logo
  Join        Login             Stock Quote

A New Old Explanation For Recessions & Financial Crises

 May 03, 2012 08:44 AM


(By Capital Spectator) Edward Conard, a retired executive of Bain Capital and a major donor to Mitt Romney's presidential campaign, tells us that the precipitating cause of the 2008 financial crisis was a surge in demand for liquidity. He's right, of course. The appetite for safety went into overdrive in the final months of that fateful year. This may be a controversial explanation in some circles, but it shouldn't be. Divisive or not, Conard's accounting of how the economy nearly melted down is an excuse to consider how far we've come (or not) in dissecting the business cycle when it goes negative in the extreme. It's also an opportunity for a refresher course on considering the practical policy responses.

[Related -Upbeat Forecasts For US Housing Sales In March]

"A lot of people don't realize that what happened in 2008 was nearly identical to what happened in 1929," Conard tells The New York Times Magazine. "Depositors ran to the bank to withdraw their money only to discover, like the citizens of Bedford Falls [in the movie It's a Wonderful Life] that there was no money in the vault. All that money had been lent."

Conard's views would be of minimal interest if he was just another voice in the black hole of economic opinion these days. But as a wealthy individual who's contributed at least $1 million to help Romney reach the White House, his thoughts on the dismal science are destined to attract more than casual scrutiny. In fact, Conard welcomes the attention, considering that he's the author of a new book slated for publication next month--a book that's sure to inflame debate about the nature and role of wealth in America: Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong.

[Related -Happy Birthday, Moore's Law - Pearls of Wisdom for Investors]

As for Conard's views on 2008's meltdown, his argument that the economy was blindsided by a bank run, albeit a 21st century version with lots of moving parts, is largely correct. Granted, the definition of "bank" has expanded dramatically since the days of FDR, but the underlying concept still holds. The details on why everyone suddenly demanded safe assets in late-2008 is a frenzy of debate, however.


Next Page >>123
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageUpbeat Forecasts For US Housing Sales In March

The Fiscal Times advises that the “the housing market is about to perk up.” One of the reasons for the read on...

article imageHappy Birthday, Moore's Law - Pearls of Wisdom for Investors

As Moore’s Law turns 50, we reflect on technology’s incredible history and limitless read on...

article imageIndex Investing Is Not Inherently Socialistic

How does capital get allocated to the public stock read on...

article imageDon't Let Fear of a 'Grexit' Keep You Out of European Stocks

After nearly three years of extremely weak economic growth, the European Central Bank is finally delivering read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.