In an FT piece, Daniel Yergin lists the many competing explanations for the financial crisis: 1) too much leverage; 2) rapid financial innovation; 3) wrongheaded or incomplete regulation; 4) government home ownership policies; 5) high US indebtedness; 6) too much greediness, not enough fear; 7) bubblicious easy credit; 8) hubris from years of global growth; 9) global securitization as a transmitter of crisis; 10) the oil spike; 11) intrinsic evil of capitalism.
Ed Yardeni runs the numbers:
Nominal GDP rose at a compounded rate of 4.2% from 1999-2009. It isn’t likely to grow any faster over the next 10-20 years. However, extrapolating the same growth rate of per capita retirement spending (5.1%) and adding the higher projected growth of the senior population (3.0%) suggests that social welfare outlays might grow by 8%. That’s significantly higher than the likely growth of nominal GDP (say 5%). Since the tax base can’t grow faster than nominal GDP on a sustainable basis, something has to give on the per capita spending side.