Self-Correction: How It Works, When It Works Worse

Public school teacher?

What would have happened without the New Deal started by Hoover and expanded by Roosevelt, is that there would not have been the level of investor uncertainty there was.

"In the long-run, we're all rich."

I don't know, some countries are doing markedly worse than they were 30 years ago.

Most people will need to earn far above minimum wage to survive.

But the real impediment was the bankruptcy law changes that took away the judges ability to lower the prices of goods bought on credit, from cars, houses, to food.

If wages are to fall, prices need to fall as well. And the biggest chunks of prices are for housing and transport.

But with the bankruptcy law changes, the way houses and cars will be reduced in prices is by foreclosure and repossession and the netting to the lender less than what the borrower could pay after a reasonable modification.

And the borrowers who borrower more than they might have were as Goldman executives explained, just supplying the highly risky debt the sophisticated investors wanted. So, writing down that debt is just exactly the kind of activity that is needed to fulfill the demand for risky debt. Having a bankruptcy judge do it is more efficient with lower losses to the lenders, and that was the system when the credit models were setup, but with the bankruptcy law changes, the models became broken.

There's also the strong possibility that if there had been no New Deal there would have been no country that we could recognize regardless of the efficacy of the policies. There are far more radical ideas than the New Deal.

Action is often less important than the perception of action.