The financial crisis was caused by:



Bad traditional bank lending, based primarily on property lending and to some extent lending to business;

Bad policy by central banks - keeping interest rates deliberately low in order to continue to fuel an asset bubble in property to mask poor economic performance (Brown's end to boom and bust);

Poor US policy in response to the crisis - causing a much deeper crisis than necessary.



In short, investment banking (which does not use people's pensions) was not the problem. They are just easy scape goats for politicians to mask their own ineptitude. In the UK we only have one big investment bank - Barclays - and that did not even need state aid.

It was not "traditional lending".



"Traditional lending" disappeared years ago.



And given that one of the biggest banks that was rescued, RBS, had been involved in gambling on a whole range of things, including but not limited to buying up other financial organisations (without checking their finances properly – how much more of a gamble do you want?), it's hardly something that is just limited to investment banks per se.



The crisis is also part of Thatcher's legacy – help create a housing crisis and then prices will go through the roof; deregulate so that financial bodies can offer riskier and risker mortgages (because people do actually need a roof over their heads). Then get a bubble – etc etc.

It's a cyclical thing. It's happened before and will happen again. Essentially it comes from too much money chasing too few assets. There is a constant stream of investment money going into the system, not least through pension funds. That has to find a home - essentially in property, bonds and shares, which generally get forced up in price and periodically drop back, often sharply, to move towards longer-term overall economic reality (ie close to overall GDP performance). It also partly comes from politicians buying into flawed economic theories, rather than being adaptive. Politicians (whether it fits your blinkered narrative or not, largely Labour ones in this country) helped by deliberate policy to fuel a domestic property boom, which exaggerated the normal cycle.

Talking of "flawed economic theories", monetarism has been a disaster, Dally.



And spouting one of its central tenets – hence the reason for its obsession with low inflation* – does not help.



Keynesian ideas, used by central banks, had improved stability – but have been deregulated away because they don't tally with the neo-liberals and the monetarists.





* See Ha-Joon Chang on inflation in [i23 Things They Don't Tell You About Capitalism[/i.

Genuine question. Which actual Labour policy was that?

Didn't the winter of discontent spell the end of the UK's experiment with Keynesian economic management? Hardly a success story. Like I said, dogma is crass and stupid. Politicians need to be flexible and change their thinking continually with the changing environment and not stick rigidly to "Keynesianism", "Monetarism", "Market Fundamentalism" or whatever economic theory is / was in vogue for decades at a time.

The one that abolished Tory boom and bust by encouraging cheap credit? Were the Fed and BoE really acting independently of theor governments at all times?

If by Fed, you mean US Federal Reserve, its a stretch to blame Labour for anything they did



It's quite possible to blame politicians for some of the mess we're in, but its a cheap jibe to suggest Labour are "largely" responsible

This is an answer to being asked what specific policy caused the housing crisis and boom, as suggested here:







Clueless.

For you and me, perhaps. Elite elements of society? No.



Have you never heard the political maxim, [i"In this town you're innocent until investigated"[/i?

No. It was an ideological choice made by Thatcher. Things like that may have been the excuse but she would have done it anyway.



They are still doing it. The "reforms" to the NHS are purely ideologically driven. Even the "have a loan until you die then pay it off" scheme for elderly care is ideological. We already pay Tax and National Insurance so in theory we already pay for the care required. The trouble is the tax and n.i. take is not big enough to fund this and many other things [iso we are told[/i (tuition fees being another example). So what you end up with is the individual paying for everything themselves (eventually to private companies brought in to take on the tasks - you just watch) and there is no state support. This is pure Tory ideology whereby income tax is reduced to paying for a runt of services you really can't privatise and the individual funds everything else.



However has your overall tax bill gone down due to the facts students now have to pay £9K a year in fees? No and neither has your local postman's but the "postman paying tax for the students education" was how this was sold. So we end up with being taxed pretty much as we were or taxed even more (VAT 20%, income tax thresholds left to be eroded by inflation) and we end up paying for what was once state provided ourselves anyway!



Pure Tory ideology.

So, as you say, tax has not gone down but the tax take is insufficient to pay for all these things. Indeed, with the ageing demographic profile in 20 - 30 years time the tax take will be nowhere near enough to remotely provide care. Are you advocating increasing taxes across the board? Personally, I favour basic rate income tax of c. 30% plus NI at, say, 10%. We need a grown up debate. Seems to me three main options (perhaps in combination):



1. Go the Swedish, etc route and increase taxes on everyone (especially the so called squeezed middle) to fund good state care.

2. People have to pay themselves - which will inevitably be paid for by employers - who will then prefer the State to take the burden (as is starting to happen in the USA).

3. Encourage married women not to work. We have a ridiculous situation whereby women pay people (usually less able than themselves) to look after their own children and are also no longer avaiable to look after ageing parents. This to me is the most sensible approach to take in any civilised society.

[url=http://www.independent.co.uk/news/business/news/jp-morgan-botched-bets-lose-37bn-7942046.htmlGambling? What gambling?[/url

A couple of points...



The bit that I have highlighted is by no means inevitable and is almost certainly not likely to happen at all in the majority of SME's and quite a lot of large coporations too.



Its slightly related but I took up the cudgel on behalf of the NHS during a discussion on Obama's healthcare bill with some American people I know on Facebook who were all dead against the concept of the state "interfering" (as they see it) in their health and well being, they were adamant that if they needed care then they would pay for it although they weren't quite sure how, but even more adamant that they were not going to pay for healthcare for those less well off then themselves, the over-riding principal being one of small government, so little would be a national governments interference in a citizens life that they would be happy to see another citizen die of a cureable disease if that other citizen could not afford to pay for the cure. - to me that is bizarre and not the sign of a civilised society.



The opinion among them was that the NHS was stood only slightly to the right hand side of communism, one even suggested that the NHS was a breeding ground for terrorists (but I think he was a nutter), and so I asked them a very simple question - I informed them what your average UK citizen on an average working wage would pay in terms of percentage income tax and in terms of national insurance, and pointed out that although not completely true anymore the NIS contribution was "supposed" to be your pension and healthcare provision with the healthcare being of an unlimited, open-ended nature and including everyone in your family if you were the only wage earner - then I asked them what they paid every month for their own private family healthcare plans.



Strange enough, no one commented after that.