I do agree wholeheartedly that the meltdown was not caused by deregulation.

My philosophy has always been to never count on what I don't have and that includes income. When I build my first home, I was shocked at how much the banks would loan. It was way out of my comfort zone to borrow as much as I could have. That was my first clue in 1996 we were headed for trouble. I did not realize how bad it was going to be until 2005 when I learned that people were getting interest only, no money down loans, at more than the face value of the property they were buying. Rolling boats & cars & credit card debt into them.
I have to stand on my statement that people signed the mortgage so it is more their responsibility than the lenders or the government. IMHO, this is only the governments problem if we expect them to take care of us.

Very true but, doesn't everyone want a bigger house in a better neighborhood? No one said these people were educated enough in the mortgage lingo as not to be convinced and tricked into signing their life away. They trusted crooked loan officers who were just increasing their commissions..

Of course it was not “just” the debt bubble.

There are factors affecting the production of goods and factors that drain that wealth.

Government service, welfare, higher prices paid for X amount of corporate shares due to the premiums of hedge fund activities, etc. Any activity that enables one to obtain purchasing power without producing goods or services of useful value diminishes the ability of the economy to sustain itself.

Rather than call it a debt bubble. Let’s call it an artificially expanded production facility.

I like to call this “The Starbucks” syndrome.

In the period of artificial abundance, created by lending “Printed money” that was not “backed” by someone else’s foregone purchasing power; people experienced a level of affluence in which they were willing to purchase things they could otherwise do without. More Starbucks opened up. When the artificially expanded purchasing power contracted, that kind of purchase is the first to go. Back to; make it at home, take a thermos to work. Many Starbucks closed.

We are on the Oregon Coast. The first business to go in the nearby small town on #101 was the hardware store; a year later, the small supermarket. Then last year, the pharmacy and this year, up the road, the only gift shop and restaurant on a twenty mile stretch. The Bobcat equipment sales and rental up in Tillamook is also gone.

Top-end, view-home activity is a small fraction of what it was before. The two design/build projects we have been doing were financed by the owner’s savings, earnings and borrowing against equity in other properties as construction loans are almost non-existent.

Where does the financial energy come from to turn this around? It would seem to require a “Sea change” across the economic spectrum:

Eliminate most of the welfare state by putting idle hands to work, rolling back government services to only what was essential (and only one agency per need), reversing the tax policies that drives production off-shore, eliminate all formal exchanges that trade “Betting paper” not backed by a physical asset and more that aren't coming to mind at this late hour.

Follow that up with revising the whole concept of bank lending to have credit directed much more to financing means of production and without leveraging via fractionalization.

I don’t see it happening other than “Rising from the ashes.”

Got Gulch?