Quote from Martinghoul:
In many ways I agree with Pabst and would even go as far as generalizing his idea to make a sorta philosophical point.
To me, as usual, it's a case of too much of a good thing turning out to be lethal. At its peak, the US system, more than any other, was the pinnacle of Pareto-optimal capitalism, with inordinate rewards allocated to entrepreneurship, risk-taking and good old ingenuity. That was what the American Dream was all about. However, everyone forgot that, fundamentally, a Ponzi scheme is also an example of ingenuity and entrepreneurship. So is giant leverage, option ARMs etc etc. All these things are examples of the flip side of the 'American Dream' that were completely forgotten while the euphoria lasted.
I suppose what I am really describing is the incentive/agency problem that people keep going on about when they talk about bank traders etc. And what I am trying to say is that this agency problem was actually all-encompassing, from the lowliest subprime borrower to the politician in the most senior position. This incentive problem is the dark ugly side of the 'free market' ideology and the American Dream.
Given all that, is it a huge surprise that it's time to pay the piper and swallow the bitter medicine? Not at all...
