That’s fine. I’m not a fan of W’s as a President (more of a guy I’d like to have a beer with). But the financial crisis was starting well before he took office. These things don’t happen overnight.
I completely agree with you on the war issue.
True we have gone from Lawyers to businessmen, why are football coaches getting left out of this. Belichick/Saban 2020
^ I’m good with Belichick, but I think I would have to assassinate Saban.
This is obviously a huge oversimplification, but IMO the financial crisis had two main causes: the trillions wasted on W’s obsession with Saddam and dems belief that denying a mortgage to someone with insufficient income, insufficient down payment, and crap credit is discriminatory. The same thing has happened with student loans and that will bite us in the ass very soon.
The financial crisis had little to do with either president and would have happened anyways.
OIF didn’t cause the crisis, but it resulted in the slaughter of hundreds of thousands of people, destabilized multiple countries, and permanently weakened American power and America’s willingness to use it.
I don’t see the wars having a strong connection to the financial crisis, but they sure resulted in a lot of other bad things.
The willingness to lend to people with highly questionable abilities to pay was a factor, but it was the idea of bundling these things together and saying that correlated defaults were extremely unlikely that allowed the financial sector to lever up to 33-to-1 (in Lehman’s case) and assuming that bundled turds smell as sweet as roses that lead to the near collapse of the banking sector.
So wasting trillions of taxpayer dollars has no negative effect on the general economy? I realize some of that money went to defense contractors who employ people, but a huge percentage basically disappeared down a black hole.
That was just a wealth transfer, wouldn’t cause credit problems in the system.
Hmm…Yeah, I’m having a hard time connecting the financial crisis - which was really 99% a housing crisis - with the money spent on the wars.
Now, if we’re talking about the next financial crisis where we go into a period of stagflation and/or hyperinflation, that will be directly tied to the cost of the wars and the “solution” to the financial crisis, QE.
If you mean the next financial crisis libertarian Dumbs have been repeatedly predicting since 2009…yeah anytime now. Except for the fact that hyperinflation is practically impossible for the US.
The financial crisis is specific to the financial sector and the value of financial assets. So although money was wasted and had bad effects, it did not precipitate the financial crisis the way bank leverage, CDS and CDOs did.
The trillions spent on the wars probably had an effect on the slow recovery (though I suspect that automation and offshoring and the concentration of income have a much bigger effect). If the wars had been paid by hikes in taxes as opposed to debt, then there would be a pinch in people’s income because of them but as it is, the cost of the wars is being paid now and in the future rather than back then.
A main issue with the wars is that it took resources away from the government that could have been used to facilitate a bigger stimulus in 2009, so it hobbled the government’s ability to respond. But it’s not as though Republicans were going to allow that anyway, IMO.
Basically agree with this.
Higgs, I’m not arguing that the wars didn’t waste a ton of money, or that it hasn’t had or will have a bad effect on the economy. I’m just saying that the 2008-10 crisis period is not directly related to the wars and would very likely have happened anyway even if we hadn’t invaded those countries.
I’m sure unwinding $4 trillion off the Fed’s balance sheet and managing a national debt that’s only going grow under Trump’s fiscal stimulus while annual GDP over the next 5 years is likely to average around 1-1.5% will go very smoothly.
Edit: bchad agreeing with me? Xmas came early.
If the government had not spent all the money on the way (and assuming it would not have spent the money elsewhere), they would either have lowered taxes (unlikely) or reduced the deficit (more likely, which would have lowered interest rates). Either scenario would have been a stimulus for non defense sectors.
This is basically how I’m looking at it, as I link the crisis itself with the recovery. Had so much not been wasted in Iraq, more money would have been available to accelerate recovery. If the recovery from something really bad is quick, that bad thing doesn’t feel quite as bad as it would if the recovery takes a long time. I realize that personal finances and national finances are vastly different, but if I lose my job and have enough in the bank to pay my bills for 6 months or a year, losing my job isn’t going to feel quite as bad as it would if I knew my mortgage was going to go unpaid next month if I didn’t find a new job.
To your earlier point about the bundling, etc. If there aren’t so many shitty loans to bundle, that market never exists.
The stimulus package might have been a bit larger if the wars weren’t already on the credit card, but I don’t think the Republicans would have been on board with a much larger stimulus in any case. First of all, they are always deficit hawks when they are not in power, secondly they were hellbent on making Obama a one-term president.
The war budget and the stimulus package are in separate mental buckets for them. War is “spend whatever seems useful.” Stimulus is “spend the minimum you think will have some effect.”
We’ll never know the true counterfactual, but I honestly think that without the wars, we would still have had a financial crisis, and the stimulus package afterwards would have been only mildly larger. So, in an absolute sense, the recovery might have been a bit faster, but it’s not as though it would not have been painful and still pretty slow to recover.
Besides, a larger stimulus would likely have been wasted in some sense, too. The point of stimulus is to get money in the hands of spenders so that businesses can keep employing people and have time to adjust to new realities, but a lot of that money would have gone to strange things. So if what is bad about the wars is that money was wasted, it likely would have been wasted as extra stimulus too. I realize that this is a partial argument for not having any stimulus, but the analogy I would use is that if you are dying of thirst in the desert, dirty water is usually better than no water at all.
Perhaps the way to reconcile this is to say that the wars didn’t cause the financial crisis but they still may have contributed to the Great Recession that followed. And they certainly do contribute to whatever comes after the next crash.