Tuesday, March 24, 2009

How Gov't. Caused, Prolonged and Worsened Crisis

Reason.tv: John B. Taylor, professor of economics at Stanford University, challenges the conventional wisdom that it was an excess of deregulation that precipitated our current financial crisis. In fact, he says, the exact opposite is true.


At 3/24/2009 7:27 AM, Anonymous Anonymous said...

I figured the quote I left up above would be good for this post too:

I'm sorry Mark but this is just flat out wrong.

I have commented about this many times, but I recently saw a quote from Chuck Prince, former CEO of Citi, that summed up the cause of the crisis in a nutshell.

When asked why he didn't get out of MBSs early and wasn't it obvious to him what type of major bubble housing was, he didn't blame regulators, bureaucrats, the CRA, Fannie or Freddie. He said:

"When the music is playing, you have got to dance"

This sums up finance perfectly. It is just a game of chasing returns. Oh, I am sure on an individual level some good analysis is being done, but on the aggregate money chases returns. This is how bubbles form.

There was a survey of commodities traders who were asked why did they all pile into oil last year. Was it their fundamental analysis? Was it the long term fundamentals of the diminishing supply of oil?

No. They put their money into oil because it was going up. Its as simple as that.

And that's why unregulated finance is prone to bubbles.

At 3/24/2009 7:48 AM, Anonymous Anonymous said...

Q: Do you know the best way to sell a book?

A: Challenge conventional wisdom no matter how unfounded or stupid it may seem to do so.

See Also, Bill O'Reilly

At 3/24/2009 9:02 AM, Blogger juandos said...

"I'm sorry Mark but this is just flat out wrong"...

Gee! Now I know where I've that silliness before: Quote of the Day posting...

Apparently mach you either didn't watch the clip or understand the clip...

Gee! I wonder what explanation you'll offer mach for the job losses that will occur when the federal government steps into the manufacturing business even harder?

At 3/24/2009 3:05 PM, Blogger KO said...

Why is this past tense? The government's changing rules every week is prolonging the crisis. Or did I miss the end of the crisis?

At 3/25/2009 11:33 AM, Blogger Unknown said...

I figured the quote I left up above would be good for this post too

Proving that your ignorance is as entrenched as Barney Frank.


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