One of the stranger aspects of human nature — or is it just people with intense affiliations with ideologies? — is the tendency to see the entire world through a distorted lens.

The origins of the financial crisis are no different. It seems that all too many people are willing to use any event to pursue their own agendas, regardless of evidence or proof.

Hence, we have a steady parade of people who seek to blame or exonerate the precise wrong factors which nonetheless fit their preconceived notions.

Examples?

Mish blames the crisis on 3 factors. While we agree about Ultra Low rates, his other two elements are simply incorrect. “Fractional lending” is his #2 cause. Never mind that this form of credit creation has been around for centuries, he is a vociferous critic of it. Naturally, it was the cause of the crisis. (See: Financial Crisis Brewing Already) Deficits are his #3 cause, which quite bluntly, is beyond my comprehension as a cause of the credit crisis.

Edward Pinto, under the theory of keep throwing shit against the wall until something sticks, has a series of peeves he blames the crisis on (all acronyms) including ACORN, HUD, CRA, and GSEs. (See, Acorn and the Housing Bubble, Yes, the CRA Is Toxic, The Future of Housing Finance, etc.)

Peter Wallison was co-director of AEI’s Financial Deregulation Project (since renamed). What are the odds he is going to find that deregulation had anything to do with it? Instead, his pet peeves about the GSEs are his pre-clusion.  (See Why is AEI Scrubbing Wallison’s Name From AEI’s Financial Deregulation Project?)

• The usually astute Gretchen Morgenson of the NYT got the GSE factor wrong, as she began one Sunday column with the sentence: :”DECIDING what to do with Fannie Mae and Freddie Mac, the taxpayer-owned mortgage giants that helped set the financial crisis in motion, will be a huge job for Congress next year. ” Hey Josh, stop ruining our best reporters!  (See The Nerve to Say No)

James Pethokoukis blames the Mortgage Interest Deduction  (Reuters)

• The Atlantic’s Megan McCardle occasionally flails about in her defenses of corporate America. For example, in a critique of Matt Taibbi, she bizarrely wrote that “financial meltdowns don’t offer villains, for the simple reason that no one person or even one group is powerful enough to take down a whole system.” Ahem . . . The FCIC begs to differ. (See: Matt Taibbi Gets His Sarah Palin On; Contra: No Financial Villains . . . ?)• Michelle Malkin claims Illegal immigration caused the mortgage mess.

Michelle Malkin blames the crisis on illegal immigration.

3 of the 4 GOP appointees of the FCIC dissented, writing: “Our views have been shaped, in part, by our knowledge of economics and financial markets generally.” And that’s the problem — your views of Efficient markets, rational actors,  and self-regulation have been proven to be  nonsense, bad theories that you slavish stick with for matters unbeknownst to thinking people.  (See 10 Questions for GOP Members of Financial Crisis Inquiry)

Of course, any group that sought to ban the phrases “phrases “Wall Street,” “shadow banking,” “interconnection,” and “deregulation” from the final report is not to be trusted in the first place.

The bottom line for most of these folks is that their own intense emotional attachments to their pet peeves, theories and ideologies prevent them from seeing reality as it is. (As investors, we know what that does to your returns).

In terms of getting to a place where you understand the actual, empirically demonstrable, provable causes?

Fail.

Category: Bailouts, Credit, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

64 Responses to “The Crisis Was Caused by [Insert Pet Peeve Here]”

  1. Mannwich says:

    And on cue. Here’s one:

    budhak0n Says:

    January 26th, 2011 at 11:05 am
    There was a crime committed. Pray Tell. We did away with the concept of Debtor’s prison many many moons ago.

    The only “crime” is in that a guy like me who pays their creditors has to live amongst a group of deadbeats constantly running around whining whilst they pork their own.

    Not exactly a felony.

  2. Mannwich says:

    Don’t forget about the evil public unions, BR. According to Lou Mish, they’re to blame for everything.

  3. steveg62 says:

    You got it as usual, Barry. Please stop scaring me with that picture of Jerry Stiller every time I check the blog!!

  4. syphax says:

    I haven’t been paying attention ever since business picked up in 2010.

    What’s the best medium-length summary out there of what actually frickin did happen, and what the core causes were? (If this is a softball for BR to promote himself, well, you’re welcome). I think I understand the basics on a 30,000 foot level, but I’d like to dig into some details.

  5. syphax says:

    PS Isn’t Gretchen Morgenson dreamy?

