Few people write more engagingly about finance than Michael Lewis; Liar’s Poker is one of the best books about Wall Street ever written. In an essay over at The Daily Beast introducing a collection of essays on the financial crisis that he has edited, Lewis writes:
The question of who emerges as the principle villain will determine what the political legacy of this crisis is. If the consensus is that the guilty men are, as Dennis Sewell argued in The Spectator a while back, the politicians who pressured banks to lend to people who weren’t really creditworthy then we will see a very different response than if people decide that the problem was an under-regulated financial sector.“The 1987 stock market crash was blamed on program trading; the Asian currency crisis was blamed on some combination of hedge funds and IMF-induced policies; the Internet bubble was blamed on Wall Street analysts. The subprime-mortgage panic has yet to find its one big culprit, and I’m not sure it ever will.”
PS If you have time, do read Greg Mankiw’s Keynesian analysis of the current situation and Arthur Laffer on why a stimulus probably won’t work.
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