Quote from: 21after2 on January 25, 2013, 12:04:08 AM

Quote from: hazek on January 25, 2013, 12:01:08 AM

Quote from: flix on January 24, 2013, 11:58:29 PM

Fractional reserve banking. Fiat money. Central banking.

All key causes of the business cycle and its latest iteration. None result of "unregulated" markets, but rather of regulations designed to give banks special privilege.

Read about regulatory capture please...

Precisely. Unfortunately 21after2 is focusing on the symptoms instead of the actual problems hence his false diagnosis.

It's okay for us to have a difference of opinion. We can just call each other liars and be on our respective ways. Wink

The only legitimate regulators of markets are competition and the invisible hand.

What part of "regulatory capture" do you find so hard to understand?

You are entitled to your own opinion, but not your own facts.

Here's How The Community Reinvestment Act Led To The Housing Bubble's Lax Lending
http://articles.businessinsider.com/2009-06-27/wall_street/30009234_1_mortgage-standards-lending-standards-mortgage-rates

Quote

The CRA was not a static piece of legislation. It evolved over the years from a relatively hands-off law focused on process into one that focused on outcomes. Regulators, beginning in the mid-nineties, began to hold banks accountable in serious ways. Banks responded to this new accountability by increasing the CRA loans they made, a move that entailed relaxing their lending standards.

Throughout the nineties banks, as banks lowered their mortgage standards, mortgage rates remained high. The laxity was spreading but the incentives for borrowers to re-finance even under relaxed standards remained low. New buyers often still didnt know that some of the loosey-goosey mortgages existed. Speculators had an internet bubble, so they werent yet attracted to real-estate. Treasury rates were not yet so low that investors seeking yield would pour into mortgage backed securities. Securitization levels were low enough that banks werent yet willing to fully embrace the loose standards. The historical data on default and loss rates from the lax lending were not yet available, so they werent embraced by banks or the broader market.

But as the years went by, these factors changed. The Fed pushed interest rates down. This made refinancing more attractive, and created an investor demand for yield. Fannie and Freddie popularized low-income securitization. Low defaults and loss rates from lax loans made them seem not as risky as previously expected. A shrinking consumer asset base thanks to the dot com bust created a demand for home-equity loans and high loan-to-value loans, as consumers exchanged high-interest credit card debt for low interest home debt. Speculators seeking higher returns and ordinary home buyers became aware that lax lending standards would allow them to buy bigger homes with little or no money down.

In short, the lax lending standards created in response to the CRA had dug a pit that was waiting to get filled when the circumstances were right.