  6. syphax says:

    Never mind; I’ve found e.g. this morning’s post. Something to chew on for awhile.

  7. contrabandista13 says:

    #1…. Intoxicating desire.

    #2…. Collective, intentional negligence.

    #3…. FRAUD…!

  8. NoKidding says:

    BR,

    You claim these people fail to adapt their positions to new information.

    Why then would you want a similar collection of people creating regulations?

    Is there some group of politicians out there that is immune to the problem?

    Have any among the present government demonstrated clear thinking or judicious use of power?

    ~~~

    BR: You have this precisely backwards: For 70 years, regulations in place prevented the US from having a major credit crisis.

    We first deregulated the S&Ls (how did that work out?)

    Then came the radical de-regulators who bankers left to their own devices to blow everyone up. (how did that work out?)

  9. Here is a perfect example of the

    Reality Checks: 10 Economic Benchmarks for the State of the Union and GOP Response

    The president gives his State of the Union address, followed by the Republican response from Rep. Paul Ryan. There’ll be a lot of talk about the economy: jobs, taxes, deficits, and the state of American business. If you find that your mind’s getting lost in vagaries and theories, here are 10 “reality checks” to bring you back to earth, benchmarks that provide context for tonight’s speeches:

  10. machinehead says:

    “Fractional lending” is [Mish's] #2 cause. Never mind that this form of credit creation has been around for centuries, he is a vociferous critic of it. Naturally, it was the cause of the crisis.’

    Right, fractional lending has been around since the Renaissance. Only in 1994, though, did the idiotic Greenspan introduce de facto reserve-free lending, via the subterfuge of overnight sweeps. This had a lot to do with the TMT Bubble I.

    In Bubble II, CDOs became the vehicle of choice for reserve-free lending. Effectively the lower-rated tranches were supposed to serve a quasi-reserve role. But in the global scheme of things, the real estate finance bubble was mostly funded through reserve-free securitization, or — in the case of Fannie and Freddie — ludicrously low equity on the order of 1 to 2% of assets.

    It’s axiomatic that an infinitely-leveraged, zero-reserve Bubble is gonna crash. And Greenspan’s sleazy overnight sweeps are still on the books. That’s one reason excess reserves are so high — because required reserves are so preposterously, imprudently low.

    Abolish the Fed … indict the bernank.

    ~~~

    BR: Excellent point! It was not fractional lending, it was reserve-free lending, via the Greenie’s sweep exemption. 1994 is somewhat attenuated, but it started the bank leverage madness.

  11. Barry:

    Isn’t this what “We the people” is all about? A re-distribution of blame to go along with the re-distribution of wealth. I’m just glad that I’m finally showing up on a list that includes both Joe the Plumber AND Cass Sunstein in the FCIC’s description of “us” who are to blame. Hey, I have a credit card and I used to have a mortgage but made the mistake of actually paying if off instead of strategically defaulting. You can’t win ‘em all, but if you’d listen to Rodney King, you’d understand better the SEC’s unspoken motto.

    I know it’s off-topic, but do you think that now that Obama is more GE & hedge-fund friendly that’s why Greenwich didn’t need Lieberman anymore? Just a thought. Glad you were delighted by the FCIC report… me too, just delighted to be recognized. There’s been too much attention focused on Lloyd, Jamie and Bernie. This report has to make Bernie feel better.

    Dave Harrison
    http://tradewithdave.com/?p=5104

    (the comment is pending approval by Lucas van Praag)

  12. baldski says:

    Mish’s #1 cause of everything that ever went wrong in the world is UNIONS! If we just get rid of all unions, the world will be OK. I wonder if he has ever heard of the Danish labor model. It was put in place over 100 years ago, and labor and management has gotten along since. By the way, minimum wage in Denmark is about $18/hour. I wonder why Burmeister and Wain, maker of large diesels, and Aalborg boilers and A.P. Moeller(largest container shipping company in the world) have not fled the country?

  13. AHodge says:

    (we collectively as a people and a planet have no f…ing idea what happened 2 years later)

    that includes all the academics officials central bankers, market pundits and financial planners.
    its all guesswork and tentative, but i like your list and my 6 supplements. my investment strategy assumes there will remain an almost complete lack of learning at the peak of the next bubble. Too bad about the marginally employed then, not pretty.

  14. VennData says:

    It was caused by the Green Bay Packers.

