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Microeconomic causes of financial crisis

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Jon Irenicus posted on Mon, Nov 2 2009 8:44 AM

Does anyone have some articles (mises.org or otherwise, and not overly long) going into the microeconomic causes of the financial crisis (e.g. excessive risk-taking &c.)?

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You will need to rephrase your question.  If you are asking how individuals caused the financials mess that the Western World faces then you won't find much as these behaviors that seem detrimental to the economy are not the cause but symptoms of the problem.  The problems are created by central banks and governments who provide cheap credit that entices people to take on too much debt, buy too much stuff and take on too much risk.

This is especially true for "Excessive Risk Taking".  This has only hurt the individuals who participate in it.  It does not hurt the economy at large even if a lot of people engage in it.  Keep in mind that for every risk taker there is someone with a lower threshold of risk that is selling the asset.  So for example I own 100 acres of Florida swamp and some dope offers me 10x what I paid for it.  The dope is taking the risk and I am taking the cash.  Each of us is better off at the point of the transaction.  Enter governments and central banks that distort the value of money.  There is a lot of material on that here.  See Gary North or Thomas Woods archives for breif descriptions of the issue.

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Yes thanks for the recap, but I'm aware of all this. I mean stuff that examines the symptoms. ABCT is typically taken to be macro theory, whereas I've an essay question which wants it looked at from a micro perspective (the crisis, that is), things like the involvement of FNM &c. I used to have an archive of articles on this but it's all gone now with a recent format.

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Here is a bunch, not all about this crisis.  If this stuff is useful, let me know and I can help you find more like it.

http://mises.org/story/3479

http://blog.mises.org/archives/007155.asp

http://blog.mises.org/archives/009050.asp

 

VVVVVVVVV

http://mises.org/story/2673

http://mises.org/story/2995

^^^^^^^^^^^^^^

 

http://mises.org/story/3375

http://www.lewrockwell.com/schiff/schiff29.1.html

http://www.lewrockwell.com/rozeff/rozeff240.html

 

If you find something evil that wobbles, push it. - Gary North

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There's one in particular I am looking for that examined the role of several factors contributing to the crisis e.g. Fannie Mae. In the end it's all linked to credit expansion but I can't really delve too deeply into it for this piece.

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http://mises.org/story/3566

http://mises.org/story/3110

http://mises.org/story/3045

http://mises.org/story/3053

http://mises.org/story/2627

 

If that fails, check the Bailout Reader and the Depression Reader

http://mises.org/story/3128

http://www.lewrockwell.com/orig9/recession-reader.html

 

This one is older, but it might be useful

http://mises.org/story/986

 

If you find something evil that wobbles, push it. - Gary North

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Thanks, the deCoster and Shostak ones look good. It's not either of those but I'll try incorporate them.

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Santtu replied on Mon, Nov 2 2009 10:47 PM

Econtalk podcast of last week is on this very topic. Very informative and had a lot to give, at least to me.

 

http://www.econtalk.org/archives/2009/10/calomiris_on_th.html


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