Whenever things go bad, everybody and their sister pulls out their pet theories and uses the current situation to justify them.

I have yet to see any cogent explanation as to how deregulation has been a cause of the current crisis. As for bankers and consumerism, anyone who points the finger in that direction clearly is ignoring the deeper reasons.

Fannie and Freddie were the most heavily regulated entities in history, and that regulation did no good. The problem is not a lack of regulation, but the unsustainability of what Fannie and Freddie had been chartered to do. What makes anybody believe that more regulation will help when it's clear from history that regulation is an ineffective solution? The SEC gave the green light to Bernard Madoff, even as whistle blowers tipped them off many times since 1999. Ratings agencies have been dead wrong countless times in the last year. Also, regulators over time are often captured by those they are regulating... that is, used as a tool to keep out the competition by making rules and regulations too difficult for new players to enter the marketplace. Compliance costs often outweigh the benefits of the regulation - this is especially true with Sarbanes-Oxley.

The causes of the current crises are rooted in government interference, starting with the USA: (1) primarily guarantees for housing loans, incentivising lenders to make bad ones, and pass off the risk to the government, and incentivising those with little wealth to live the good life without skin in the game; (2) keeping interest rates lower than what investors naturally demand, incentivising borrowing and disincentivising savings; (3) Allowing bankers to create money out of thin air via lending, without being backed by deposits, to multiply gains 12-fold based on nothing other than a small amount of paperwork; channeling real economic resources away from real production and towards the false economy of banking.

Bankers, investors, the free market in general, only responded to ridiculously unsustainable and ludicrous incentives put in place by governments and the central banks. Just like a rat eats cheese placed in front of it, so do people take advantage of situations that improve their plight. To consider this natural behavior of people (self-interest, even greed) as the problem is to select a cause that is fundamentally unalterable, and thus to castrate any efforts towards a solution.

The next shoe to drop will be sovereign defaults, and those will not be due to deregulation either, but due to governments ignoring their balance sheets at the instructions of dead and not-too-bright economists like John Maynard Keynes.

People don't seem to learn from logical discourse. Few people have trained their logical faculties to the levels required, and fewer have good judgment abilities. It seems that most people prefer to believe whatever feels good, or whatever belief system aids in the deception of those around them. Or whatever is popular. Or even, whatever they read last.

People learn better by example. But in a complex world with a lot of mouths spouting nonsense, regurgitating what they've heard recently in order to try to sound intelligent, even that is probably too much to hope for.

I have zero hope that governments or bright people can design solutions. The world is ever and always in a prisoner's dilemma, in tragedies of the commons type problems, fundamentally unsolvable, fundamentally chaotic, and in some aspects fundamentally destructive, but with overarching Nash equilibria which moderate the chaos to a realm that is not too damaging and usually positively beneficial. Too few realize this; too many people suffer from "chronic hope" that things can be improved beyond the possible. The solutions appear to work, but do so in unsustainable ways. "Solutions" such as guaranteeing home loans, guaranteeing student loans, social security, Medicare, attempts to make health care more affordable, regulation of industry, nationalization, price fixing, protectionist, unionism, government-initiated job creation, market regulations such as prevention of short selling, foreign wars to defeat terrorism, money supply and interest rate manipulation, rescue packages, and stimulus packages -- they all carry with them many unintentional consequences which are worse than the problem they are trying to address.

You cannot create wealth by borrowing it. You cannot stimulate by moving money from one place to another, even if the source happens to be the future. You cannot improve the quality and efficiency of the economy by punishing the successful and rewarding failure. Investment requires concomitant savings. Wealth comes from efficient production. You can not improve the efficiency of a company by nationalizing it, insulating it from the free market forces that blow away the weak leaving only the strong and efficient. Money supply growth requires proportional growth of the real economy to be anything more than a nominal change and a temporary deception. Just ask a Zimbabwian. You cannot solve the problem of over-indebtedness by creating even stronger incentives to lend and borrow.

Few have the moral fortitude to take their loss now; nearly every government is instead raising the stakes, throwing good money after bad, and making the situation doubly or triply worse. If you think it's bad now, you're going to be suicidal in 2 or 3 years. The results of current policy are difficult to time but easy to predict. A deep sharp necessary corrective recession has been turned into a global long term depression. The engines of the real economy have been depowered by the rescues, as well as the current wave of liberals who incidentally hate anyone who has wealth, and have no issue with biting the hand that feeds them, and who perpetually believe that the world is rich enough that we can do anything. The best hope we have is that governments around the world will go defunct, people will start anew from grassroots efforts, and we can trade among ourselves with shells, cows, or gold. But even that scenario is highly unlikely; it is much more likely that we will all be fiscally enslaved by the ruling classes of government. It's time to go bush.

American conservative viewpoints are highly marginalized now, in minority. Their last president has damaged their image immeasurably. And while I will not stand behind 90% of their reasoning, the 10% that they have right-on-the-money is the baby being thrown out with the bath water.

Deregulation was not the problem. People trying to help themselves is an ever-present natural condition of humans, and should not be seen as the problem either. The problem was the unsustainability of the cockamamy governmental programs. Such programs will only grow under the Obama administration; they will only grow with spending plans; they will only grow as nationalization takes hold and ramps up. The future looks very dim indeed for the United States.

Lao Tsu's (author of the Taoist writing "Tao Tse Ching") recommended solution of non-action is too infrequently considered.

The US is following the path of immorality towards its logical end of destruction. I had hoped they would turn from it, but in fact they are too stupid and too self-worshiping to do so. Schumpter's creative destruction is in fact working to strengthen the world by ridding the world of what has become it's worst evil, which is ending like all great civilizations do: crumbling from within.

A few main street economists are finally coming out of their Keynesian one-track-minds and admitting that balance sheets matter. Or perhaps they have always been, but are now coming out of the closet. Axel Leijonhufvud, Professor of Monetary Theory and Policy at the University of Trento, Italy, and Professor Emeritus, Department of Economics, UCLA, says:

This is not an ordinary recession that differs from other recent episodes simply by being somewhat more severe. It differs in kind. ... What is the difference? It resides in the state of balance sheets.