighborhoods.’...[T]o earn high ratings, banks were forced to make increasingly risky loans to borrowers who wouldn’t qualify for a mortgage under normal standards of creditworthiness. The CRA, made even more stringent during the Clinton administration, trapped lenders in a Catch-22. ‘If they comply,’ wrote Loyola College economist Thomas DiLorenzo, ‘they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties... which can cost a large corporation like Bank of America billions of dollars.’ Banks nationwide thus ended up making more and more ‘sub-prime’ loans and agreeing to dangerously lax underwriting standardsno down payment, no verification of income, interest-only payment plans, weak credit history. If they tried to compensate for the higher risks they were taking by charging higher interest rates, they were accused of unfairly steering borrowers into ‘predatory’ loans they couldn’t afford. Trapped in a no-win situation entirely of the government’s making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of sub-prime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.” Jeff Jacoby
Historically we've actually been quite a good economic engine making gains and runs on good growth, especially compared to much of Europe (taxed their own brains out) and especially the Socialist Eastern Bloc where a kind of constant recession hovered over them like a black cloud, with each quarter a little slide back and a lot of fudging of numbers and shifting of quotas. No 5-Year Plan ever survived even the first five months.
It's not complicated.
When you get government (local, state, federal) involved in business you can be sure it will get screwed up beyond belief.
Good business practices are not known to governments.
When they do get involved, business have to scramble to comply and that always ends up a disaster for the customer and the business alike.
Best to leave business to the market and to the customer and business.
That way, competition, profit and customer preference will determine the market and it will always prove true that those who can buy will, and those that can't...won't.
Tough love...you bet. But it works.
So, Russell, what you are saying is that former governmental programs are the cause of all of this and the free market bears no responsibility whatsoever? Just asking for clarification...
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