What Caused the '08 Financial Crisis: Free Markets or Government? financial crisis 2008

There is a good deal to be learned by studying how depression triggers aligned in the past. So, to understand why the "Great Depression" occurred in the 1930s, one must look at what occurred during the years building up to the crash.

A significant amount of the credit made available during the 1920s went into land speculation. A good primer on what occurred is found in the book "Only Yesterday" by historian Frederick Lewis Allen. Not only did investors become captured by the frenzy of the Florida land boom, this same frenzy occurred in many cities in response to population increases that triggered a significant increase in the demand for both commercial and residential land. An agricultural land boom also occurred during the First World War, during which time farmers borrowed heavily to expand their land holdings and production. A few years was required after the war ended for European farmers to recover, but by the mid-1920s global production exceeded demand, prices fell, farmers defaulted on loans when government guarantees were removed, and rural banks failed by the hundreds.

As the land boom crashed, investors shifted heavily into the stock market, driving up prices well beyond what any fundamentals supported. Thus, by the end of 1929 the U.S. economy was stressed across almost all areas of production as well in the financial markets. To be sure, imprudent bank lending deepened the crash and lengthened its duration, but it was a crash in the making because of the failure to utilize tax policy to tame the credit-fueled, speculation-driven land markets. A few economists (e.g., Harry Gunnison Brown, Scott Nearing and John R. Commons) had argued the case made in the late 19th century by Henry George, who showed that cyclical booms and busts would be tamed only if the full or nearly-full public capture of the potential annual rental value of land and of rents from other sources (e.g., the broadcast spectrum) became public policy.

Harry Gunnison Brown was joined over the succeeding decades by a small group of economics professors who continued to make Henry George's case. One could argue that recessions that began again following the end of the Second World War would have been even worse if local governments did not capture some land rent via the taxation of real estate. However, as land prices climbed property assessments rarely kept pace. This made speculation in land an even more profitable investment.

Relying on out-of-date assessed valuations rather than current market values created a serious analytical problem for government statisticians. They simply did not understand that any increase in the price of land is inflationary and did not include such increases in their calculation of inflation. Another failure has been to accurately calculate the annual aggregate rent that is privately captured as unearned income (whether imputed or actual). Since the administration of Ronald Reagan, the federal government has not monitored land prices. The figures utilized in the econometric models relied upon by the Congressional Budget Office and the Federal Reserve are around 5 percent of the actual potential rent in the economy (see Joseph Stiglitz or Mason Gaffney on this particular problem).

I offer here a very rough estimate of the rent attached to just one part of the economy, the residential property market. At mid-2020, the median price of a single-family property was around $295,000. There are about 140 million existing housing units in the United States. If we assume a fairly conservative median land-to-total value ratio of 35%, this means that the aggregate residential land value in the U.S. is $103,250 per property, multiplied by 140 million = $14,455,000,000,000 ($14.455 trillion). Economic theory tells us that this aggregate land price occurs because of the capitalization of the net amount of rent that remains in private hands after taxation. If most or all of the rent were captured via taxation there would be nothing to be capitalized and land prices would fall to very close to zero. What the rent fund might be depends on the discount rate. If we assume that investors will invest in land if they can obtain an annual increase of 5%, the the rent fund would be calculated as follows: 5% of $14.455 trillion = $722.75 billion of rent JUST for the land under existing residential buildings. Add in the number of vacant residential lots around the U.S. and this figure will increase considerably.

Tragically, the public capture of land rent never became public policy, allowing the land market cycle to operate from boom to bust. It is on schedule to crash again in 2026. I have prepared a relatively short video in support of this forecast for anyone who reads this and has an interest in more details:

https://www.youtube.com/watch?v=fmA6ZPs-wus

may 2010 ron hera : forget about housing, real cause of crisis OTC derivatives
30july1998 brooksley born : testimony concerning OTC derivatives
nov 1999: repealed Glass-Steagall Act
dec 2000 : commodity futures modernization act
2007/2008 crisis/meltdown
evidence of the looting @ bis.org, see for yourself the gigantic increase in OTC derivatives bets post dec 2000!!! is beyond GREED, it's CRIMINAL
housing triggered, but not the main cause of meltdown & trillions after trillions of bailout for bankers that cause the crisis, no executives prosecuted, laughing all the ways to the banks. made hundred millions bonuses generating the crisis, made millions after the crash, with the trillions bailout………the bottom 99% holding the bag o DEBTS

There is nothing more regulated other then nuclear power then the economy and financial markets of the world

@46:50 from a libertarian perspective I can see where Greenspan may have gotten this wrong. If fannie adn freddie didnt exist then we wouldnt have needed regulators because there wouldnt have been a bubble. However, fannie and freddie did exist and a bubble had alreeady occurred. So by the tim ethe damage had already been done in 2005/06 the only way to stop this result of government interfering in the market would have been another intruision into the market from Greenspan and the Fed.

@27:50 he displays a graph saying that fannie and freddie's share of the residential mortgage debt had dropped, but at any given time it still had 20% more of the mortgages and they had already increased housing prices through artificially increasing demand in years prior. Therefore the damage had already been done and the new influx of chinese money kept demand high. That is my understanding of what was going in right there from a libertarian perspective, If I got this wrong please somebody correct me.

John Allison is talking sense. Mark is talking and is incapable of critical thinking or just playing the other side of the debate. If he works for Moody’s then his job depends on government regulation. Moodys has a government backed monopoly along with the other rating agencies and he’s not a “card carrying member of the free market”.

What I discovered from this and I don’t want to be mean, but I thought there were evil people behind the Federal Reserve system and the current monetary system. Mark just came across as incompetent and earning a great living from the system as it is. It’s not that they want to control people via a debt based currency, it’s the fact they don’t know what they are doing and they don’t possess the ability to see the whole picture and the idea of questioning it is just unbelievable to people like Mark.

School Sucks podcast did a great intro on an episode where they highlight Alan Greenspan and his “Fed speak”. He just spoke fancy words to politicians/media and what he was saying was complete nonsense and they just bought it. Greenspan admitted to deliberately chatting sh!t on purpose.

Book mark this part from Mark: 1:15:26 for proof of his and many others incompetence. Watch the next financial crash happen within 5 years (probably even sooner) and it be devastating.

Socialism put man on the moon Happy 50th birthday apollo 11

John Allison is the person who Trump should nominate to the Fed Reserve. Him, Jim Rickards and James Grant.

One of the key ways that gov intervention distorts markets is by creating a false sense of security. Mark's presentation in front of the Fed illustrates this beautifully. Even Mark, an expert in the field left that meeting thinking that if these wise men of the Fed aren't concerned then maybe he was wrong and everything was fine.

Central banking caused this problem, abolish central banking