Krugman Takes Ideology Too Far
In an op-ed piece in the New York Times, Paul Krugman says "Reagan did it", when speaking of today's financial turmoil. He blames policies, enacted in another time of recession, for the economic crisis our country finds itself in today.
“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression .
That's a far reaching assessment and assignment of blame, which doesn't take into account any of the changes in regulation, legislation, and corporate greed that have occured over those same 25 years. I can understand, although not condone, anyone holding fast to their ideological beliefs. But wearing blinders to block out reality is absurd.
Krugman goes on to further lay the blame at Reagan's feet"
Now, the proximate causes of today’s economic crisis lie in events that took place long after Reagan left office — in the global savings glut created by surpluses in China and elsewhere, and in the giant housing bubble that savings glut helped inflate.
But it was the explosion of debt over the previous quarter-century that made the U.S. economy so vulnerable. Overstretched borrowers were bound to start defaulting in large numbers once the housing bubble burst and unemployment began to rise.
These defaults in turn wreaked havoc with a financial system that — also mainly thanks to Reagan-era deregulation — took on too much risk with too little capital.
"Took on too much risk with too little capital"....Humph! Amd this is Reagan's fault HOW??? Corporate America's use and abuse of deregulation since the Reagan era pretty much shoots down Ayn Rand's theory that given the opportunity, business will behave in a more or less altruistic manner