In 2008, the American economy crashed. The cause of this disastrous crash has been highly debated, but I believe that this crash was caused by the overinvolvement of the government in the markets, as well as the weird tactics the government used to artificially inflate the apparent prosperity of the nation.
First of all, I should clarify that I believe that the government should have very limited, if any, interaction with the market aside from restricting trade on nefarious goods, unless it is selling a good or service with which to fund itself (as opposed to the common practice of taxation), but that is a separate issue. From what I understand, the crash the economy experienced in 2008 is a result of the patching and pretending of the government that was done to recover from the financial crisis before it. The most fatal of these tactics were the government backing sketchy loans in order to boost the sale of homes, as well as leaving the gold standard.
When World War two ended, the United States government decided that it was very important for people to buy and own their own houses. As a result of this ideal, the government decided to back sub-prime loans, which basically means loaning money to people with bad credit or without means to repay the loan and doing so without taking collateral. This resulted in an insane amount of loans being taken out that could never hope to be repaid. The government quickly realized that this was a mistake and began selling these loans out to various companies to collect, but then began backing these companies. This was beginning to sound like a national level case of embezzlement, but then the government started selling these loans to its citizens as investments. However, since the loans were not the kind that could be repaid, and since now a strong, driving presence in the market was the transfer of these loans, when the loans inevitably stopped being paid, everyone who had invested in them saw all of the income they had relied on vanish, and panicked.
This was made worse by the fact that the government had been hiding the true status of the nation’s wealth for years by departing from the gold standard to enable itself to artificially generate as much money as it wanted. This allowed the government to keep up its contracts, but devastated the value of the American dollar. Now, as a result of this, the dollar is only worth as much as people think it should be worth. There is no international metric of value, and there is no real value backing it up any longer. I believe that when this combined with the sudden realization that everyone had been investing in bad loans, the economy crashed in 2008.
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