I had no idea how close we really came to a total financial collapse. I hope that the whole economy wouldn't have shut down, but at the very least, we would have had a terrible situation to work through and no amount of government bailout would have been able to fix the problem.
It's interesting to see how lax regulation and enforcement in one area of the financial system of this country led to a huge ripple effect which has severely weakened America as a whole. I think it really highlights the need for government to find a balance between too much regulation and too little.
With too much regulation, the economy pretty much turns into communism, with prices and other rules of commerce set by a central authority. With too little, the free market becomes a constant sequence of bubbles and busts, as greed and profits drive inflation in prices to ridiculous levels, followed by huge corrections.
The role of government should be to allow the free market to function, but to slow down unchecked speculation and prevent huge rises and drops in prices. Boom and bust cycles are normal, but very large ones threaten the safety of the system as a whole, as we have seen in the past few weeks.
Basically, governmental regulation should act as an impartial referee, enforcing common sense on the market when greed drives individuals to act in a manner which emphasises short term gains far more than long term well-being. Greed is good, but unchecked greed is not.
