Some dangerous myths have been generated in the wake of the sub-prime crisis. It is hard to think of a more charitable word for them than “nonsense”.
The first is that the crisis is attributable to “free market capitalism” and this is justification for compromising or abandoning the system.
This myth overlooks two basic facts: that markets have and should have fluctuations, panics and crises; and the failure of big corporations. These are natural and desirable manifestations of the dynamic nature of markets and essential parts of what makes markets superior to government alternatives, where countless follies are perpetuated at the expense of taxpayers and national prosperity.
Even if the market is responsible for the crisis — which it is not — there would be no justification for tampering with the system that has made countries with it the wealthiest.
Countries with the systems now being proposed as supposed solutions are the hellholes on earth where destitution is so normal that it is not regarded as a “crisis”. Brief setbacks in the world’s most successful system are no reason to switch to the world’s least successful systems.
Second, as far as the SA economy is concerned, exchange control can, at best, now be credited with brief and slight benefits, which do not justify its continuance in the long term. The National Credit Act (NCA) has plunged SA into an opposite “supra-prime” crisis.
The US government forced the market to provide credit to credit unworthy (sub-prime) people, whereas the SA government forces our market to deny credit to creditworthy people. This has caused or contributed to a collapse in our credit-intense sectors (vehicles, housing, furniture, clothing, and so on ) by as much or more than the collapse in America’s sub-prime housing sector.
Thousands of creditworthy South Africans, especially blacks, have been denied credit, hundreds of marginal businesses have collapsed due to the NCA making credit costly and risky.
The third and most fundamental myth is that the crisis is a manifestation of “the market”. The nonsense surrounding this idea goes so far as to attribute the problem to “Wall Street greed”, as if it is a new phenomenon, unique to the past few months and Wall Street financiers. It is an idea so obviously absurd as to justify no further comment.
“The market” has indeed been responsible for dubious practices such as underrating the risk of securitised and highly geared and leveraged derivatives, but this, on its own, is neither a sufficient nor necessary condition for the crisis. At most, it would have caused spontaneous market corrections and insolvencies for the guiltiest parties. South Africans can easily understand government provision of sub-prime credit and implicit backing by reference to our Land Bank, the sole purpose of which is sub-prime credit to farmers, and SA parastatals, which are implicitly government-backed and therefore able to purchase on credit.
The fourth myth is the thought that the crisis was caused by “deregulation”. The truth is that there were various laws which obliged banks to provide sub-prime credit such as the Community Reinvestment Act and the prohibition of “red-lining”.
What little deregulation there was, was firstly trivial and secondly of no direct relevance to sub-prime mortgages.

BY: Manik Prasher

Thanx for ur opinion. This blog is a series of blogs when I get into my ” Professor” attitude. U forgot, it seems

And i agree with you , i can’t even imagine myself graduating from a different college ( imagine a rishi-less class …heheehhee) ! And to think of it , i was supposed to be a doctor ! But last minute turn of events after the 12th std , changed sooo much !

And ur post , is very reflective , in the beginning , but gets very teacherly towards the end !
Just an opinion !

P.S : Saurabh , ek machhar aadmi ko …ehehe !

Recent events have definitely made a impact on ur brain….

Kuch bhi likta hai …. ( atleast u wrote a comment )

Umm .. then again, it might – and it was just a hint (which you probably didn’t get) to stop boring him to death narrating your past

Anyways, everything matters in life actually, coz I believe that every little action you perform now shapes the future you create for yourself.

Like if you had taken up architecture, you’d be in a completely different sphere right now (parallel dimensions anyone?)

Or maybe, while writing your maths paper, a fly came and sat in front of you – you tried to shoo it away, in the process, dropping your pen, breaking it, losing 5 minutes in the process, not being able to complete a 5 mark question, getting 5 marks less, landing up in a different college altogether.

Freaky huh?
And all because a small fly came and sat in front of you instead of the guy ahead!