Overview summary of the lessons gleaned from the Great Recession

We have been hearing quite a bit lately about what happened in and to our economy that produced the Great Recession. Numerous economic experts, in addition to a government- sponsored commission (which could not agree on a final report that stipulated their findings), have provided their unequivocally ‘unbiased’ findings and accounts of the debacle. Within all of the ‘findings of causation and fault’, I would say that there are bits of truth scattered among the reams of presented opinions. But only bits.

As a response from the peanut gallery (that’s me), after spending quite a bit of time pondering what really happened, I have put together my summary of the root causations and the lessons to be gleaned from this time of economic distress.

Overview summary of the lessons gleaned from the Great Recession:
Leverage ALWAYS has a limit – over-leverage ALWAYS has a price.

Bubbles ALWAYS deflate (pop) – the only question is the rapidity and the breadth of their destructive wake.

Economic cycles come and go – it’s only a matter of the height, depth, time span and finally, the amount of unemployed.

Rapid price appreciation in any asset class cannot exceed fundamentals for an extended period of time – no matter what the experts say – without a proceeding deflationary adjustment (i.e.: economic pain).

Government policy (fiscal and/or monetary) drives market economic decision- making, thus providing the motivation, or might I say, encouraging, asset value manipulation along the way.

Excesses occur when markets, motivated by policy, progress beyond, ahead of, and/or in spite of, fundamentals.

Government policy-making largess ensures bubble formation – past, present, and future.

Government policy-making is usually short-sighted, and in the instances of crises have a preference for topical, symptomatic band-aid fixes – and pledge to worry about the root causes when the next crisis arrives.

When you play the hyperbole of a heated economic lottery, very few end up winning.

Summation: Time, perseverance, minimal governmental intervention, and a return to foundational financial truths are the quickest way back to sound economic health.

2011 P.R. Barriball