Mike K

What If What Economists Taught Us Is Wrong?

Greed and status quo following are responsible for the crisis, not doctrines of economics, which are as straightforward as math can be.

Case in point: Banks are liquidating homes in the low end right now below 2000 prices in the very low end in southern california, despite the higher end not having come down enough. I actually believe this is below where the market will stabilize. Furthermore, their minimal carrying costs combined with a booming rental market put them in the perfect position to become landlords and actually *not loose* any more on these properties without liquidating.

So why aren't banks in the business of becoming landlords? Status quo. There is an arbitrary rule that banks blindly follow that is keeping them out of the business. The same arbitrary rules misrated subprime debt (rating agencies' fault), with banks blindly following suit (bank manager's faults). When there is no one with common sense nor initiative driving the car, of course it will crash. Perhaps one could blame the corporate shield for this - no otherwise intelligent individual would have taken the risks personally that banks were taking this past 5 years. But the corporate shield allows behavior that goes unchecked -- a firing is in no ways a meaningful threat when decisionmaking can be levered to have downside that in no way equates with the punishment.

So let me propose: It is greed, the corporation, and sheepish herd mentality that got us into this mess. Not laws or doctrines of economics. Fundamentally, people are stupid? Take a look below.

www.youtube.com/watch?...