How Honesty Relates to the Great Recession
The Great Recession of 2008/2009 revealed the consequences of a banking industry seriously lacking in ethics. Greed is good finally proved a broader, more socially responsible understanding of capitalism is a necessary component to servicing the needs of the world. As investigations into the exact causes of the most catastrophic financial crisis since the Great Depression move forward, it is clear short-sighted thinking helped lead to disaster. A lack of honesty is one element in the thinking that resulted in such an enormous global failure.
Most obvious is the dishonesty associated with the financial derivatives market and the value of homes. Banks deliberately decided to make risky loans, which helped inflate home prices, then package these uncertain debts as investments. Perhaps the managers and executives at these financial firms felt these supposed investments could turn a profit for some, but they also understood the risk associated with these proclaimed innovations would seriously hurt others. They may have even justified their reckless behavior as part of the job and risk, thus they clouded what the consequences of failure would mean for everyone.
The dishonesty in the Recession goes beyond a willful attempt to deceive investors and homeowners. The banking industry was lying to itself. To justify huge short-term profits, our financial institutes neglected to consider the long-term effects of what they were promoting. With house prices booming, banks, investors, and homeowners failed to recognize ballooning prices and mounting consumer debt would result in significant consequences for the real world. It was this kind of deception and dishonesty that lead many to overlook the signs of an impending crisis.
Meanwhile, our government and regulatory agencies were just as much in denial. After all, over two decades had passed with only minor disruptions to our economy while those were fixed with tax cut and more spending. Certainly, there were those who wanted to do something, yet others denied the crisis would spread beyond those who deserved to fail. Success was somehow equivalent to moral righteousness versus a result of an artificially inflated economy and clever strategies, thus failure would be limited to only unhealthy firms. In this case, it was all of the big firms as well as the rest of the global economy. Certainly, the bad economy corrected such limited thinking, at least temporally.
In all, dishonestly had a lot to do with the Great Recession of 2008/2009. Although there was dishonesty among the greedy, who sold bad "assets," the most prevailing kind of dishonesty comes in the form of denial. It is the people, who deceived their selves and others, that allowed this crisis to explode. Refusing to recognize the signs of crisis is what ultimately allowed the global financial catastrophe to take place. It is also this denial that will likely continue unless powerful figures intercede to force those, who are still unable to cope with reality, to except the truth.