    – VennData (lifelong Bear fan)

  15. JimRino says:

    I liked Inviticus’s comment.
    Who instructed the banks to abandon all lending standards?
    Was there a Wall Street memo?

  16. Julia Chestnut says:

    Blinders is a fairly universal problem: that is why teamwork is so valuable, and the whole is often greater than the sum of its parts — at least until the team ossifies and they form a collective set of blinders.

    Lately I see a set of collective values at the base that disturb me, and that I don’t know how to get away from. “Greed is good” serves as a valuable shorthand, in some respects, but it comes down to a materialism that pervades society and determines completely a person’s worth as a human being. It has formed a religion, along with the concept that — even assuming that an efficient market does most efficiently allocate resources — the most efficient or “natural” outcome is the RIGHT outcome. What happened to Locke’s idea that the “state of nature” is not a very good place to be?

    Perhaps it is my tendency to see patterns where there may be none (cognitive defect that is clearly hardwired, but still). I begin to be concerned about things very deep at the center.

    Lots of what I read in different places just seem to be different flavors of the same spoiled milk.

  17. IS_LM says:

    Regarding monetary policy in the early naughts, standard models showed through about 2003 a high probability (roughly 20 percent) of a deflationary contraction after the tech bubble burst and the 9/11 attacks. Loose monetary policy was the correct policy prescription. What failed was the regulatory oversight regarding balance sheets of financial institutions. In particular, the 2004 decision by the SEC to permit high levels of debt-fueled leverage was critical in creating the conditions for our 2008 Minsky moment. (I know BR has written about this.)

    But I’m glad BR is blogging heavily today about this topic today. BR, go tell it on the mountain! Or at least on Squawk Box and Kudlow.

  18. mathman says:

    Oh, and of course NOBODY saw this coming in, oh, say 1994 . . .

    http://www.youtube.com/watch?v=4PQrz8F0dBI

  19. rktbrkr says:

    Effective regulation of ANY SINGLE ELEMENT of the real estate financing process might have prevented the disaster we are experiencing, the appraisals, the bond ratings, the 105% loans. In a few months when the TBTF are back for another bailout because their mortgage losses are “surprisingly large” we can add absent accounting standards to the list.

  20. Sechel says:

    •3 of the 4 GOP appointees of the FCIC dissented, writing: “Our views have been shaped, in part, by our knowledge of economics and financial markets generally.” And that’s the problem — your views of Efficient markets, rational actors, and self-regulation have been proven to be nonsense, bad theories that you slavish stick with for matters unbeknownst to thinking people. (See 10 Questions for GOP Members of Financial Crisis Inquiry)

    ————-
    I have a problem with this. Not so much the belief, but it’s use in not supporting the notion.
    It almost comes across like a juror acquitting based on their own independent research.

  21. Jah Love says:

    Dont forget this slice of idiocy:

    Smart People Saying Dumb Things

  22. [...] we have been discussing human foibles lately, why not go to Jeremy Grantham’s monthly piece, titled Pavlovs [...]

  23. globaleyes says:

    Failure precedes success — ask any winner.

  24. DMR says:

    He he. This is a list of people who irrationally stick to the rational actors assumption.

  25. budhak0n says:

    Eh, America is not a lesson in fundamental moralities.

    One man’s morality is another man’s misstatement of the facts.

    Just accept a certain degree of moral ambiguity and move on. But that’s a personal choice each person makes on their own.

  26. cognos says:

    Its wierd that everyone doesnt realized it was all about –

    LOW DOWNPAYMENTS!

    If you actually had 20% down on each home purchase this:

    a) keeps a HUGE governor on price bubble as price run-ups need to be met with ever larger down payments
    b) provide the KEY SECURITY in the downturn
    c) helps lower fraud because the buyer thinks more seriously when the down payment is more material and it prevents massive over-extension by the low-income folks (bc they cannot come up with the DP)

    There were many mechanisms built to work around the 20% down. Speculative pre-construction realestate is regularly done at 10% down. Mortgage “insurance” allowed most subprime loans to be done at 2% or 5% or 10% down.

    If you wanted to regulate in a bubble… moving the downpayment to 30% or even more for second homes is THE KEY. Note — this is exactly how China is handling the real estate situation.

    ~~~

    BR: LTV falls into the category abdication of lending standards . . .

  27. budhak0n says:

    I still want somebody to explain to me how families with unencumbered property fit into all your equations of what all of this meant.

