Ten Years Of Hell

Read this from Nieman Watchdog.

Despite catastrophic events, it is folly to expect the suffering of millions and an onslaught of inconsistent facts to wipe out an economic theory whose tenets were and still are so convenient for so many powerful economic interests. At present the defenders of the efficient market hypothesis are engaged in trying to pin the cause of the financial crisis on the government. (If the financial crisis was the result of government policies, then one could still plausibly claim the market to be rational, efficient, etc.) Their targets include the mortgage practices of the quasi-government lenders, Fannie Mae and Freddie Mac, the Community Reinvestment Act of 1977, the low interest rates of the Federal Reserve, and a pessimistic speech by President George W. Bush. The problem with this “blame-the-government” approach is the disproportion between these purported causes and economic effects. As Paul Krugman noted,

“[N]one of the proposed evil deeds of policy makers were remotely large enough to cause problems of this magnitude unless markets vastly overreacted. That is, you have to start by assuming wildly dysfunctional markets before you can blame the government for the crisis; and if markets are that dysfunctional, who needs the government to create a mess?”