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  • How Government Intervention Caused the Credit Crisis

    Fantastic clear explanation of how federal government intervention with the market directly caused today’s financial turmoil by Peter Schiff in today’s Washington Post:

    Just as prices in a free market are set by supply and demand, financial and real estate markets are governed by the opposing tension between greed and fear. …

    [O]ver the past generation, government has removed the necessary counterbalance of fear from the equation. Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow — until it could grow no more. …

    [T]he FHA, Fannie and Freddie were created to encourage lending by allowing primary lenders to turn their long-term risk over to the government. Absent this implicit guarantee, lenders would probably have been much more conservative in approving borrowers and setting interest terms, and in requiring documentation of incomes and higher down payments. Market forces would have kept out unqualified buyers and prevented home-price appreciation from exceeding the growth in household income.

    Posted in Economics [slideshow_deploy]

    7 Responses to How Government Intervention Caused the Credit Crisis

    1. Ron Holland, Ashevil says:

      The Federal Reserve is Guilty of Helping Create the Global Financial Meltdown

      Many investors and concerned citizens around the world are showing their outrage at what the Federal Reserve has done to the American economy with their easy money policies which caused the credit & real estate bubble and subsequent global financial meltdown.

      Join the thousands who are signing & commenting on the Abolish the Federal Reserve Petition at http://www.petitiononline.com/fed/petition.html

    2. Kohnert, Germany says:

      I would suggest my mother to read Keynes 1935, Krugman 1979, Stiglitz 2006 and perhaps Jean Ziegler and take your hands off political freedom ….. regards to Mont Pelerin

    3. Pingback: On The Current Financial Crisis | ChooseTheHero.com

    4. Michigan Voter says:

      Start here making it madatory that 7th graders

      understand this material this Gentlemen provided below.

      Oh for that matter start with the Senate as in both party's. There is no excuse period other than all truth passes through 3 stages.

      Ridiculed – Opposed – Self Evident

      Some of them are old enough to be my Children now and if they where at my table they would really have to be acountable.

      http://www.chrismartenson.com/crash-course/chapte

    5. Pingback: Consider Yourselves Warned | ChooseTheHero.com

    6. Pingback: Consider Yourselves Warned | PoliticsMuch.com

    7. ryan says:

      Republicans are bizarre. They wreck the army, destroy an American city, waste wall street, besmirch America's reputation, institutionalize torture, blow up the middle class, and corrupt the justice department and still we are supposed to believe that they are not responsible for the mess where are currently in. Thos leads to only one conclusion. REPUBLICANS LIE. ALL DAY. ALL NIGHT. ALL THEIR LIVES.

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