One of the major causes of the 2008 recession was the irresponsible banks that lowered their standards and lent mortgages to homeowners who couldn’t actually afford their homes. According to the article “The Crash of 2008: Causes and Lessons to Be Learned” by James D. Gwartney and Joesph Connors, the lax regulations of the banks like low required down payments and credit standards had disastrous consequences: “the easier availability of …show more content…
It points out how the government basically attempted to re-inflate the credit and housing markets, namely with the bailouts i.e. Bear Sterns and other measures. The government’s role in inflating the housing bubble in the first place was emphasized with its promotion of buying homes through low interest rates and adjustable mortgages. Schiff argues that the government should not have aided the banks and businesses destined to fail because it misappropriated the available capital and labor. All in all, the book claims the true solution would be to allow the free market forces to regulate and rebalance the economy if needed. With the $700 billion stimulus, the government may have exacerbated the problem, especially since all forms of debt turned into government debt and another bubble in Treasury bonds is