A Complete Explanation of the 2008 Financial Collapse

To the Sanders-supporting socialists among us:

Well-meaning socialist politicians caused the economic downturn. This is absolutely certain. Every other explanation is entirely incorrect. You need to understand this, so I will explain it from the start.

In 1977, Jimmy Carter signed into law the Community Reinvestment Act (CRA) requiring banks to hand out housing loans on the basis of affirmative action. However, no enforcement mechanism was put in place, and the Act was mostly ignored. So in 1995, Bill Clinton pushed for and signed into law reforms to this Act, making it enforceable by the Federal Reserve, who can deny banks licenses to operate if they do not engage in sufficient affirmative action. Because the proposed customers of these loans did not qualify for ordinary housing loans, this forced banks and other finance firms to create an excessive number of subprime loans to service this market.

In 1998, Congress passed a bill to audit the Community Reinvestment Act and put together a report studying its effects. The report, released in 2000, showed that the results were atrocious. The individuals receiving these subprime loans were going bankrupt at an astronomical rate, and banks were beginning to collapse under the weight of all these junk loan contracts that would never be paid off. Clinton’s response to this was to issue an executive order demanding that Fannie Mae and Freddie Mac buy up subprime loans, increasing their balance sheets to 50% subprime, in order to try to save the collapsing banking industry without stopping the CRA.

For several years, this quick fix seemed to be working. However, this created a new problem. Now that Fannie and Freddie were a guaranteed buyer for subprime loans, these loans were no longer valued as junk, even though they were realistically nothing more than junk. So the number of subprime loans on the market exponentially multiplied, as a means of creating money from nothing. The Democrats (especially Sanders) were pretty happy about this, because these loans were being used to purchase homes for poor and minority individuals. But the lack of real value there means this was nothing more than a bubble.

In 2007, the housing bubble burst, and subprime loan customers started going bankrupt. Suddenly, the perceived value of those subprime loans dropped back to $0, where they belong. Minorities lost their homes and savings at an unprecedented scale. This wiped out half the assets held by Fannie and Freddie, sending them into bankruptcy. Other banks that had gotten heavily into the subprime lending business (e.g. Lehman Brothers) were the first private sector businesses to collapse. By 2008 the global economy was collapsing, as a broader asset bubble popped. The rest is history.

This is a clear example of socialist politicians meddling in the economy for their idea of the “greater good” and screwing it up for everyone. When you try to use government to regulate markets for some supposed social goal, you destabilize the capitalist pricing system, creating bubble/burst cycles. There is an entire field of economics devoted to studying this phenomenon (see: Austrian Economics). It is completely foolish to think that you or anyone you might vote for can out-think the capitalist free markets and create a “greater good” without inadvertently blowing up the whole thing. Jimmy Carter, Bill Clinton, Barack Obama, and Bernie Sanders are all guilty of this same type of foolishness, and that is one of the many reasons why they are dangerous.

If you still insist on refusing to believe me, then just keep an eye on the stock market. We have reached the peak of another bubble, inflated by Barack Obama’s stimulus and Quantitative Easing schemes. Before Obama leaves office, the markets will have begun an unprecedented crash that will cut all the major indices by >50%. The global economy will once again be in turmoil. If you haven’t learned from the 2008 financial collapse, hopefully you will learn from the 2016 one.

Summary of the Arguments Against Libertarianism, and Responses

After seeing the same misconceptions produce the same arguments against liberty over and over again, I’ve decided it is time to organize the responses to those arguments into a single, highly-accessible list. I will continue updating this list over time, using this as the central hub linking to all of the responses to all of the arguments against individual liberty. If an argument is not yet listed with a link, it doesn’t mean I don’t have an argument. It just means I want the argument here so I will remember to answer it, but I haven’t yet taken the time to compile that argument into a complete post. If you want the answer to any of the un-linked arguments, just ask me.

