The commission investigating the causes of the housing bubble claims that because the ensueing economic meltdown was international, it was not caused by the US government.
If the US government caused the great recession, why did it go global? Thank you, John
It has to do with this current international monetary system which lacks certain mechanisms that prevent continuous expansion and/or dramatic contractions (across the board), and which yields major and continuous international distortions (continuous capital flight, exchange rate instability, and interest rate volatility). Additionally, the USD and the Federal Reserve System play an integral role within this monetary system; they are the key players, so to speak. The FED is essentially the central bank of central banks. But the U.S. is not solely responsible for this calamity.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
johnd1216:If the US government caused the great recession, why did it go global?
Welcome. The quick answer would be that the crash of the housing bubble dragged the global economy down with it. When a large amount of loans go bust, as in the case of the housing bubble, the banks that made those loans loose a bunch of money. Now they are short on cash and stop borrowing money to other banks, then they become short on cash. That drives up interest rates and borrowers in a difficult financial situation, like the Greek government, suddenly can't get new loans to refinance their debt. And so they are in trouble.
The quick answer would be that the crash of the housing bubble dragged the global economy down with it. When a large amount of loans go bust, as in the case of the housing bubble, the banks that made those loans loose a bunch of money. Now they are short on cash and stop borrowing money to other banks, then they become short on cash. That drives up interest rates and borrowers in a difficult financial situation, like the Greek government, suddenly can't get new loans to refinance their debt. And so they are in trouble.
Yes but this doesn't explain why there were (and still are) housing bubbles all over the world.
Esuric:Yes but this doesn't explain why there were (and still are) housing bubbles all over the world.
Correct, I left that part out to make it simpler. He just asked why a local bust would go global. That bubbles are caused by artificially low interest rates is a different part of the story.