Ten years after the financial crisis of 2008, your friends are still saying the same thing:
“Don’t you libertarians know the financial crisis was caused by deregulation?”
It was not in any way caused by deregulation. We have to get this right, and we can’t let it pass.
F.A. Hayek once noted how important history was to current events: if we misunderstand history, we’re going to do the wrong things in the present. So if we think the late nineteenth century was characterized by “monopolies” from which wise government officials rescued us (and, unfortunately, this is indeed what most people believe), we’ll have different views on antitrust law than we otherwise would. Likewise, if we think the Great Depression was caused by “laissez faire,” that will influence the kind of economic policy we advocate today.
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So if people believe “deregulation” caused the financial crisis of 2008, and wise government policy delivered us from it, you can imagine how that, too, might influence future policy.
As I show in my new eBook The Deregulation Bogeyman (it’s free, by the way), none of the deregulation that did occur had anything to do with what happened in 2008 and the years that led up to it.
There is no repealed regulation that would have prevented the housing bubble and subsequent bust. Ask your friends exactly which repealed regulation(s) they’re talking about and they’ll run the other way. (The smart ones will mutter something about Glass Steagall; I handle that one in the book.) Banks did nothing they had not been allowed to do all along. The crisis occurred because banks made…