Sure, I'll bite. Massive amounts of criminal fraud in the mortgage and mortgage backed securities industries, to be simplistic. To take a wider view, it was the inevitable outcome of financial services deregulation.

Bob Ghengishkan?

(2015? Sarg, are you psychic?!

Quickly!

Will I get the tutoring job at the university?
Will Obama beat Romney??
Will you tell me the winning numbers tonight???
WILL THE METS WIN THE PENNANT????

TELL ME, SARG!) :p

(But yeah, Bob's explanation is a good, concise one.)

Will I get the tutoring job at the university? Yes.
Will Obama beat Romney?? Yes.
Will you tell me the winning numbers tonight??? Sorry, no.
WILL THE METS WIN THE PENNANT???? This will never happen.

Anyway, the only answer I was looking for was: Bob Genghiskhan.

He was right about all four...my Mets never WILL win the pennant!

You ARE psychic, Sarg (though you wouldn't need to be to tell that.) ;)

http://i.imgur.com/BHpXy.gif

The global recession has been caused by the capitalist greed of the bankers, and by the failure of governments to control the bankers properly because we have a system which teaches that greed is good and should be encouraged.

"Sure, I'll bite. Massive amounts of criminal fraud in the mortgage and mortgage backed securities industries, to be simplistic. To take a wider view, it was the inevitable outcome of financial services deregulation."

I've yet to see someone document convincingly the specific deregulation they think caused the recession.

There are really two questions to answer: why did we have a recession in the first place, and why is it still going on?

The reasons we've got a recession I think are simply the reasons we had a housing bubble. These are primarily the Bush-Greenspan policies attempting to alleviate the 2001 recession. Stimulus caused excessive spending and insufficient saving (i.e. high leverage), particularly on housing. This mal-investment was making people poorer, but borrowing stopped the effects from being felt. Added to which, freddie-mac and fannie-mae were tacitly underwritten by the US government, which incentivised risk taking.

There was also ineffective evaluation of risk- the ratings agency industry clearly failed to signal alarm. Extra regulation would not have helped, since the regulators were ignorant of the impending problems too. Indeed, in general, regulators didn't realise where the weak-points of the system were, again, this is understandable, since it is a global business, and immensely complicated (as any large industry will be).


Why has it gone on so long? Mal-investments haven't been done away with, and people have not been expected to meet the consequences of risk taking. Doing this would have resulted in a very sharp recession, but the present situation of a socialisation of risk and privatisation of profit. The effect is now, even businesses that did not take undue risks, and could have survived, are in trouble (see the consequences of mergers in the UK, for instance).

Bob Genghiskhan.

"capitalist greed of the bankers, and by the failure of governments to control the bankers properly "

Or possibly the success of the bankers to control the government improperly? I think regular greed of the bankers, their stakeholders and politicians is enough.

George W. Bush.

Political, financial, societal, technological, and demographic factors that are at least 3 decades old, and that have been exacerbated by financial and political elites of the last ten years.

Oh, and it's the second Great Depression, and if it ends in 2015 we'll be extremely fortunate.

@Ghostmaker

Really the deregulation which most specifically has a straight line causal effect for the current depression would be the relentless lowering of reserve requirements over the past thirty odd years. It allowed the stakes of failure to raise commensurately. Honestly, though, to be fair, the systemic failure of regulators to do their fucking jobs had more to do with it.

There is no single cause. A combination of factors is to blame. Any short list of factors that I would bother to provide would not be anywhere near exhaustive.

In short, the economy rises and falls. It is natural. It is good. Depressions are good in the sense that they cause political mobilization and can lead to positive change. For example, Hitler came to power as a result of the economic conditions in Germany in the 1920s and 30s. These conditions were initially caused by the Treaty of Versailles and and made worse by the Great Depression, causing WWII. America arose to the challenge and rocketed out of the depression and into a long period of economic gain.

I fundamentally believe that things have to get worse before they get better (sorry, whoever wrote The Dark Knight, but that expression is far older than that movie)

Sorry Gunfighter, hang on.... did you just claim that Hitler coming to power was a good thing because it caused a war which stimulated the US economy?

Dude, 70 million people died! Isn't that a pretty heavy price to pay for a bit of economic stimulus?