    It was meaningless by the way. Unless you cashed a mega check, it’s really pretty meaningless in the long run.

    Just another glorified S&L scandal.

  28. tagyoureit says:

    The crisis was caused by [disobedience].

    Credit is the Tree of Life, banker-snakes suggested we eat the fruit of leverage, for it would bestow prosperity upon us. We ate the fruit, and discovered our net worth was naked.

    This time around though, G-d doesn’t give a shit.

    demonstrate your own ignorance – check
    unfamiliarity with empirical data – check
    ability to repeat discredited memes – check
    and lack of respect for scientific knowledge – check

    :D

  29. “Lately I see a set of collective values at the base that disturb me, and that I don’t know how to get away from. “Greed is good” serves as a valuable shorthand, in some respects, but it comes down to a materialism that pervades society and determines completely a person’s worth as a human being. It has formed a religion, along with the concept that — even assuming that an efficient market does most efficiently allocate resources — the most efficient or “natural” outcome is the RIGHT outcome. What happened to Locke’s idea that the “state of nature” is not a very good place to be?”

    ~Lately? The whole history of the US is its ever-yearning search for material gain. Materialism is the whole reason for its being, and always has.

  30. nofoulsontheplayground says:

    I agree that Greenspan’s greenlighting of sweep accounts is a biggie that was left out. That levered up banks and was another factor often overlooked in the making of the credit bubble.

  31. DeDude says:

    “By the way, minimum wage in Denmark is about $18/hour.”

    Yes and their gobinment is more than twice as big as ours (over 50% of GDP – and some famous idiot from Chicago exploded when he was told because it sort of disproved some of the BS he continued to spew out, in spite of the evidence).

    “I wonder why Burmeister and Wain, maker of large diesels, and Aalborg boilers and A.P. Moeller (largest container shipping company in the world) have not fled the country?”

    Must be because of that small and homogeneous population they have. It couldn’t possibly be because of free soc!alised health care and education.

  32. DeDude says:

    “One man’s morality is another man’s misstatement of the facts.”

    Gosh your are just a master of being wrong today. Facts are completely separate from morality, and they are absolute (nobody is entitled to their own facts).

  33. DeDude says:

    “If you wanted to regulate in a bubble… moving the downpayment to 30% or even more for second homes is THE KEY. Note — this is exactly how China is handling the real estate situation.”

    And how exactly have they been doing on that?, did 10% or 20% or 30% downpayments stop their bubble in RE, if not, how come their facts contradict your hypothesis and is the fact or the hypothesis that is wrong?

  34. patient renter says:

    “According to Lou Mish, they’re to blame for everything.”

    I’m sure Mish can defend himself, but that’s a pretty pathetic strawman.

  35. patient renter says:

    “In Bubble II, CDOs became the vehicle of choice for reserve-free lending. Effectively the lower-rated tranches were supposed to serve a quasi-reserve role.”

    Indeed. But there was no regulation against repackaging and re-rating lower tranches. It fits the classic definition of fraud, even if it was legal.

  36. budhak0n says:

    Don’t go to law school DeDude, you’ll be sadly disappointed.

  37. budhak0n says:

    LOL seriously if we ever actually held your feet to the fire on the “facts” … hahahaha.

    Could you imagine that? Now back to reality.

  38. DeDude says:

    And when you then present them with an example of how [pet peeve] existed at another place or time without that causing a similar crisis, then they move from simple correlation to multivariate (saying it was because of this other variable preventing the crisis).

  39. DeDude says:

    Since when did “law school” have anything to do with “facts” ? – seriously

  40. budhak0n says:

    And yet this is a country which has prospered for the most part for the greater part of 230 some odd years on the basic framework established by a group of barristers.

    Imagine that. Nobody likes the lawyers. Until they need one

  41. DeDude says:

    Although policy should (and used to) have something to do with facts, politics (the lawyer part of it) has nothing to do with facts.

  42. cognos says:

    Dedude — China does not appear to have a real-estate bubble. (Major urban center prices are a fraction of our bubble price here in the US. Somewhere 1/4 to 1/20th). Further, if there is 40% down on second homes, and no lending for 3rd homes … a drop in price by 20-30% really wont hit the banks. Thats the point, right?

    Those predicting that China is a bubble… have already been wrong for years and mainly will continue to be wrong. Per capita income in China will not have major problems moving up to $25,000 annually. This is 5x today’s level. Thats another decade or 2 of growth.

