. . . “what problems do you think are important today that you didn’t think were important in 2004, and what policies would you favor now that you would have opposed then?”. My answer is that low house prices are a problem today where I would previously said low prices are just transfers from sellers to buyers, and I would favor policies that prop them up when I would previously have opposed them. What are yours?
Without any certainty that I actually answered his question, I commented thusly:
My view in 2004 (or maybe it was ’05) was that the prices in both housing and crude oil were in bubbles – parts of the rolling bubble phenomenon as mis-distributed financial assets, aided and abetted by a lack of regulation and the proliferation of derivative instruments that nobody knows how to evaluate, roamed the world in search of the next big killing, rather than being channeled into any productive investment – and that there would be problems when they burst. Oil prices have held up more than I thought – I really expected well below $50 by this time.
Actually, I think all the problems of today were problems in 2004 – a futile, misplaced, no-win, war effort, extreme and growing wealth disparity, tax policy close to regressive, the choking of the middle class, and an economy on the edge of depression. The latter was pretty well concealed at the time, but I always thought the alleged recovery from the 2001 recession was a chimera.
And I disagree with you about housing prices. They only look too low by comparison to previous bubble-inflated valuations. By rent income producing capability or any other look at fundamentals, they still need to come down. This is really bad news.
We have a long hard road ahead of us. I think the naughts were a lot like the roaring 20′s, with the rich getting richer and the poor struggling with an ever-smaller slice of the pie; and if policy is made by folks who think like Gary, above, channeling Andrew Mellon circa 1930, then the next great depression is far more likely to become a reality.
Rebecca opines, more or less to my point:
. . . It’s not that so much has changed, simply that people are becoming more aware. . . .
What do you think? Has the world changed? Stayed the same? Moved farther down a destructive path? Corrected itself?
Update: On the subject of derivatives, consider THIS.