Financial Crisis Stimulus Hindsight

In hindsight, I’d like to offer an alternative analysis of the Great Recession (2008/2009):

Real estate tycoons created a way to sell swamp land across the world. They bundled the swamp into the lawns of regular homes, which they sold as investments. The new real estate swamp investments created a housing bubble, and everyone who bought a home got a little swamp — some more, some less. Who made money? The tycoons.

Fat Cat Bankers jumped on the bubble and hyped all sorts of other stocks, creating a dollar bubble. Who made money? The Fat Cats.

Monster insurance companies didn’t want to get left out, so they created credit default swaps — a way to gamble on stock market losses (which were all but guaranteed at this point). Who made money? Insurance companies.

So, the financial markets melted down because they experienced a serious loss of cash as a result of the above as the perpetrators sold their holdings at a market high point, and didn’t reinvest, causing a cash flow problem across the markets. And the markets don’t work without cash flow.

Banks weren’t lending, not because of a credit crisis, but because they didn’t have any money to lend. They had overextended themselves in the various bubbles. So when the Big Dogs pulled out of the bubbles, they were left holding the (carpet) bags.

So, the government stepped in and saved the day by injecting (giving) money into the largest, most diversified companies (which had been asset stripped) to keep them from failing and bringing the whole economy down. In essence, the government paid for the market losses that had been — is stolen to strong of a word?

It probably is too strong of a word because for the most part this was all legal. At what point does legality slip over into criminality? I’m looking in the rear view mirror for that point, but I think it may be too far gone to see.

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