Last Updated: 7/1/2015

The common arguments against liberty and libertarianism [click the argument to be taken to the response]:

  1. Libertarians should just move to Somalia.
  2. Libertarians should not use X, because X is a public service.
  3. Roads are a natural monopoly and cannot be provided by the free market.
  4. The free market does not account for positive and negative externalities.
  5. Democracy is freedom, or is the best system of government.
  6. By living in our society, you consent to its rules.

Argument: Libertarians should just move to Somalia.

Somalia is in a state of anarchy, in which several different authoritarian powers, all very hostile to liberty, are vying for control. This is nowhere near the type of system that libertarians call for, in which a strong central government exists solely to protect the liberty of a country’s citizens.

A libertarian government does several important things, all of which distinguish it from a state of anarchy:

1.) Maintains a military to defend the country from external attack.

2.) Constitutionally defines the defense of individual liberty as the fundamental purpose of government, and forbids the government from exceeding this role.

3.) Implements a legislature that clarifies the defense of liberty in particular scenarios, determining when violence has been enacted against another person, or when a contract has been violated.

4.) Implements a police force to stop citizens from enacting violence against one another, or from applying the type of force involved in violating a contract.

5.) Implements a judicial system to try cases in which someone claims to be a victim of violent force, to identify the facts of those cases, and to apply corrective measures.

How Would A Vaccination Mandate be Enforced?

There’s a reason the law focuses on punishing harmful actions, rather than on implementing mandates and punishing inaction, at least in free societies.

Imagine a world where vaccines are mandatory under the law. How exactly would you enforce a vaccine mandate? Specifically, how would you determine who has not been vaccinated, and what would the punishment be for them or their parents?

Would you have to have a vaccination certification? What would it cost to get it? If you neglect to get it or lose it, how would the authorities find out? Aren’t there privacy issues at stake there? Aren’t the Democrats still, to this day, arguing that Voter ID is an affront to civil rights because poor black people can’t fill out forms or go to the DMV or something? Isn’t requiring people to go to the doctor and get a medical procedure done and get that certified quite a bit more intrusive, expensive, and burdensome?

So suppose people can be arrested for not vaccinating themselves or their kids…wouldn’t breaking up so many families like that do more harm to our society than measles?

Those of you who have been speaking out in support of a vaccination mandate…did you think about any of these issues before jumping to the conclusion that if there’s a problem, the government should fix it?


The word “liberal” is not used in the US the same as it is in Europe, and this undoubtedly has created some international miscommunications. Europeans still use “liberal” to describe people who favor freedom from government intervention. Americans use “liberal” to describe people who favor MORE government intervention and components of socialism. The American usage is nonsensical, because the word “liberal” derives from and used to refer to the philosophy of liberty.

So when Rush Limbaugh screams about how liberals are going to destroy society, he’s talking about people who are more similar to Europe’s Social Democrats and Labour parties. When the BBC complains about how liberals are going to destroy society, they’re talking about people who are more similar to America’s Libertarians.

This reversal of meaning in the US has its roots in the early 20th century, when Americans who sympathized with more socialist policies found that using the word “socialism” made them very unpopular. Hence, they tried to manipulate public perception by saying that they “still support liberalism, just a more socially progressive form of liberalism.” They then argued that anyone who doesn’t support this “progress” towards socialism is “conservative,” even (especially?) when those “conservatives” actually favored greater liberty. These progressives started winning elections, and cemented their incorrect “liberals vs. conservatives” terminology into American political discussion.

In order to resolve this confusion and avoid further miscommunications, I would recommend the following rules:

  • Americans stop using the term “liberal” altogether, unless you specify very clearly that you’re referring to “modern American liberalism.”
  • Most modern American liberals are okay with being called “progressives,” so you can use that term pretty much everywhere you would have previously used the term “liberal.”
  • The more extreme ones (think Elizabeth Warren, Bernie Sanders, and anyone else who talks about the “fair share” that “the rich” need to pay) can be referred to as social democrats or democratic socialists.
  • If you want to refer to the belief in reduced government intervention in people’s personal or professional lives, then you should refer to that sentiment as “libertarian.”

Europeans, I suppose, could carry on as usual (since you use the correct terminology to begin with), but you may achieve more productive conversations with those across the pond if you adapt to use the word “libertarian” in place of “liberal.”

