1) That's not actually what he said. He said that the regulatory apparatus is currently working to assist rent-seeking and pushing wealth to the "1%". Regulation has been used to protect the wealth of the wealthy from the consequences of a free market, at everyone else's expense.

2) Argument from consensus isn't actually a valid argument. Most of the people in your consensus have been journalists, not economists. (economists are mostly trying to get people to understand that the causes are way more complex than the journalists want to believe)

2) Many notable economists actually blame deregulation, such as Alan Greenspan & the SEC [0]. I think the man who oversaw much of the deregulation while it was happening calling it a problem in hindsight is a pretty darn good indication.

Of course your right though in the sense it's many things happening together, and the finger can never be pointed at one person let alone one group of policies. Still many people see the increased volatility caused by that regulation as a pretty big part of the cause.

[0] http://www.nytimes.com/2008/09/27/business/27sec.html

Stop perpetuating false dichotomies that preclude valid criticism of current policies.

Thanks for the reply!

Similarly, the SEC isn't a super credible economic source for several reasons. One being if you are smart enough to work at Goldmans you don't work at the SEC. It's pretty self-serving for the agency in charge of regulation to argue that de-regulation was harmful. Do you know the specific economists making this argument? I'm very skeptical until I see names, and then my skepticism decreases while reading the actual paper.

I would argue that deregulation was not the central issue - which was a rise in activities which circumvented regulation, like off-balance bank trading. Greenspan shielded these new fields from regulation, and the resulting over-leverage killed banks. In addition, overly cheap credit made these activities and mortgage in general overly attractive.

There is a lot of evidence for this view, mostly in the multitude of institutions and industries which all had problems simultaneously. You can view this as a coincidence or you can view it as industries responding to incentives set by Greenspan.

TLDR Greenspan caused the housing bubble.

No, you're discussing your narrative... which doesn't have much to do with the post you replied to.

Greenspan is rather heavily implicated as one cause of the problems. But he's attempting to shift the blame to the political side, rather than the economic side he was responsible for. He may actually be right, but I wouldn't take his word for it just because he was there. He's joined by political hacks pretending to be economists (like Krugman), and a few genuine economists. But it's far from agreed-upon.

The wealth of that period had a lot to do with the British mortgaging their global empire to the US in order to pay off their war debt from WWI and for the US bailing them out again in WWII. In exchange, the US received approximate hegemony over "the free world" and the disguised blessing of a scary enemy to unite their side.

Given climate change is only going to get worse, I guess a pretty big catastrophe coming our way and causing similar change soon-ish isn't that far fetched.

Most human conflict is based on resource scarcity, fear of future resource scarcity, and/or fear of what others will do when faced with resource scarcity. This certainly applied to WWII. Even ideological/sectarian conflicts have fear of resource scarcity underpinning them.

Banks responded to this pressure in the only way they could by giving out loans to minorities who then defaulted. Banks couldn't change the government initiatives, so they bundled bad loans with good to try to control the damage and save the economy, but too many minorities were irresponsible. The government then made the problem worse by adding even more regulation on banks, slowing the economic recovery and extending the recession.

I don't personally subscribe to this, but it does seem to have a lot of weight with a certain crowd. It's also used as an example of how minorities and government are the source of other problems in the country, so the only way we can solve the problem is through deregulation, giving more freedom to the financial industry, and ending any sort of affirmative action.

The public at large doesn't understand the banking system and how it is funded. Banks fund loans by creating deposits out of thin air. They don't loan money from their depositors. Because of this, they must be and are carefully regulated.

The banks further profited by investing their own money - something we then prohibited them from doing, as it made them far too risky. Essentially the banks had abnormally high returns, which is almost always a sign of high risk. The entire purpose of regulation is to force the banks to be boring, low-risk low-return options so they have a very low chance of failing. People seeking high-returns can then go to the stock market or hedge funds, which are much less likely to be 'too big to fail'.

The public is also unaware that nearly every substantial banking regulation was created as the result of a bubble, recession, or depression. We need strong bank regulations in order to prevent financial crises which can cause global depressions.

Throwing away regulations when everything is going well is much like throwing out all that error-handling code your application has built up over a decade. Sure, you get better performance initially...

Not to mention when will the change stop? There isn't any indication it will stabilize in the near future meaning semi-unpredictable changes will continue to occur.

Also, living through the snowball earth era would have probably been awful for the human species. Sure life survived many apocalyptic events, no reason to think our species would survive when 99% of others couldn't.