The Financial Crisis in a Nutshell

If you’re looking for a clear, cogent description of how the current financial crisis happened, The Objective Standard has it: The High Cost of Washington’s Price Manipulation Policy:

For decades Washington has been manipulating prices to encourage homeownership and “steer” the economy. To “incentivize” you to buy a house, it made mortgage payments tax deductible, largely exempted homes from capital gains taxes, and created Fannie Mae and Freddie Mac. After the stock market tumbled in 2001 and 2002, Washington established a policy of artificially low interest rates that created the illusion of cheap credit; leery of the stock market, and looking for someplace else to put all this easy money, Americans began buying homes in droves.

But eventually the drug-induced high of artificial credit wore off, and out-of-whack housing prices plummeted, sparking the financial crisis. What was Washington’s response? It ramped up its price manipulation policy, injecting us with a new round of “easy money” amphetamine:  Bush doled out “stimulus” checks, the Treasury began funneling billions into banks, and the Fed started frantically slashing interest rates. And, we are told, this is only the beginning. A new dose of bailouts, interest rate cuts, and “stimulus” giveaways is just around the corner.

Read the whole thing.

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