A Crisis of Faith

The article “A Crisis of Faith” by a New York Times columnist Paul Krugman brought up an interesting question about the US economic status at present. Obviously we all know the financial condition of the US has not been in a good shape since it has reached the peak in 2000 AD. Series of Gulf War and Afghanistan War. Sequentially, the internet bubble collapse, 9/11, and then the wars lowered the consumer spending. Since 2001 the US economic had been in a stagflation up until 2005 when we started to see little bit of progress in the market. We witness that the government did not actively involved in the marked until it got really worse.

Since 2005 we started to see the same problem in the housing market. The forty years low interest and the booming housing marking made the general public invest more and more regardless of what sort of income source they had. According to the article the trouble in the financial market was brought up by investors and the banking, which I do not believe it is true. Yes, today we can claim that the faith between the investors and bankers has diminished, but who is to blame to bring up this situation today. My question here is why the federal government was apathetic about putting some sort of regulation from the very beginning? How come people who do not have stable job were allowed to get enough loans to buy more than one houses. As we all know how the banking system collapsed in the early 1930s. Having witness the lack of government intervention at the right time has brought up such financial crisis in the financial market today. The author complains about not having the faith between bankers and investors. In my point of view it is not bankers or consumers to blame who created record high default loan in the market, it is the lack of government regulation that has not been implemented on time. The US government could have intervened by setting up strict rules and regulation against banking system as well as against consumers even if the market was running smoothly. In the article the author is right in his point of view for the current situation. However, to find a solution we have to look at few years back what brought this problem.