Join Date: 06-06-2005
Location: Toronto, Canada
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Re: Is Bush To Blame?
Every time there's one of these spectacular crashes, we all act like it's the first time. The fact is, American history is rife with examples of unfettered capitalism causing huge bubbles and crashes.
The reasons for this happening are no different, fundamentally, from the reasons for the tech crash of 2000/2001, or the massive corporate governance scandals a la Enron which caused another major correction.
There are people looking for opportunities to make money fast. When they find an opportunity, they exploit it. Eventually, they over-exploit the opportunity and try to come up with more ways to squeeze money out of it. As they get more and more inventive at "creating value", the actual value of their enterprises diverges further and further from the fundamental value, which never changed in the first place. Eventually, reality sets in.
In most places, there are regulations against rampant greed, so that when reality sets in, you get a correction. In America, with it's unbridled optimism, people really do believe that "trees grow to the sky", and take a dim view of regulatory efforts to slow down growth and keep things realistic. So whereas most economies experience a business cycle, America experiences booms and busts.
From the beginning of its economy, Americans have been looking for some kind of economic fountain of youth, some kind of Eldorado, a source of limitless wealth and opportunity. Fishing. Farming. Mining. Oil. Pharmaceuticals. Technology. Ethanol. Mortgages. The gold rush and its consequences are part of American mythology, and admit it or not, that mythology shapes the culture.
What's the next gold rush? I don't know, but whatever it is, it will have a spectacular rise, a spectacular fall, and we'll all look around saying "how did we let this happen?" "Should we have more regulation?" "We knew it was a shell game all along."
What's that saying about history repeating?