The Economic Crisis -- Documentarian View

There is a terrific documentary series (4 parts of 44 minutes each) called "Meltdown" about the crisis. Here is a link to the four parts (from YouTube).

https://www.youtube.com/playlist?list=PLUbZez7C8LKwnYGLwv0mk0xQfz2euM_8i


Near the end of the last part the narrator says, "Now that we know what caused this crisis ..." and my reaction was that "No, we don't know". After all, why did the mortgages go bad? Who created them? Were they legal or were laws changed to let them be used? Who created Credit Default Swaps (which were the private insurance policies providing for the mortgages which went bad to be paid off and which brought down AIG)? Why were small mortgage lenders allowed to sell their bad mortgages to larger banks rather than keeping (some of) them (and their risk) on their books? Why did the rating agencies of Wall Street not downgrade the mortgages and the Mortgage-Backed Securities made from them? There are many questions.


I see many aspects to this story which are a step back from the actual mortgage and Wall St. businesses.

There is the interplay of Wall St. and the politicians and the fight between Democrats and Republicans for power and the fact Wall St. is a big funding source in politics and that the Conservative Supreme Court chose to make it legal for corporations to contribute money to political campaigns. This intermingling of interests and the fights between various parties is a huge factor in what has happened and what continues to happen with the economy and the political fights.

There is the contest between Wall St. and London to be the "capital of the world economy". There is the money from Russian oligarchs moving into the U.K. and America (especially just after the 1989 collapse of the Soviet Union). There is Asian and Middle-Eastern money all trying to buy properties as a kind of "bank account" to hold the value of their money. Over-building homes, apartments, and business office space was a key indicator of the problem and it may happen again. What do the wealthy do with all their money? There's apparently too much money in the world and few ways to safely invest in real businesses. So instead, there are schemes doomed to failure.


At the heart of this it can be said there is an economic system which is enabling tremendous amounts of wealth to go into the hands of few people around the world and there are some very greedy manipulative people (not all bankers) who are trying to get their hands on it. When a an uninformed or uneducated person is placed in a system which enables them to become wealthy, there is bound to be someone smarter who will try to con them out of their wealth. This greed is usually at the heart of our economic problems. Put another way, there is a lack of morality and character in some people and when they are in charge everything is likely to collapse. Consider Donald John Trump. As the French economist Christine Lagarde said, this is human nature and there is a constant struggle to restrain the worst effects of the greed and corruption.


I won't delve too far into the mortgage crisis. It's done and we've recovered pretty well. Key to the recovery was tighter regulation, less leveraging, removing bad mortgages from the marketplace, and allowing some companies and individuals to leave the "playing field". On to the next thing.