The doom merchants are correct. The US is toast and our turn comes next as the property market corrects down 40%. As we try to grow our way out of it we will slam into the ceiling of static/declining world oil production. Goodbye world economic growth - forever. Read about it here:

http://postcarbon.org/end_growth

Thanks for a good article on this debacle.

Apart from political backflips and quick-fix 'solutions', what sticks out in the current fiasco is the fact that so few professional commentators have a clue about causation let alone possible remedies.

Likewise, financial advisers flounder. Their computerised advice manuals are rendered worthless when the rules become redundant.

One thing that we can be sure of: for all the many millions of losers there will be winners somewhere rubbing their hands together.

Hmmm. Milton Friedman argued for control of the money supply as a key weapon against inflation. Lack of control of the money supply is one of the underlying causes of our present difficulties. Von Hayek argued against exactly the sort of central planning that saw Jimmy Carter, Bill Clinton and George Bush intervene in mortage markets to provide loans to people who had little or no chance of repaying them.

There's no doubt that George Bush is one of America's most incompetent Presidents. Low taxes and high government spending, financed in the main by China, was never a sustainable economic model. If anything, it demonstrated the power of Friedman's insight about the importance of the money supply. To link Friedman and Von Hayek with the irresponsibility of George Bush really demonstrates the authors' lack of knowledge more than anything else.

The sad thing is that these authors have some responsibility for the education of young people. I hope their classes are more factual and less ideological than is this article.

Senior Victorian “The sad thing is that these authors have some responsibility for the education of young people. I hope their classes are more factual and less ideological than is this article.”

Agree

The article is a bunch of hogwash.

Anyone who relies on Chomsky for references is a dill

But what do you expect from a pair of social scientist (engineers) used to dealing with the fluff and fables of human feelings and unused to the grit and crunch of finance.

Sure the economics processes have produced an acute and serious problem but the system is designed to prevail over problems, even if the chicken littles of social science see the sky falling in (or maybe it is ‘entryist’ wishful thinking on their part).

Is this article an example of the bias that the Young Libs have complained about?
No doubt they believe that Australia by itself can mitigate climate change as well.

Thank you authors for your insightful commentary.

Col Rouge

"But what do you expect from a pair of social scientist (engineers) used to dealing with the fluff and fables of human feelings and unused to the grit and crunch of finance."

As usual you attack the messenger and leave the message to shine all the more strongly for it. If it's such a load of 'hogwash', let's have some informed rebuttal on your part. You've been quick before to gloat over what you make selling your financial wizardry to others. We all know you're part of the 'grit and crunch of finance' (great description by the way, couldn't have described it better myself, though I might have changed 'grit' to 'dirt'), so here's your chance. You tell us what we in the social sciences are too fluffy-headed to know.

Senior Victorian

"To link Friedman and Von Hayek with the irresponsibility of George Bush really demonstrates the authors' lack of knowledge more than anything else."

The authors didn't specifically link Friedman and Von Hayek to Bush. They described them far more broadly as the 'philosophical mentors to neo-conservative Washington', which is a perfectly apt description. Bush alone is not responsible for this current debacle. The US has been set on this course for several decades under presidencies of both persuasions.

"Von Hayek argued against exactly the sort of central planning that saw Jimmy Carter, Bill Clinton and George Bush intervene in mortgage markets to provide loans to people who had little or no chance of repaying them."

It's always ideologically convenient for free market believers to blame government. The vast majority of these loans went bad due to bank greed and corruption. Government directives, which I keep hearing mentioned but as yet have seen no direct quoting of, had little if anything to do with it. If you're still not convinced, try and catch a repeat of last night's Four Corners. It's spelt out plainly and clearly enough for even the most diehard free marketeers to have pause for reflection and to just maybe stop sinking the boot into the victim.