A World of Wealth: How Capitalism Turns Profits into Progress

Chapter 10. A Capitalist Look at the Current Economy

At the beginning of 2008, Americans began to perceive that the United States was slipping into a recession. Energy prices had touched $100 a barrel, and the high cost of fuel was working through the economy like a tax, raising prices and suppressing demand for almost everything. The biggest problem, however, wasn’t fuel costs but the disruption caused by the bursting of a bubble in housing. Home construction is one of the largest industries in the U.S., but it had grown too fast.

Ever since the Great Depression, when specialized housing finance with federal government backing made home buying less risky and more rewarding, housing has been riding a great wave of federal sponsorship and federal ...