mrstickball said:
Badassbab said:
mrstickball said:
Arguably, Keynesian economics did help create the American crisis.
Our housing markets failed due in part to the government creating incentives for people to purchase houses (a classic Keynesian idea - incentivize consumption). Furthermore, the Community Reinvestment Act was/is a partial culprit in the crisis which (again) has roots in Keynesian economics of the 1970s which continued to grow and maturate in such a way to give significant power to incentivizing housing sales for those that could ill afford it.
|
Arguably yes but Keynesian economics never intended it to be used in conjunction with monetarism. With the deregulation of the Financial institution starting in the 1970's remnants of Keynesians economics did stay with us (and to the benefit of the banks and lenders). It was a lethal mix.
|
I agree it was a lethal mix. You can't incentivize bad behavior (promoting government-backed loans to minorities to improve home ownership) while negating risk. It allows for systemic exploitation of the free market, which causes it to collapse. That is why my view is that we must remove all Keynesian policies from the government and let the free market determine the amount of risk needed in the system - which is likely to be far more fiscally conservative than was ever allowed during the sub prime crisis.
|
Yes but a key problem with the idea of free market is that it has never fully existed (like communism in fact) so can't really compare. Reason it's never really existed in it's most pure state is because it probably wouldn't work. In economics you have what's called externalities and companies just do not take it into account because what's important is the bottom line. The current crisis was (amongst other reasons) because of a lack of regulation and too much risk. The financial institutions, banks, loan sharks, credit agencies etc had free reign to lend/advise money, Governments took a step back and let them get on with it. That's a fairly free market thought. The religious like invisible hand school of thought didn't work.
