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Tuesday, September 1, 2009

What started the Great Depression:

From Hot Air :

What really started the Great Depression? Government Intervention.

In times of economic crisis, the temptation for public officials to do something is both overwhelming and tremendously dangerous.

We have seen this most recently with the housing bubble that was created artificially by the Clinton Administration and Congress including more than a few Republicans. At the time, they wanted to expand home ownership and distorted the lending markets to create a demand bubble, and essentially another Ponzi scheme in which buyers were encouraged to overreach and then refinance on equity gains. Congress fueled it through mandates to Fannie Mae and Freddie Mac to buy and securitize marginal loans that eventually collapsed and poisoned the entire financial sector.

Government has a legitimate role in regulating markets to prevent fraud and abuse. It does not have a legitimate role in manipulating markets for social engineering, no matter how well-intentioned that social engineering might be.

link to the entire report by UCLA’s Dr. Lee Ohanian:

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