  43. budhak0n says:

    Could lead one to conclude that in some ways… it all depends on your interpretation of the facts.

    By the way , my original statement compared morality to a “misstatement” of the facts thereby leaving it completely open for a person such as yourself to continue to believe in a very narrow interpretation of the word fact.

  44. WFTA says:

    Pretty late in the day to be throwing my thesis in, but I
    will: There is blame and guilt aplenty to go around—borrowers who
    shouldn’t have, lenders who shouldn’t have, investors who shouldn’t
    have, bankers who shouldn’t have—but one thing that could have and
    would kept it from getting so insanely out of hand and just wasn’t
    to be found was transparency in the derivatives (read: Credit
    Default Swaps) market. The banks packaging and selling sub-prime
    mortgage backed securities, were definitely out to steal, but if we
    (and especially the poor idiots selling the CDSs on “AAA” rated
    MBSs) could have seen how the betting was going, this thing would
    have corrected in (pardon the expression) a New York
    minute.

  45. Mish responds here:
    http://globaleconomicanalysis.blogspot.com/2011/01/missing-big-picture-part-ii.html

    And in his defense, I do not believe he thinks Public Unions caused this crisis . . .

  46. Union Jack says:

    Mish blames deficits as a cause of the crisis

    He blames Unions as a cause of deficits.

    THEREFORE . . .

  47. Thor says:

    Ah Mish – it must suck to be known by so many people as the nations leading Union basher.

    Politicians, and the people who elected them (us) are to blame for the problems in the states and the cities. They’re the one’s who agree to the union contracts and we’re the one’s who keep electing them to office. When’s the last time we saw a major strike by a union in this country? The traffic controllers?

    I also find it more than a little odd that someone who makes a living making other wealthy people even wealthier, has the nerve to bad mouth public employees.

    Dedude – Must be because of that small and homogeneous population they have.

    Hah, you beat me to that! You never did get an answer to that question did you?

  48. DeDude says:

    cognos; I realize that ultimately a bubble is not proven until after it bursts, and a lot of people were discounting that RE or the stock market were in bubbles right up to the time they crashed. Those who like Barry and “Dr. Doom” were predicting them, were ridiculed as being wrong right up to the time when they certainly became the only ones who were ever right. A lot of people would say you are sticking your head in the sand if you think China is not having bubble problems in their RE markets right now.

  49. DeDude says:

    Thor; never did get a response, but I may be on the “don’t answer list” of a few people here, as in “do not respond when he is right”.

  50. Subprime Loans by Fannie, Freddie Performed ’Better’, FCIC Says
    2011-01-26 23:16:01.129 GMT

    “Fannie Mae and Freddie Mac’s portfolio of subprime loans “performed significantly better” than those packaged into mortgage-backed securities by private issuers…In the study, FCIC staff examined loan performance in 2008 and 2009. They found that that mortgages bought by Fannie Mae and Freddie Mac were more likely than privately purchased loans to require a significant down payment when borrowers had weak credit, and were therefore less likely to go into default…GSE mortgages with a down payment of at least 10 percent that were rated Alt-A, a status between prime and subprime, had a serious delinquency rate of 5.7 percent in 2008, compared with a delinquency rate of 15.5 percent among mortgages in private-label securities”

    By Clea Benson and Lorraine Woellert

    Jan. 26 (Bloomberg) — Fannie Mae and Freddie Mac’s portfolio of subprime loans “performed significantly better” than those packaged into mortgage-backed securities by private issuers, the Financial Crisis Inquiry Commission found in a report.

    The panel’s report, scheduled to be published tomorrow, attempts to refute claims by Republican lawmakers and some economists that the two government-sponsored enterprises were a driving force behind the growth in subprime home lending that led to the 2008 financial crisis.

    Fannie Mae and Freddie Mac, which have been operating under U.S. conservatorship since September 2008, “contributed to, but were not a primary cause of, the financial crisis,” said the report, which was written by the Democratic majority on the congressionally appointed panel.

    In a written dissent, Republicans on the panel placed more blame on Fannie Mae and Freddie Mac, saying they “contributed significantly in a number of ways” to the crisis. Their “failures were the result of policy makers using the power of government to blend public purpose with private gains and then socializing the losses,” the report said.

