Its 4 years since the economic "crisis" began. We got rid of a president widely seen as part of the cause with his experiments in trickle down economics. However, as we enter another election, which one of these guys will "fix" the situation? Further, have those who made the mess been punished?
The banks and the media have spent much fo the last 4 years passing blame on anyone but themselves - high risk debtors, mortgage insurers, fraudsters, politicians, even the American dream. Now, who is really to blame?
The top 3 causes of bankruptcy are:
1. Job Loss / Income Reduction
2. Sickness / Death
3. Marital Breakdown
Now, not one of these is borrowing more than you can afford, spending too much money, living beyond your means .... having bad credit or buying a house with too little down. The causes of personal financial ruin are virtually all unplanned (perhaps the Marital breakdown one ....). Now, one could argue that being overextended contributes to the impact of these, but 95% of Americans would be in serious trouble 3 months into any of those ....
So, who caused the problem? Well clearly banks decide how much to lend you based on a very invasive investigation into your life. However, how does that determine how much you need? The real question is how much banks lend you is a result of you needing the money, or them creating that need.
The price of housing, transportation, food, education, even taxes are highly correlate to what banks decide to lend you. The father of Modern Monetary Economics Friedman said"Inflation is always a monetary phenomenon". What that really means is credit is the main influence over price - not supply and demand, not competition, not cost to produce, but how much the banks is going to lend out for someone to buy it. You think the price of your house is based on location, the curtains or kitchen?? Nah, its the loan value from the banker.
So, if we accept banks determine the price of collateralized assets (houses, cars, stocks, even TVs, cell phones, shoes) what does that mean about the relative price of these items to each other and your income. For example the price of housing has rising significantly since 1950, both in nominal terms and real terms. Is this a market function? Or a monetary one? How about the 100% increase in housing prices from 2002 - 2007?? Clearly that increase was a direct result of monetary policy - banks created the bubble, not people.
So if Banks caused the mess, what has been done to them? Well, really, absolutely nothing. Today, we blame the government, some ponzi schemes, Europe, sub prime borrowers ... but mostly we seem to accept that no one is going to be punished. The sad part is all recessions are caused by monetary policy - so by doing nothing we are ensuring that within 10 years the same thing will happen. Isn't it time to demand something different be done?