Bronwyn

My point is that to describe Von Hayek and Friedman as 'philosophical mentors to neo-conservative Washington' is neither apt nor accurate. Both economists opposed the sort of economic mumbo-jumbo that Bush - and Reagan for that matter - practised. You simply can't increase the money supply, as Greenspan and Bush did after 9/11 and not have the asset price bubble we have experienced.

As to 'free markets',such a thing does not exist in the OECD. All markets in OECD countries are regulated. The point, as Lindsay Tanner said recently, is to have effective, well targetted regulation rather than regulation for its own sake. From my point of view, good regulation promotes transparency (for example, no insider trading) fair competition and individual choice. What we've had in both the US and the UK is burdensome, vague, poorly drafted regulation and particularly silly accounting rules, which have made the current crisis worse.

This is the time for all the intellectual Lilliputians to raise their head. Before our two authors send to the gallows Milton Friedman and Frederick Hayek, they ought to be reminded of some facts. The dragon teeth that mauled the only system that brought relative prosperity to the peoples of the world were spawned by government intervention in the first place. Roosevelt’s creation of the publically funded Fannie Mae, and many years after its twin Freddie Mac, the Community Reinvestment Act, under Jimmy Carter, and which was resurrected By Bill Clinton, were all the offspring of government intervention. They were the putty in the frame of social engineering by which all Americans would have realized their dream, to have and own their own homes. Fannie and Freddie were providing the easy loans and the ...Reinvestment Act were enforcing bankers to render their credit services to all and sundry irrespective of the financial position of the borrowers. And the whole saga of the subprime loans was resting on these rotten foundations.

Hence Wall Street collapsed through the derivatives market multiplier leveraging founded on the subprime loans by which the moguls of finance made for a while their ephemeral profits. And this collapse released the nightmare that was always embedded in the dream of mass home ownership when it became evident that many ordinary Americans were not only going to lose their homes but also their jobs all by the grace of government intervention.

http://kotzabasis4.wordpress.com

Ouch, Ouch, Ouch, Now that US economist Paul Krugman has won the 2008 Nobel Economics Prize, will the left accept fact over fiction.

Dallas:

<<Now that US economist Paul Krugman has won the 2008 Nobel Economics Prize, will the left accept fact over fiction.>>

In times of real crisis, I thought we might be able to put the old cliches and false dichotomies aside (left/right; fact/fiction) and stick to the fundamental issues: what's caused the crisis and what's the most effective way of dealing with it?

Themistocles,

would you mind bringing to light exactly which pieces of government regulation compelled Wall street to engage in such dubious lending practices. This went way beyond freddie and fannie.

The particular regulation you speak of is in fact, a failure of US governments to be able to think/act outside the box of free market ideaology. Housing trust/commission housing is one effective way of providing a roof over the heads of those unable to otherwise afford it. The problem is that the US has the most extraordinarily paranoid terror of anything that might be even vaguely regarded as "socialism".

So they looked to the market to solve a serious social problem that was created by the market in the first place ie freer markets demand loose labour standards resulting in a large underclass of working poor at the bottom. A market driven bubble in the price of the commodity (if you can really call it that intrinsically)that fullfills the fundamental human need for shelter from the elements and a safe, stable place to live and have a family only exacerbated the situation.

Bronwyn,

I watched the Four Corners “EXPOSE” on Monday night. I almost lost it, when they presented their hard luck story who had a McMansion on 2 hectares, with 100,000 dollars worth of motor vehicles out the front, and who purchased a ARM loan, and then found out he couldn’t pay.

And you have the hide to call these people victims. They are no more victims than the banks are of their own greed. These people saw easy money and they took it without thinking about how they might pay it back.

Caveat Emptor should be stamped on the forehead of some of these utter morons. They are as much a cause of the mess we are in as the banks are. Now I’m not saying every single mortgage seller was entirely truthful, but the overwhelming majority of people simply did not read the fine print, nor did they get advice. Banks can't make people take out loans.

Second, you want to pretend that the role of gov’t in this crisis is not relevant. Yet Fannie Mae and Freddie Mac accounted for the majority of loans held by Americans. Their politically appointed board members were instructed to give loans to low income people, who never had a hope of paying them back.

>> “Following their mission to meet federal Housing and Urban Development housing goals , GSE's such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have strived to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." http://en.wikipedia.org/wiki/Fannie_Mae#The_mortgage_crisis_from_late_2007

The primary focus for Fannie Mae, operating under a government directive, is to provide the maximum amount of help to lenders in making mortgage loans to the low, to middle, to moderate income families across America. Fannie Mae is also involved in a nation wide effort to join with lenders and community partners to create even more homeownership possibilities. http://www.getlowratemortgage.com/info/how_does_fannie_mae_work.html