Role of easy credit

Approximately every eight years since 1980 an asset bubble has caused a severe economic downturn, which had to be cured by the introduction of cheap debt. Cheap debt is then used to finance the next bubble and so on - the 2008 crash was the latest. Worse is to follow in the next one. The interests of Main Street and Wall Street are diametrically opposed - Main Street wants economic stability, Wall Street wants instability. Wall Street money is not made in stable markets; it is made in fluctuating markets and very big money is made in market recessions. Removal of Glass-Steagall regulation (see chapter 4 of Sabotaging America) vastly increased the amount of funds available for speculation and the securitization of assets, such as housing, opened up new avenues for that speculation. Currently, the bank bail funds out have gone into front running institutional stock investing (see next blog) or into commodities. You may have noticed the recent fluctuation in oil prices, which was driven more by speculative demand rather than commercial supply/demand.