10 thoughts on “Government failure caused the financial crisis”

  1. Posted 12/05/2009 at 13:07 | Permalink

    Your sentiment is right but the order is wrong. Point 3 is the most important, followed by points 4 & 5, then point 2, then points 6 & 7, and finally point 1. I am unconvinced by the idea that central banks could have prevented the build up in debt through tighter monetary policy. It was the failure by those in authority, i.e. regulators, to recognize the risks of excessive debt that was the root cause of the problem. Talk of overly loose monetary policy dilutes the force of this argument.

  2. Posted 12/05/2009 at 13:07 | Permalink

    Your sentiment is right but the order is wrong. Point 3 is the most important, followed by points 4 & 5, then point 2, then points 6 & 7, and finally point 1. I am unconvinced by the idea that central banks could have prevented the build up in debt through tighter monetary policy. It was the failure by those in authority, i.e. regulators, to recognize the risks of excessive debt that was the root cause of the problem. Talk of overly loose monetary policy dilutes the force of this argument.

  3. Posted 12/05/2009 at 17:56 | Permalink

    Yes, the politicians turned a blind eye/encouraged a credit bubble.

    But do not overlook the flipside of the credit bubble, in other words the asset price bubble. Buying off voters, most of whom are home-owners, with a house price bubble is the oldest trick in the book, which Labour copied off the Tories, but took it to extremes (the same goes for governments in other bubble countries).

  4. Posted 12/05/2009 at 17:56 | Permalink

    Yes, the politicians turned a blind eye/encouraged a credit bubble.

    But do not overlook the flipside of the credit bubble, in other words the asset price bubble. Buying off voters, most of whom are home-owners, with a house price bubble is the oldest trick in the book, which Labour copied off the Tories, but took it to extremes (the same goes for governments in other bubble countries).

  5. Posted 13/05/2009 at 15:29 | Permalink

    We have spoken on the crash many times, and my point of view in respect of yours is common only generally.
    1. Obviously, US has started the financial crisis, so we are to find what initiated it in the US. Bubble of the house prices etc. are the reasons – but all staying behind one and main point – very high share of the US annual warfare expenditures (20-25%). Why? Imagine you have a business with a cash of say 100000, which produces earnings at 15-20% rate. According to compound interest formula, your initial injected capital will build up every year – all know about it. The US has eaten up all the earnings by spending on warfare, instead of economic development.

  6. Posted 13/05/2009 at 15:29 | Permalink

    We have spoken on the crash many times, and my point of view in respect of yours is common only generally.
    1. Obviously, US has started the financial crisis, so we are to find what initiated it in the US. Bubble of the house prices etc. are the reasons – but all staying behind one and main point – very high share of the US annual warfare expenditures (20-25%). Why? Imagine you have a business with a cash of say 100000, which produces earnings at 15-20% rate. According to compound interest formula, your initial injected capital will build up every year – all know about it. The US has eaten up all the earnings by spending on warfare, instead of economic development.

  7. Posted 13/05/2009 at 15:34 | Permalink

    It is especially obvious since the rate of growth of the US economy is much less then its war expenses. On the contrary, Canada which has open border with the US and much-much less warfare expenditurees, has higher growth.
    2. Global financial system needs changes – same as in times of F.D.Roosevelt, but on the global scale. Having the EU Central Bank as possible scenario and invention of euro to the market – but on global scale. Fundamental bottom line of this stays on the need for global economic integration, at least for major players – are they ready for this? Almost, just to remind of EAFTA, NAFTA, SACU, EU, EurAzEC, AFTA, EU-US FTA etc. – these are all in place.

  8. Posted 13/05/2009 at 15:34 | Permalink

    It is especially obvious since the rate of growth of the US economy is much less then its war expenses. On the contrary, Canada which has open border with the US and much-much less warfare expenditurees, has higher growth.
    2. Global financial system needs changes – same as in times of F.D.Roosevelt, but on the global scale. Having the EU Central Bank as possible scenario and invention of euro to the market – but on global scale. Fundamental bottom line of this stays on the need for global economic integration, at least for major players – are they ready for this? Almost, just to remind of EAFTA, NAFTA, SACU, EU, EurAzEC, AFTA, EU-US FTA etc. – these are all in place.

  9. Posted 13/05/2009 at 15:45 | Permalink

    What confronts them as major obstacle is political will of the people in power, and cultural differences. Israel and Arabs, US and Russia, India and Pakistan – they all say, but not doing much, although being a step from integration in respective and prospective economic unions.
    3. The measures you propose to do it or not – in market sense, like more regulation of the markets, they are to be discussed since they will lead to better functioning, to even more perfection of existing system.
    Banks allowed for falling down, will cause default of businesses, and not insured deposits of the citizen. So may be, you are cautiously right.

  10. Posted 13/05/2009 at 15:45 | Permalink

    What confronts them as major obstacle is political will of the people in power, and cultural differences. Israel and Arabs, US and Russia, India and Pakistan – they all say, but not doing much, although being a step from integration in respective and prospective economic unions.
    3. The measures you propose to do it or not – in market sense, like more regulation of the markets, they are to be discussed since they will lead to better functioning, to even more perfection of existing system.
    Banks allowed for falling down, will cause default of businesses, and not insured deposits of the citizen. So may be, you are cautiously right.

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