Question

Based on the Keynesian method.

I think that government intervention maybe not always be what people want, but at the end of the day might be the best thing for the country. But, what strikes me the wrong way was that during the post-depression era, I feel like economists and the government did all that they could from preventing another depression like this. Even though it was almost half a century later and not so much on a grand scale, How come the government didnt intervene prior to the recession of 08-09? Why were such a large amount of people allowed to take loans out like they did during the 1930's even though they might not have had the credentials to do so? It confuses me as to why such a thing was allowed to happen again when we live during a more involved and educated society now.

Thoughts on these questions?

Answer 1

The economic crisis which happened in 2008 to 2009 was mainly a financial crisis whose intialization was led in 2001 when new laws were made for the financial institutions so as to make borrowing easy and to increase the investment opportunities  for the locals. However this easening of the financial opportunities created bad loans in the economy which led to the economic crisis resulting in the economic slow down in the world. Though this crisis was easily predictable in the economy by the economist as easening of financial opportunities can lead to bad loans.Many economist criticize this one of them was Raghuram Rajan IMF secterate but US govt and federal governor GreenSpan told in return that this was meant for investment opportunities.So this was all about the crisis .

It is important to note that the there were some firms which gained during this crisis these were some investment Banks which created securities and also the insurance compainies were also got saved by the federal the main who got stuck was the general public who had invested their money and their money was transformed into bad loans.

Now comming to your question why did govt did not get into this the reason could be they might have being favoring some investment banks which were benefited from this crisis making large profit.

As already being told Robert Rieche in his book of"saving capitalism"that many laws made in USA was in the favor of capitalist then the normal public or the workers.

I think it should not be about that we are becoming educated society now because the economist has already predicted this crisis the question should be that why in the name of self interest we are harming our own capitalsit society . The govt members is being involved in the self interest can effect the capitalist society easily