Could this Economic Crisis have been Avoided?

If you were to ask five different 'experts' how long they think this global financial crisis that we're currently in will last, you'd very likely receive five completely different answers. Every day, the unrelenting volatility of the stock market makes it virtually impossible for anyone to get a real handle on the length of time this economic downturn will continue to be with us. Does anyone really know anything? There are no easy answers forthcoming; no overall consensus, just speculation. Expert economists give answers like these:

• "18 months at the most. But this, of course, is dependent upon the stabilization of the credit market."
• "Two years at most. Given the massive infusion of capital into the banks, they'll be able to once more lend to other banks and allow for businesses and individuals to apply for loans again."
• "Five years." According to economists Stijn Claessens, M. Ayhan Kose, and Marco E. Terrones, "The episodes of credit crunches and housing busts are often long and deep. For example, a 'credit crunch' episode typically lasts two-and-a-half years and is associated with nearly a 20 percent decline in real credit. A 'housing bust' tends to last even longer: four-and-a-half years with a 30 percent fall in real home prices. And an 'equity price bust' lasts some ten quarters and when it's over, the real value of equities has dropped to half."
• In a hearing on Capitol Hill in October of 2008, then-Federal Reserve Chairman Alan Greenspan said, "This is a once-in-a-lifetime economic tsunami."

One could easily argue the opinion that the germination of the sub-prime mortgage crisis was clearly evident in 2006, when over 100,000 homes were already in foreclosure and many more were headed in that same direction. Hindsight, therefore, demands that we ask the question, "Could this economic collapse have been avoided?" Most certainly, any person of reasonable intelligence would agree that the answer is 'yes.'

While CEOs of major brokerage houses were raking in millions of dollars by manipulating the stock market, the prices of stocks were soaring far beyond their realistic values. And, predatory lenders were making money hand-over-fist by selling homes to individuals that couldn't actually afford to buy them and/or had bad credit ratings. Of course, the lenders really didn't care about that, because they certainly weren't going to keep the mortgages; they were destined to be packaged and sold to investors as new-fangled security instruments that promised limited risk and a good return.

In short, it's fairly safe to say that this economic crisis can be summed up in one word: deregulation. Remember back a few decades when the airline industry was de-regulated, there were competitive fares, but eventually some airline carriers succumbed and went into bankruptcy. This same analogy can be used to explain not only the sub-prime mortgage crisis, but the volatility in the stock market as well. Without sufficient regulation, Wall Street and the financial services industries were allowed to run amok. As long as everyone (that is, those who knew the game and had access to the rules and rule-makers) was amassing a fortune, no new legislation was put in place that could have avoided this disaster.