Originally posted by: Jhhnn
Sigh. The bursting of speculative bubbles occurs because the bubble was allowed to develop in the first place, which is precisely what the bush admin and greenspan's FRB allowed to develop in housing and the derivatives market. A huge bubble, so big that the collapse threatened the whole economy.
You're right, Genx87, that the timing of the collapse isn't the important issue, yet still seem to want to overlook the reasons it was inevitable. Those reasons are inherent in the policy of the last 8 years, like it or not... Had policy been sound in the first place, we wouldn't have been faced with the alternatives of bailout or extreme contraction in the economy.
It really is fitting that the collapse occur under the old regime, the regime that set things in motion making it inevitable. Like it or not, the cause and effect relationship is clearer to most of us than it would be otherwise. It really is the result of misplaced ideological faith in the ability of markets to regulate themselves over time, the same sort of illusion that led to the collapse of 1929. Yeh, sure, the markets will do that, but the results aren't always what's good for the general population. That was true in 1873, 1907, 1929, 1987, and it remains true today. Failure to instill discipline on the upside dictates overextension at the peak, followed by sharp and damaging declines on the downside...