Hi Mitch. Your post made me think about the nightmare of my attempting to take a macro-eco class in college because I had a crush on the prof. Since I didn't understand a word of it, I had to drop the couse. But, when I hear the arguements of many economists, they seem to be more guided by their politics than actual historical data or theory. I believe the sub-prime mortgage crisis was possible because of the republicans' deregulation of the banking industry. Historically, I believe that mortgage risks were assumed only by the lending institutions, but what they did with the sub-primes was to spread with risk by creating these commodity type investments that promised large returns based upon the promise of a larger pool of mortgagors who would be forced to pay ever increasing, and apparently, unreasonable interest rates. Of course, the crisis was destined by the greed and imorality of those persons selling the mortgages and by the stupidity and/or unsophistication of the purchasers. Politically the motive is to make the rich richer and the poor . . .Additionally, Greenspan has actually now admitted some political motives behind some of his decisions. Anyway, that's my armchair, or bar stool opinion. Please be gentle if I'm way off base here! Thanks, ATK

you know, i think i remember seeing an interview with alan greenspan where he said that out of all of the data and techniques used to analyze data, the best predictor of how well the economy will do is consumer perception.
they say that when doomsdayers on t.v. tell us how we're heading downhill, people change their behaviors which actually cause the economy to slow down; like a self-fulfilling prophecy. as for me, what recession?

so what i get from economics, is that it's driven more by perception than data; people can perceive data differently. part of economics is understanding human nature and motivation.

some blame the fed for the housing crisis because they made interestr rates artifically low; people started selling and buying overpriced houses because they were only looking at their monthly payments. i would never pay $50,000 for a toyota camry just because i was buying it on a loan and interest rates were low enough to make the payments the same as buying a $20,000 camry two years ago. it sounds ridiculous to me, but that's what people did. just like these companies that decidied to hold mortgages that they knew nothing about and that came from originators who they knew only cared about their commissions. what kind of a screwed up system is that?

while i think that for you, and most others who have taken some basic finance or economics classes, it was easy to predict these failings, but i think that for most people it wasn't and that for a lot of these people, the temptation of money and what they saw as a great opportunity got the better of them; they get caught up in the hype.

as one of my teachers said today, don't trust anyone else's advice on how to invest; if the advice was really all that great, they'd be keeping it to themselves beause once everyone knows about, they won't have an advantage anymore and the worth of the investment will go down.

these "experts" we see on t.v. are just speculating like the rest of us; they have no special knowledge; if they did they'd be billionaires and if it only required learning in a classroom, they we all could get in on it and it'd end up being worthless at that point anyway. but before we can make our own choices and judgments, we do have to be schooled on the fundamentals, because they do apply even if they aren't the only consideration.

... they make for great interpreters of difficult topics for the layperson.

I have a question about Greenspan.

he was a demigod in the 90's but now critics are pointing out that his tactics set up the downfall of our economy today.

Whats the deal here, Mitch, you agree. and I don't understand... not to simplify but Greenspan's tactic to stimulate the economy was to drop interest rates -- was he a one trick pony?