"The Great Bubble Era Was Caused by Financial Deregulation, Not Easy Money"

[applegrove]

The Great Bubble Era Was Caused by Financial Deregulation, Not Easy Money

by Kevin Drum at Mother Jones

http://www.motherjones.com/kevin-drum/2013/08/bubbles-financial-deregulation-easy-money

"SNIP............................


Real long-term interest rates during the past 30 years have been consistently higher than in the 50s and 60s. It wasn't until 2008 that they fell noticeably below their 1950-1970 average. And yet, as Krugman says:


The whole era since around 1985 has been one of successive bubbles. There was a huge commercial real estate bubble (pdf) in the 80s, closely tied up with the S&L crisis; a bubble in capital flows to Asia in the mid 90s; the dotcom bubble; the housing bubble; and now, it seems, the BRIC bubble. There was nothing comparable in the 50s and 60s.

And don't forget the Nordic property bubble of the early 90s. That's a lot of bubbles. So if it wasn't easy money, what was it? Krugman again:


So what was different? The answer seems obvious: financial deregulation, including capital account liberalization. Banks were set free — and went wild, again and again.


.............................SNIP"

[applegrove]

1. The rich like bubbles. They make money hand over fist. They have enough put away

for a slow year or two. Plus they see a down market as investment opportunities as acquiring property and other corporations is much, much cheaper. Then they are on to the next bubble.

[Hydra]

2. Yup

They love the ups and downs- they steal from us on both ends.

A stable system would be too boring for them- things like laws would get in the way.