Hat Tip: ARRA News Service
With the failure of the Democratic approach to economic “stimulus” becoming ever more apparent, it’s time to look at the current recession from a different angle. This chart shows that unemployment actually began its steep ascent soon after Democrats took control of the House and Senate in 2006!
The British think tank, The Institute of Economic Affairs, released a study that pins the blame for the worldwide financial meltdown on government failure, not market failure. You read it correctly. The 14 leading economists who authored the report “explain how government failure caused the financial crisis and why politicians’ calls for tighter regulation are misconceived.”
The IEA’s blog post introducing the report highlights seven key findings
- Central banks created a monetary bubble that fed an asset price boom and distorted the pricing of risk.
- US government policy encouraged high-risk lending through support for Fannie Mae and Freddie Mac (which had explicit government targets of providing over 50pc of mortgage finance to poor households) and through the Community Reinvestment Act and related regulations.
- Regulators and central bankers failed to use their considerable powers to stop risks building up in the financial system and an extension of regulation will not make a future crash less likely.
- Much existing banking regulation exacerbated the crisis and reduced the effectiveness of market monitoring of banks. The FSA, in the UK, has failed in its statutory duty to “maintain market confidence”.
- The tax and regulatory systems encourage complex and opaque methods of increasing gearing in the financial system.
- Financial institutions that have made mistakes have lost the majority of their value. On the other hand, regulators are being rewarded for failure by an extension of their size and powers.
- Evidence suggests that serious systemic problems have not arisen amongst unregulated institutions.