Nonsense. A consensus of pundits and economists agree with fred that Democrats collapsed the economy with high energy prices and sub prime mortgages.
Saturday, October 04, 2008
What Caused the Financial Crisis?
An article in the NY Times, "Pressured to Take on Risk, Fannie Hit a Tipping Point," is causing many people to wonder if Fannie and Freddie caused the financial crisis.
First, let me clarify the question. We are asking what caused the housing bubble, and, by definition, the cause cannot be explained by changes in an underlying market fundamental. I don't mean that we can't point to, say, a rumor that led to a rapid increase in the price of some good as speculators rush in, just that bubbles - by definition - are divorced from market fundamentals.
I think a more interesting question is what sets the stage for a bubble to emerge - what allows the rumor, irrational exuberance, etc., to express itself as a bubble? One thing that is needed is liquidity and credit, some way of substantially increasing demand. This is the air that inflates the bubble. Even if all the other conditions for a bubble to emerge are present, if there is no way to inflate the bubble - no way for speculators to rush in and drive up the price - then it won't inflate.
Here's what did it:
Bush offers up 'ownership society'
""Bush is placing new emphasis on restructuring Social Security, the centerpiece of his ownership pitch, as he lays out his second-term priorities in Wednesday’s State of the Union address and his 2006 budget next week.
The phrase “ownership society” began popping up in presidential speeches three years ago, as Bush took note of the growing numbers of Americans who own stock and of the importance of home ownership.
As early as February 2002, Bush said at a conference on retirement savings,“I want America to be an ownership society, a society where a life of work becomes a retirement of independence.” Even as Texas governor, he told senior citizens:“Ownership in our society should not be an exclusive club.... Everyone should be a part owner in the American dream.”
Bush made the banks loan money to people who couldn't pay it back because it made him look good - until the loans defaulted.
America gets it - that's why Obama will be reelected!!