> During and after the economic collapse of 2007-2009 I wondered who was at fault; who to blame. I kept waiting for a clear answer to "THE root cause".
Well, there can be a difference between "who is at fault" and "THE root cause". Quite a large difference, potentially.
In the case of '07-'09, maybe nobody was at fault (seems plausible) but there was a very neat root cause. The government handed out a lot of money to people who shouldn't have gotten it, the people responsible were largely protected from bankruptcy and the system forced to reform largely as it was. The people who took excessive risk earned an excessive reward - they should have all gone bankrupt. The financial system should actually have changed, and people who made productive investments and didn't take risk should have become ascendant. Instead we have the same old crowd playing the same old game.
Disabling the major feedback mechanism of capitalism is about as root-causal as can be gotten. Nobody in particular chose to disable it though, it was a consensus decision among the powerful.
Any issue can be made impossible to solve if enough details are highlighted. Deciding what to eat for breakfast is an impossible collection of nutrient requirements, bodily requirements, long and short term tradeoffs, economic problems and social expectations. Yet somehow we mostly manage.
"Oh but it's complicated" is a completely standard line of misdirection that comes up very regularly when people are making repeated bad decisions. Even small children sometimes try it. It is very, very rarely true and particularly in totally synthetic systems like the monetary one. There is always a point of greatest leverage that could be changed and it makes sense to call that the root cause and try changing it.
Now I'm totally open to the idea that I don't know what the point of greatest leverage is in the GFC. I haven't read the regulations and I wasn't in the room when the money was being handed out. But there were billions to trillions of dollars in fake wealth that turned out never to have existed. The fact that the banking industry skated through with the same people largely in charge suggests strongly that no serious attempt was made to figure out who exactly was screwing up.
"But there were billions to trillions of dollars in fake wealth that turned out never to have existed" That is not true. They were financial assets which only have the value that people put into them. They are underpinned by confidence. Confidence goes away, it takes value with it.
"no serious attempt was made to figure out who exactly was screwing up" Exactly. Some very powerful people got very rich and it was in now bodies incentives to find anybody accountable.
What would you have done differently from what the policymakers have done? And how would you account for potentially undesirable second-order effects? (Which were quite massive for most of the obvious alternatives.)
Well, there can be a difference between "who is at fault" and "THE root cause". Quite a large difference, potentially.
In the case of '07-'09, maybe nobody was at fault (seems plausible) but there was a very neat root cause. The government handed out a lot of money to people who shouldn't have gotten it, the people responsible were largely protected from bankruptcy and the system forced to reform largely as it was. The people who took excessive risk earned an excessive reward - they should have all gone bankrupt. The financial system should actually have changed, and people who made productive investments and didn't take risk should have become ascendant. Instead we have the same old crowd playing the same old game.
Disabling the major feedback mechanism of capitalism is about as root-causal as can be gotten. Nobody in particular chose to disable it though, it was a consensus decision among the powerful.