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My hypothesis is that when a system is large enough, you run across so many counter-examples and ‘that shouldn’t work’s that do for everything that it’s easy to lose the forest for the trees and have large scale systemic problems that seem simple in hindsight but no one has the ability or will to pull together or change at the time - until it blows up. Most of the firms
Originating the shitty loans never lobbied Congress. Most
of the people signing up for these impossible loans had no idea the rules changed, and just wanted to be rich(Er), and thought they had a sure thing. You’re 8th grade economics class also probably didn’t cover some very real scenarios where prices don’t and can’t go down - hyperinflation. It’s easy to say Effective Regulation, it’s harder to do it - especially when everyone is getting rich (including the average homeowner who sees the value of their home skyrocket). I lived through ‘08. I was in the market to buy due to life changes in ‘05 and it was already out of control. Of the literally hundreds of co-workers, investors, other buyers, etc I interacted with, only one other one actually didn’t get involved and avoided problems. Of the dozen friends who I’m close with, a quarter of them got in over their heads buying during this time (others sold, or wanted to buy but were priced out). I ended up buying in early ‘10 for literally half the price. Keeping a steady hand through the run up of prices literally had me crying myself to sleep a few times. It isn’t realistic to expect all but a tiny portion of people to see what is really going on in such a mass psychosis event. And Canada has been having a similar crisis for a decade+, it just hasn’t blown up yet - see the Vancouver, Toronto, etc. housing markets. These are impending financial crises in the making - or not. They may not have had bank crises in ‘08, but a lot of investors still lost a ton of Money. And you keep insisting on everyone getting rich off bailouts - when what really kicked off the collapse was when firms were allowed to implode to set an example, everyone lost massive amounts of money on their investments, banks were nationalized, and an entire industry (mortgage origination) went through a nuclear winter. The gov’t bailouts (that in many cases were forced on solvent firms so the few that were in trouble didn’t get pushed into bank runs) got paid back, with interest. Someone made money, but someone always makes money. On a whole, they lost way more, and if everyone knew it was going to play out this way, very few would have kept doing it. That not every single financial firm went bankrupt is indeed a thing. That we didn’t enter a Great Depression spiral because of it is also probably a good thing for everyone. Unless you’re saying you are a ‘debt is evil’ person, in which case be aware the hangover from implementing THAT in the modern economy would make the Great Depression look like a blip. |