| binary solo said:
No, the economy didn't work fine without it. If the economy worked fine in those intervening decades we wouldn't have had recessions on a regular basis. It's not the specifics of the sub-prime thing, it's the fundamentals of our economic system that drives people and businesses to seek money and profits in ways that inevitably lead to unstable economic conditions. Things are set up to create boom and bust cycles. Each boom and subsequent bust has a different proximate cause, but the ongoing cycle is the real problem. Every time the boom times roll around people delude themselves into thinking that this time the party will never end, but it inevitably does. @ Numonex: Immigration is not the problem, if you think that's going to solve your woes then you are gravely mistaken. Immigrant bashing is the lowest form of electioneering. Fix the global economic and political systems and migration will disappear as a perennial political hot button issue. |
First off recessions are a sign that the economy is functioning well ...
No matter how hard you try to prevent it, in an economy there will always be misallocations of resources that drive investment too heavily into one sector. Unlike a communist economy where this misallocation persists as long as the government chooses to invest in that sector, in a capitalist economy when consumers and investors no longer support this sector so heavily the resources are rapidly allocated elsewhere. Now, you could try to correct this by preventing the misallocation of resources but in the process of preventing the dot-com bubble you would also prevent the existence of most of the good websites that exist today; or you could try to prevent the correction, and then companies like pets.com would still be worth billions even though their revenues were in the hundreds of thousands of dollars, and their losses were huge.
Where this becomes problematic is when the downturn threatens the entire economy, and this can not happen unless people are investing with too much credit; and (for the most part) without heavy government interference it would be difficult/impossible to have too much credit. If it wasn’t for pseudo-governmental bodies like the Federal Reserve, Fannie Mae and Freddy Mac keeping interest rates down and eliminating direct risk from lending practices, and the US government and activist groups pressuring banks to lend to people who didn’t qualify, it is unlikely that the sub-prime crisis could have existed.
