It has been a decade since the financial crisis of 2008.  I have posted a few things here and have read perhaps hunderds of articles and a handful of books on the subject.  A few things still puzzle me and a few more things seem to go unsaid.

Today everybody knows that a massive real estate bubble was blown in the US that lead to the crisis.  I have since met people who worked in finance and knew absolutely we were headed for trouble as much as two years before the event.  This brings up the always difficult, but basic question:  Why?

While the banks aren’t blameless and have quietly taken the blame for the crisis, I can’t help but think there is at least another layer to this onion. Why did every bank and financial instution participate in an obvious bubble?  Where was all the banking regulation (I know some of these institutions were lightly or unregulated, but still).

I think the underlying questions is:  why were interest rates kept so low during this period?  Alan Greenspan, the long time chairman of the Federal Reserve, claims he didn’t realize a bubble was being blown.  Being a good Libertarian, he believes all prices are set by an efficient market and that bubbles are impossible.

So then, what did he make of the role of the Fed in setting interest rates.  Did it not matter?  Certainly he believed the Fed and the setting of interest rates was a serious business.  So what was happening here?

I haven’t heard this anywhere else, but this was during a time when the country was piling up unprecedented debt from tax cuts and two unfunded wars.  I have to believe the low interest rates and housing bubble were the mechanism that papered over this debt.  It was a time of patriotism and all of this was cast as part of the war on terror, but how many times in history has an otherwise great country or even Empire been brought low by long and costly foreign wars?

So that is what I am going with.  The Bush War on Terror was ultimately paid for by the real estate bubble.  And many Americans are still paying the price.