Thinkin of a master plan /Cuz ain't nuthin but sweat inside my hand /
So I dig into my pocket, all my money is spent /
So I dig deeper but still comin up with lint
Spending money that isn't yours, that you can't back, and you don't have: Not a good idea, right? Yet, it seems on the large scale many didn't realize this seemingly simple premise. Mortgages owed to banks, those mortgages in turn swapped up by other institutions to collect debt and sell it as a commodity. Eventually, the mortgages turned out to be too large for many John Doe's britches. Problem is, the debt others saw as an asset thus became a liability. And thus went Wall Street as we know it. Not that I knew it well, or claim to understand economics; but, I try. Like many other subjects, I want to understand the way world may [or may not] work.
NYT bloggers Freakonomics recently brought in two economists to discuss the causes behind the problems on Wall Street and how it got this bad. Your basic mixture of Wall Street greed and a scheme that spirals out of control [credit default swaps being this generation's junk bonds].
What is odd to me is what has occurred because of this crisis: the government not just bailing out big business [for there certainly nothing new there], but literally buying big business. That would seemingly go against so-called free-market/laissez-faire economics that supposedly won out in the latter half of the 20th century and thus far in the 21st century. American taxpayers became owners of Bear Stearns a few months ago; more recently, they became owners of Fannie Mae and Freddie Mac, the duo of mortgage giants. Now the government and its citizen shareholders also own AIG, the world's largest insurance corporation. Much of Wall Street has become [hopefully, and most likely, temporarily] nationalized.
