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The system was trying to regulate itself. Thats why the economic crisis is happening. The companies that are in trouble are ones that can not be maintained that

• quoderat 18y ago
  And meanwhile, what happens to the people who are bankrupted, ruined, cannot eat or get health care, while the system self-corrects? Reasonably happy, non-malnourished people make better employees, you'll have to admit.
  • corentin 18y ago
    The system doesn't self-correct everywhere at the same time (unless there is a central bank point of failure, if you see where I'm going...), so if your company is bankrupt you can find a job elsewhere. Mind you, people who were careful with their money and didn't believe in the pipe dream of ever increasing home equity need not worry about what's going on (well, they need to worry about what the government is doing, but that's another matter).
    • redrobot5050 18y ago
      Um, we didn't have a central bank point of failure. We had 5 large investment banks, most of which had the intelligence to survive the first great depression. The major problem is that the American economy had become entirely dependent on consumer spending, which, because of a lack of real wage growth among the bottom 80% led to a massive expansion and dependence on credit. When the housing bubble burst, credit went cold turkey, and many defaulted on their debt because of their inflated lifestyle. As a result, everyone suffered. Consumers stopped spending, which lead to businesses credit lines being downgraded, leading to a halt in manufacturing and importing. The global ripples of having a force (like credit) simply disappear are obvious, just as they were right before the first great depression.
  • sounddust 18y ago
    Exactly; The system, left completely unregulated, will find the most efficient/optimal path, but at what cost? The optimal path may involve ruining the lives of 100 million people. The optimal path may bankrupt many countries, causing its citizens to starve to death. There is nothing wrong with reasonable regulation to ensure a certain amount of stability in life.
• dhimes 18y ago
  It's regulating itself like a poorly built skyscraper that is being regulated by gravity: collapsing. We have rules about how to build skyscrapers to keep people from getting hurt. Why not the economy? Take what works, throw out what hurts. There has to be an incentive for people to make money, but it should be ok if it's required to be within a set of guidelines. Unfettered capitalism builds an unstable system. Unstable is bad (again, think skyscraper). Certainly, economists must have a set of rules or principles that apply here. It would be some equation with a bunch of variable coefficients. Under some values of those coefficients, the equation would have an approximate solution that is unstable, like an exponential term with an exponent that can swing from being positive to negative and back. The job of "regulations" would be to limit these coefficients. They must have that sort of thing, right? I mean, what the fuck do they do all day?
  • DanielBMarkham 18y ago
    Yep, you would think so. But the economy is mind-bogglingly complex and nuanced, full of billions of actors who act rationally and irrationally. Lately we have computer systems thrown into the mix that move billions of dollars around without a human decision involved. The one thing economists can say is that people usually act in their own best interests. If there is a loophole to be found, people will find it. However smart the person coming up with the rules might be, those billions of people, due to the powers of chaos and sheer numbers, will always be smarter. You can't engineer billions of people like you would a skyscraper. The logical conclusion here is to that simple systems that are easy to understand (and likewise easy to understand how to game) are better than complex systems that still get gamed but nobody can easily figure out why. However there is a second camp that says that the economy is like a big science experiment: pull a rope here and see what happens over there. Sure -- things might not work as expected, but somebody has to be in charge and that's how science experiments work. After all, as you pointed out, just how difficult can it be? What do those guys do all day? The problem is that the social engineering camp always seems to have the same problem as the laissez-faire camp -- there have been panics (recessions) for as far back as we have records. So policy doesn't seem to matter that much (or if it does, we haven't hit the magic combination yet). In fact, because of the points in the first two paragraphs here, there's good evidence that the more we muck around with the economy, the worse we actually make it. There is a large and growing faction of economists that believe that the actions of the Federal Reserve (and to some extent Hoover and FDR) made the panic of 1929 into a full-blown depression -- turned something that would have taken a year or three to recover from and turned it into the biggest panic the country has ever seen. So no, economics are chaotic, not Newtonian. the laws that apply are myriad, complex, and currently non-understandable -- and they apply at the individual rather than system level. That's why economics are so much fun (or suck so much, depending on your viewpoint.) Hey -- if it were easy, everybody would be doing it.