Meltdown Thomas E. Woods Jr.

Capitalism is economic and political system in which country’s trade and industry are controlled by private owners for profit rather than by the state. Since crisis is been experienced by the whole world, capitalism is indeed they see as the culprit that caused such economic mess. The crisis was the fault of libertarianism, same thing as they considered the capitalism as well in 2008 were considered responsible for the 2008 economic trouble.

But behind of this let us look at the real culprit of this claimed. This book identified the culprits that led the economy suffer.

Federal Reserve the one who monitors ricks to the financial system and works to help ensure the system supports a healthy economy for US household. Borrowers can no longer sell any housed for their profit for price depreciation started. Greedy lenders and foolish borrowers were blamed, but not the government.

Fannie Mae and Freddie Mac, the government sponsored enterprises. The enjoyment of privileges which no private enterprises had. And in case if they were encounter trouble sure the government will be one of their back up in terms of financial burden to taxpayers.

The GSEs, the one who bought the mortgages from local banks, with funds in their hands, bankers returned to the mortgage making it easier for people to own houses, and thereby boosted the housing market.

The particular law which identify the Carter’s time and revived under the Clinton’s administration that is called the Community Reinvestment Act. This are the combination of the law coupled with political pressure from special interest groups, bankers that forced to lower lending requirements to provide easy access to housing loan for low-income borrowers.

Racial discrimination also arouse that makes the rallying cry during those years. Lenders were being afraid to go against a popular political tide and legal threat were forced to even conform to pressure and thereby loosened lending requirements.

The speculators multiplied, not only from low-income buyers same as to the higher-income borrowers. It becomes viral. The most notorious examples of this were house-flippers and market-timers. The price of houses artificially appreciated.

Private rating agencies also had their share of responsibility in the housing bubble. They failed to do their duty sue to SEC regulations. Like bankers, they were also afraid to go against popular political propaganda that caused them not to do their job.

In spite of all this how can we solve the economic crisis? Let see the US government solution from these matter.

Short-selling

The exact opposite of “buy low and sell high” strategy used by investors. By these traders return the borrowed stocks and keep the gain for themselves. Traders are doing service to investors by giving them important information about sound firms.

Increase of insurance

Another tool to aid the economy is this, increase the insurance of depositors’ money without even thinking the soundness of the bank’s finances. So if the banking crisis occurs, the probably solution to this is to return to the old trick of printing USD.

Foreclosure holidays

This result in lesser credit, depriving the common man to avail a mortgage loan, an unfortunate outcome that will be blamed on free market’s “inefficiency”.

More regulation

Regulation and deregulation is taking place, which is the act of transferring the risk of unsound companies to taxpayers. Deregulation is actually anomalous for how one can talk if it when the government allows firms to make riskier investments with the guarantee of taxpayers money.

Let’s have a concrete steps to recover from a free-market perspective.

1. Allow firms to declare bankruptcy. This avoid due to two baseless fears which related to perceived negative impact on the economy once firm disappeared and the second one is about the loss of credit.

2. Stop the bailouts and cut government spending. Stop giving subsidy. Excessive consumption and too much debt cause economic crisis.

3. Demand transparency from the Fed.

4. Keep the government away from the monopoly and manipulation of money.