Amazingly, this is in today’s Wall Street Journal:
The classic explanation of financial crises is that they are caused by excesses — frequently monetary excesses — which lead to a boom and an inevitable bust. This crisis was no different: A housing boom followed by a bust led to defaults, the implosion of mortgages and mortgage-related securities at financial institutions, and resulting financial turmoil.
…Other government actions were at play: The government-sponsored enterprises Fannie Mae and Freddie Mac were encouraged to expand and buy mortgage-backed securities, including those formed with the risky subprime mortgages.
Government action also helped prolong the crisis. Consider that the financial crisis became acute on Aug. 9 and 10, 2007, when money-market interest rates rose dramatically. Interest rate spreads, such as the difference between three-month and overnight interbank loans, jumped to unprecedented levels.
There’s some heroic stuff in here. Things like this excite me because it shows that years and years of hard work and well-placed passions have paid off, and now, in light of the current economic meltdown, it is time for the ideas long proposed by Austrian economists and other radical free-marketeers – that have been perpetually belittled by the mainstream establishment – to take center stage and shine. Thanks to Adam Chudy for the link.