The cause is capitalism itself and the competition pup that we have been sold by most economists of all political complexions:

A striking paradox animates political economy in our times. On the one hand, mainstream economics and much of left economics discuss our era as one of intense and increased competition among businesses, now on a global scale. It is a matter so self-evident as no longer to require empirical verification or scholarly examination. On the other hand, wherever one looks, it seems that nearly every industry is concentrated into fewer and fewer hands. Formerly competitive sectors like retail are now the province of enormous monopolistic chains, massive economic fortunes are being assembled into the hands of a few mega-billionaires sitting atop vast empires, and the new firms and industries spawned by the digital revolution have quickly gravitated to monopoly status. In short, monopoly power is ascendant as never before.
http://monthlyreview.org/2011/04/01/monopoly-and-competition-in-twenty-first-century-capitalism

@ obi

I am

Will I get the tutoring job at the university?
Will Obama beat Romney??
Will you tell me the winning numbers tonight???
WILL THE METS WIN THE PENNANT????


answers:

yes
no
no
lol

@ Jamiet99uk

WWII was awful, and I am in no way trying to belittle the sacrifices of everyone who fought and/or died. Nor am I saying that Hitler's rise to power was a good thing.

All I said is that economic recessions and depressions end eventually and are part of a natural economic cycle. You can't be in a boom forever. Even steady controlled growth cannot be maintained indefinitely.

If any of you are at all genuinely interested in the reasons, please please watch Inside Job.

http://www.imdb.com/title/tt1645089/

It outlines everything very nicely. And for those who have watched it, you know to worry even more because the people defending the old system and who made the mistakes are the ones who were, and still are, writing all of our financial and economic textbooks so that future generations think like them.

A combination of lax government oversight of lending practices and government policies which encouraged bad loans being made to people who could never pay them was the immediate cause.

As for the questions, the answers are no, maybe, no, and the season after the Cubs do.

A link to the actual movie

http://vimeo.com/25491676

But it was a lot of things. Changes in laws and regulations going back to the 1980s are to blame. Most of all is the decision to allow banks to dabble in investments. It used to be if you wanted your money to be invested in bonds and derivatives and such that you could put it in an investment banks such as Goldman Sachs, Lehman Brothers, etc. But starting in the early 00's financial deregulation allowed regular banks such as Bank of America and such to dabble in any investment instrument they wanted to. If you wanted to go back further, inter-state banking began in earnest in the early 1990s after the repeal of some Great Depression era regulations, which led to the formation of the current mega-banks that we know best.

On top of that is a bunch of greedy assholes in banks who are paid for short-term profit, not long-term stability, as well as regulators who don't care enough to do their job, or are too understaffed to do it properly.

But my thoughts are that its a structural problem. Unless you fix the fundamental structure of our financial institutions, no amount of regulation and oversight will prevent it from happening again.

But seriously, watch the movie

There was no single cause. I think a major problem was that rating agencies and government regulators were captured by the banking industry. Also, insufficient understanding of complex financial instruments and poor risk management practices on the part of the major banks and institutional investors. The ideology that every American should own a home is also partly to blame. Inside Job and Margin Call are both good movies about this.

@Invictus

So Wall Street's clamoring for any mortgage that could be offered, no matter how transparently fraudulent, for the purpose of bundling, tranching, and then selling off utter shit as AAA rated securities had nothing to do with it? Or for that matter, the consistent rigging of the interbank offering rates and bond rates were of no import to the collapse of the financial sytem? It was all on the governments, whether we're talking about lax enforcement of good regulations or bad policy?

I am far from a financial expert so am only relaying things I've heard. I'm happy to hear more and/or corrections.

One factor I've heard of is the law the separated investment banks from savings banks, which had been on the books for a very long time, was removed in the late 90s by a Democratic congress and president. (I'm not saying it is all the Democrats fault, just pointing out that you can't lay it on all Bush either.) In any case, this lead to banks being "too big to fail".

And for the mortgage crisis, I'd say the push to get people that could not afford it to buy homes to buy them with horrible mortgage products is largely to blame. If you live with no buffer between what you have and what you can afford and you lose the least bit of income, you are screwed. Overspending and not savings is a recipe for disaster.

As Dave Ramsey has said, if you buy a house with no savings, you are asking cousin Murphy (as in Murphy's law) to move in with you along with cousins Broke, Desperate, and Stupid.

Wall Street's raison d'etre is to make money. Blaming Wall Street for being greedy is like blaming a supermodel for being attractive.

That is a bad analogy. There is a difference between being greedy and being stupid. If you make money short term, but in a way that hurts you long term, then you are being stupid, not greedy. The smart greedy will make money long term. So you can't just say they were being naturally greedy in doing what they did.