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“What were the errors in the American response to the (2008 financial) crisis?” - stonemasoner
The American government’s response to this, along with the previous financial disasters, was very akin to that of a new parent or first time babysitter. The second things started looking bad, the government tried to swoop in and fix everything, making it all worse in the process. The main failure was the creation of money and monetary systems without creating any actual value to back them. This resulted in great instability, like how after the dollar ceased being tied in value to gold, the dollar became worth only as much as the general public agreed it should be worth, regardless of how reasonable or stable this would be. This also made global financial interactions difficult, as the money was worthless to anyone outside of the United States until there was something by which to guarantee its value.
The effort of the government to boost the housing market seemed to be to give people money, and then obfuscate the true source of the money to the point where people had no choice but to assume it had actual value, despite the fact that it did not. Loans were guaranteed that never should have been, causing people to buy things they could not afford with money that was not theirs. Eventually, the debt was called in, and everyone suddenly had to come to terms that most of the assets they had been relying on only had value as long as no one questioned it, like a cartoon character running off a cliff and not falling until they acknowledge that they are now standing above a chasm. The economy attempted to pull a similar stunt, but eventually reality kicked in. Due to many people spending more than they had or could hope to have for several years, the economy seemed to be bountiful and great, but since everything was borrowed, when the debt was called in, there was nothing to pay with, and the economy crashed. Borrowing and lending money are rarely, if ever, a reasonable way to get out of financial trouble. Doing so only makes the problem be worse for you to deal with, but now it is a problem in the future. With short governmental office terms, it is easy to see why such short-term solutions were so appealing.
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