    The companies, known as government-sponsored enterprises, have borrowed more than $150 billion from the U.S. Treasury Department since they were seized in 2008. The Obama administration is in the process of revamping the government’s role in the housing market and the role of the GSEs in a new system is under debate.

    A copy of the 545-page FCIC report was obtained by Bloomberg News.

  51. cognos says:

    Dedude – “dr doom” predicted the bubble in 1995!

  52. cognos says:

    Oh, and he totally missed subprime. He said “high interest rates will hit adjustable rate mortgages”. That’s just an idiot.

    Paulson got the bubble. Few others. He made $10b.

  53. DeDude says:

    In economic forecasting it is better to predict the future a decade ahead than 3 days late.

  54. Thor says:

    An alternate voice to the “3 trillion in unfunded liabilities” meme. Can’t remember who linked to this article in the first place but it’s definitely worth a read.

    http://www.cbpp.org/cms/index.cfm?fa=view&id=3372

    Some observers claim that states and localities have $3 trillion in unfunded pension liabilities and that pension obligations are unmanageable, may cause localities to declare bankruptcy, and are a reason to enact a federal law allowing states to declare bankruptcy. Some also are calling for a federal law to force states and localities to change the way they calculate their pension liabilities (and possibly to change the way they fund those liabilities as well). Such claims overstate the fiscal problem, fail to acknowledge that severe problems are concentrated in a small number of states, and often promote extreme actions rather than more appropriate solutions.

    A debate has begun over what assumptions public pension plans should use for the “discount rate,” which is the interest rate used to translate future benefit obligations into today’s dollars. The discount rate assumption affects the stated future liabilities and may affect the required annual contributions. The oft-cited $3 trillion estimate of unfunded liabilities calculates liabilities using what is known as the “riskless rate,” because the pension obligations themselves are guaranteed and virtually riskless to the recipients. In contrast, standard analyses based on accepted state and local accounting rules, which calculate liabilities using the historical return on plans’ assets, put the unfunded liability at about a quarter of that amount, a more manageable (although still troubling) $700 billion.

  55. gloppie says:

    Fraud, lies and disregard for law and truth, at every level, pretty much everywhere if one looks closely enough.

  56. Grace Styles says:

    Thsi artcile has an intereseting way to describe the financial crisis:
    http://www.mindfulmoney.co.uk/wp/all-errors-are-human-errors/
    It says – Any sufficiently complex, tightly coupled system will fail sooner or later, the example then used is the meltdown at Hinkley Point B nuclear power plant in the UK.
    there system was to complicated, so that even those whp were experts in the areas didn’t not know how to assess what was going on, therefore when something started to go wrong, everyone was ‘completely lost’. even though the systems were ones they set up and they beleived in them but the confidence was misplaced, the complexity of the system poorly understood.
    The same can be said about the financial crisis.

    All errors are human errors – so its really no surprise that the financial crisis was ‘aviodable’

  57. wngoju says:

    wow, Mish’s defense is pathetic at best. And, the union thing… uh.

  58. constantnormal says:

    What’s all this “was” stuff? Unless you consider the crisis to be limited to the brief scare that the markets were about to collapse, it is still on-going. NOTHING HAS CHANGED. We still have quasi-depression-level unemployment, a continuing tsunami of foreclosures engineered by the banksters, a continuing outpouring of wealth to the uppermost fractions of our economy, officially-sanctioned fraud continues to be the “New Normal” …

    The only way you can consider the “crisis” to be over is if you carefully affix your “Reality blinders” to only permit viewing the stock markets. And even once the “Reality blinders” are in place, one must be still aware of a lot of uncertainty and doubt, the pervasive meme that our markets are rigged, and a certain reluctance among the sheeple to invest in our future.

    THAT is the real crisis, it is on-going, and only a correction of the things that are wrong in this society can deal with it.

  59. [...] Shedlock on Fractional Reserve Lending Posted on January 27, 2011 by crutcherworldpolitics Barry Ritholtz disagrees with Michael Shedlock over the role of fractional reserve lending on the near financial [...]

  60. IvoZ says:

    I do not find Mish’s defense pathetic at all. He just goes to the root cause of bubbles and bursts and not exactly the last one. Especially his explanation of the indirect effect of budget deficits is worth considering.

  61. [...] Barry Ritholtz demurs; he’s got a longer, more involved explanation. [...]

  62. [...] The Crisis Was Caused by [Insert Pet Peeve Here] (January [...]