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I was only providing an example of how libertarian principles don't always scale. I said nothing about the housing market in the U.S. and I don't know why you b

I was only providing an example of how libertarian principles don't always scale. I said nothing about the housing market in the U.S. and I don't know why you bring up the U.S. housing market.

jerf 15y ago
"One person who buys a house they can't really afford is not a big deal. Let such a person make that bad decision if this is their inclination is a libertarian attitude. But millions of people make a similarly bad decision affects us all." I don't think it's exactly a stretch to assume that such a (putatively) topical example was related to current events. Besides, in the process of describing why the crisis wasn't caused by markets, I answered your objection anyhow. When the free market was making the decisions about mortgages, they did in fact make it in a sustainable way. Once the lenders were detached from the consequences of their decisions by the government, that broke. There's no better way to ensure that we don't have a housing crisis than to use those market mechanisms. Note carefully I didn't say "if we use those mechanisms, we'll never have a housing crisis". I said there's no better way. It's basically impossible to completely prevent periodic crises.
- yequalsx 15y ago
  I did write, "The problem with this is that I don't think it scales." before the quoted line. It was a stretch. Lenders weren't detached from the consequences of their decisions by the government. They were detached from the consequences of their decisions by selling securities based on the loans they made to dupes. That it was done at a massive scale without the dupes properly pricing in the risk caused a meltdown.
  - jerf 15y ago
    The fundamental underlying reason they could sell those securities was that they were exploiting the arbitrage from being able to dump the mortgages off on the FMs, at which point everybody knew they were unrealistically guaranteed by the Federal Government. I would point out that here in 2011, that's no longer a theory or mere rhetoric; it is now historical fact that the mortgages are in fact being covered by the Feds, as manifested by all the bailouts. Check out the FM's current financial situation if you need more proof. Without that risk sink in the system, they would never have been able to fly as far off the handle as they did. The securities were just ways of slicing up the stuff that was broken by the government-created risk sink.
    - scott_s 15y ago
      I think you're ignoring the big investment banks, which also had many (most?) of these loans. I don't see how Fannie and Freddie factor into for, say, Lehman Brothers, which collapsed because they backed so many MBSs that were becoming losses.

I was only providing an example of how libertarian principles don't always scale. I said nothing about the housing market in the U.S. and I don't know why you bring up the U.S. housing market.

jerf 15y ago

"One person who buys a house they can't really afford is not a big deal. Let such a person make that bad decision if this is their inclination is a libertarian attitude. But millions of people make a similarly bad decision affects us all." I don't think it's exactly a stretch to assume that such a (putatively) topical example was related to current events. Besides, in the process of describing why the crisis wasn't caused by markets, I answered your objection anyhow. When the free market was making the decisions about mortgages, they did in fact make it in a sustainable way. Once the lenders were detached from the consequences of their decisions by the government, that broke. There's no better way to ensure that we don't have a housing crisis than to use those market mechanisms. Note carefully I didn't say "if we use those mechanisms, we'll never have a housing crisis". I said there's no better way. It's basically impossible to completely prevent periodic crises.

yequalsx 15y ago
I did write, "The problem with this is that I don't think it scales." before the quoted line. It was a stretch. Lenders weren't detached from the consequences of their decisions by the government. They were detached from the consequences of their decisions by selling securities based on the loans they made to dupes. That it was done at a massive scale without the dupes properly pricing in the risk caused a meltdown.
- jerf 15y ago
  The fundamental underlying reason they could sell those securities was that they were exploiting the arbitrage from being able to dump the mortgages off on the FMs, at which point everybody knew they were unrealistically guaranteed by the Federal Government. I would point out that here in 2011, that's no longer a theory or mere rhetoric; it is now historical fact that the mortgages are in fact being covered by the Feds, as manifested by all the bailouts. Check out the FM's current financial situation if you need more proof. Without that risk sink in the system, they would never have been able to fly as far off the handle as they did. The securities were just ways of slicing up the stuff that was broken by the government-created risk sink.
  - scott_s 15y ago
    I think you're ignoring the big investment banks, which also had many (most?) of these loans. I don't see how Fannie and Freddie factor into for, say, Lehman Brothers, which collapsed because they backed so many MBSs that were becoming losses.