Tuesday, June 22, 2010

The Failure of Laissez-Faire Economics or the Failure to Think?

The collapse of the economy in the Great Recession gave us the starkest, most painful evidence imaginable of the failure of laissez-faire economics and the destructive force of the alliance of big business and government against the interests of ordinary Americans.
NYT, Bob Herbert: When Greatness Slips Away

This is the nonsense that passes as informed opinion. Laissez-faire capitalism did not create Fannie Mae and Freddie Mac; laissez-faire capitalism would not have the government force banks to create sub-prime mortgages nor would laissez-faire capitalism have the government force banks to make these loans.

If the banks didn’t issue the sub-prime loans they would have been considered to be non-compliant (ie: be fined and/or forced out of business).

Clearly the sub-prime mortgage crisis is a result of government regulation, a result of government policy - not the result of laissez-faire capitalism.

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