Liberty-Based Selection of a State to Call Home

I was looking at a state-by-state map of liberty across the US, and thinking about where I would like to live in the future. Often, states are heavily favored as “free” because of their stance on marijuana. That’s great for people who like using drugs, but that’s simply not even on my list of things to care about. Fortunately, the Mercatus Center offers a tool that lets you personalize your view of freedom.

Overall liberty is here.

Economic liberty is here.

Drug-free (excluding alcohol) overall liberty for an average American is here.

Non-drug (excluding alcohol) personal liberty for an average American is here.

What you can see is that the southwestern desert states of Arizona, Texas, and New Mexico are some of the best for people who don’t like being told what to do, but personally choose to avoid the harder drugs. I like this because, as a native of California and a current resident of Wisconsin, I have learned the hard way that I definitely want to live somewhere hot and free.

When economic measures are thrown in there as well, Texas and Arizona still do reasonably well, but are no longer at the top of the list. Given that I don’t really want to live in a landlocked middle of nowhere (and my prior conditions), the top 5 on this list (the Dakotas, Oklahoma, Idaho, Tennessee) are ruled out. Surprisingly, Virginia and New Hampshire are #6 and #7, but they both voted for Obama twice, so that can’t be right. And that brings us back to Arizona and Texas. It’s worth noting that Georgia and Florida do pretty well by both measures too, though they are extremely humid, and both states seem to want a third Bush in the White House. So…


  • Rapidly rising in the ranks of liberty.
  • Hot and dry.
  • Sunny all the time.
  • Great geography.
  • Closer to California family.
  • Landlocked.


  • High, yet stagnant in the ranks of liberty.
  • Hot and humid.
  • Sunny, but not as much as CA or AZ.
  • Great economy.
  • Further from California crazies.
  • Ocean access.

I have to say that both of these states look like excellent places to live. I hope Texas keeps its liberty, but Arizona seems to have made more recent progress. I’d prefer the climate in Arizona, but as beautiful as the natural landscape is there, it’s fairly important for me to be near the ocean. Plus, Texas has an amazing economy, with many job opportunities for someone in my field.

Taking into account liberty, economy, environment, and weather, I think Houston, Texas really would be the best place in the United States for me to live. It’s quite appealing that the Houston suburbs have names like “Jefferson” and “Freeport,” and were the districts that sent Ron Paul to Congress.

The Separation of Commerce and State

The principle of the Separation of Church and State has done wonders for religious freedom, and has brought impressive levels of interpersonal harmony and general prosperity. Why? Because this principle removes the mechanism of violence from religion, making the proposal in explicitly harmonious terms.

Unfortunately, a new kind of violent, crusading morality has taken its place, in the form of economic progressivism. Progressives believe that certain kinds of economic transactions between people, though completely voluntary on all sides, are immoral, and thus must be violently suppressed. This has created, on economic matters, the same kind of heated partisan discord that once divided British Catholics and Protestants. In the less civilized corners of the world, the economic crusaders have employed corruption and military strength to gain a permanent advantage over their opponents, establishing socialist dictatorships.

To restore harmony on economic matters, and ensure that violence is never used for the sake of overly-intrusive, moralistic crusading, what we need is a principle of Separation of Commerce and State.

I believe this principle would function the way the Separation of Church and State has, becoming shorthand for the plea to maintain civility through the enforcement of “live and let live” on economic matters. In other words, you may not agree with the contracts that I agree to, but I am free to make my own choices according to my own economic beliefs, and so are you. Certainly, the progressives will object to such a principle, arguing that the people are too stupid to know what’s best for themselves, just as religious crusaders have continued to do, centuries after the introduction of the Separation of Church and state. Yet, I think the formalization of this concept in parallel to the language that protects religious freedom will take a giant leap forward in protecting economic freedom, with far more success than general pleas for liberty (which are often difficult for the uninitiated to understand).

So, have I made my case? Are you ready to start framing the debate over economic liberty in terms of “Separation of Commerce and State”?


Get every new post delivered to your Inbox.