Although the foundations were laid sometime earlier, the real crash was brought on by the now-discredited policies of Alan Greenspan and how they were adopted internationally.

His strategy was to generate ever-increasing corporate profits by putting downward pressure on real wages and outsourcing, and then flooding the world with cheap credit so consumers could borrow to fill the gap. Despite criticism is seemed to work initially but could never be sustained indefinitely.

Add in the housing bubble plus further deregulating the fractional banking system plus rampant consumer greed and everybody dug their own economic graves. Every dollar deposited now supports thirty dollars of debt and because of the international banking system, everybody is affected.

Anybody who warned about the coming crisis was denounced and labelled some sort of socialist.

When times were "good" it was indeed the "neo-liberals" who claimed credit but now it's failed, they are pointing the finger at everybody but themselves. They were the ones who have been running this market for many years now.

So if Rudd was so completely wrong, who was really to blame? Those Chardonnay-sipping socialists? The greenies? The greedy consumers?

RobbyH posted on Thursday, 5 February 2009 3:59:17 PM:

“The complete nitwit and his fans. Debating(?) ar article that has yet to be published. Just brilliant.”

Er, Robby, “The Monthly” was published on Wednesday 4 February and subscribers had their copies before that.

Now what was that you said about “a pathetic gathering of fools”?

Hi JamesH,

It's nice to see writing from someone who has at least looked to the causes of the crisis. I have read variously that Barack Obama single-handedly engineered the whole catastrophe (which, it must be said, was carried out with perfect timing to get him elected); alternatively it is an Arab plot. Finally, someone who has looked at plausible reasons!

The only thing I would add is that many of the low income earners should be held to account as well. While banks funded loans that would never be repaid, the low income earners took out loans that they knew they would never repay. The phenomenon of 'jingle mail' - people walking out on their McMansions and sending the keys to the bank - is a disgrace to both parties. Banks cannot recover the debt without selling their newly-acquired houses; people cannot afford to buy the banks' houses; debts are called in and banks go broke; economy takes a beating.

In essence, the nature of individualistic capitalism is to build up capital for ourselves. Three years of interest-only repayments is a small price to pay for three years in a nice house - and who looks to the future with prospects like that? Hopefully, after this debacle, the answer to the last question is 'everyone'. But I doubt it.

Otokonoko

there is a saying I rather like.

In your twenties, if you are not a socialist, you dont have a heart.
In your fourties, if you are not a capitalist, you dont have a brain.

So basically some very smart but perhaps morally corrupt people packaged the risk and sold it on to corporate greed as a sound investment.

Had the sub prime mortagages continued, it would have gotten larger and larger, until a crisis point was reached.

I find I am cynical, for example our goverment bailing out car salesmen. This like crooks bailing out other crooks.