The panel, appointed by Congress to ferret out the evil doers in the financial collapse of 2008, have finally finished their report finding enough blame to spread around on nearly everyone. If the 5 million books already written on the crisis have not made mush of your brain, you can probably obtain a copy of the Financial Crisis Inquiry Commission’s report.
But I suggest you read Robert Samuelson’s essay, Rethinking the Great Recession, which was published in the Winter 2011 issue of The Wilson Quarterly. Samuelson takes us away from the victims and the villains to examine the real causes of this mind-bending collapsed bubble. The roots reside in policy decisions made in the early 1980s that stem into incredibly high inflation rates. This initiative set in motion 25 years of relative prosperity. “What started as a justifiable response to good economic news–lower inflation–slowly evolved into corrupting overconfidence, the catalyst for the reckless borrowing, overspending, financial speculation, and regulatory lapses that caused the bust.” Get rich quick became a mantra; taking short-cuts to get there was good. But, we are left with a huge problem: we are all to blame for the 2008 collapse.
Americans more than anyone else love booms (which always bring on a bust). Neither side has the proper response. More regulation–we had regulation–they just could not anticipate the problem. As for greed and dishonesty–Samuelson stresses that it has always been there but in this case it does not appear that banks were “universally off-loading mortgages.” What is going to happen is that the legacy of this crisis is going to be a loss of economic control. Prevailing economic assumptions will have to be revised–“economic change seems to have outrun economic understanding and control.” We will have to think about better managing debt, realigning our consumption patterns, and living better with less (at least for most of us). This crisis now in our memory will cast a long shadow on our young adults and children as they try to find their place in the world.