BobbyRutan said:

Regulation can go overboard but this time the pendulum swung way to far to the deregulation side. Hopefully we can find the appropriate balance and stay there for awhile.

I believe Greenspan should top that list. It was he who lowered interest rates to the lowest levels in decades in an effort to contain the adjustments of dot-com crash and effects of 9/11, which by the way dispels the claim that he's genuinely a do-nothing advocate of free-markets.

It was easy money...too easy. He kept the Fed rate at 1% for a full year, during which time mortgage rates plummeted, construction boomed (along with associated industries), and naturally housing values rose. It...

BobbyRutan said:

Regulation can go overboard but this time the pendulum swung way to far to the deregulation side. Hopefully we can find the appropriate balance and stay there for awhile.

I believe Greenspan should top that list. It was he who lowered interest rates to the lowest levels in decades in an effort to contain the adjustments of dot-com crash and effects of 9/11, which by the way dispels the claim that he's genuinely a do-nothing advocate of free-markets.

It was easy money...too easy. He kept the Fed rate at 1% for a full year, during which time mortgage rates plummeted, construction boomed (along with associated industries), and naturally housing values rose. It seems like a success while it lasts, yet it's undeserved and unsustainable. Real estate appreciation peaked shortly after he started inching the rate back up (in an effort to reign in inflation). The bubble started to burst.

The others (and more) had their roles and certainly contributed further distortions, but for the initial cause of widespread malinvestments spanning different industries and the stock market...look to the Fed.

The "appropriate balance" is to allow market corrections to occur; bankruptcies and the reallocation of resources (assets, employment, capital, etc.) are an essential part of the efficiency of capitalism. Stimulating, manipulating, and propping up sectors of the economy trying to avoid these things is a temporary solution, which only delays and worsens the necessary corrections.

Rustee,

I would disagree with your assessment of the appropriate balance. All administrations after the depression, comprised of both parties, exercise expansionary monetary policy during recessionary periods. Some use tax cuts some use direct government spending. Either method creates budget deficits.

However, before the government starting being proactive in managing recessions, recessions use to last for 2-4, or even longer in the case of the depression, years. Now that administrations use expansionary monetary policy they typically last 12-18 months, sometime longer if they were closer to a depression (like our current recession).

There are so many people who talk about laissez fair...

Rustee,

I would disagree with your assessment of the appropriate balance. All administrations after the depression, comprised of both parties, exercise expansionary monetary policy during recessionary periods. Some use tax cuts some use direct government spending. Either method creates budget deficits.

However, before the government starting being proactive in managing recessions, recessions use to last for 2-4, or even longer in the case of the depression, years. Now that administrations use expansionary monetary policy they typically last 12-18 months, sometime longer if they were closer to a depression (like our current recession).

There are so many people who talk about laissez faire economics who never lived through the depression, the era of robber barons, or working conditions described in Lewis Sinclair's "The Jungle".

I know with certainty in my heart that if we entered a depression and the government did nothing everyone including conservatives would be screaming their lungs out about not doing anything.

By the way, bailouts are not new, the government has been conducting bailouts for centuries.

Do conservatives believe we should allow the small family farm sector to die off so that huge corporate farms can take over? That would be "hands off" economics.