30 years ago, Reagan initiated policies that encouraged people to borrow more than they could pay back. These same policies opened up business to create more and more speculative financial procedures. Eventually, it became a house of cards, and when people finally realized that houses were way over-valued, and started defaulting, the insurance that companies like Lehman and Merril-Lynch and AIG provided to insure against defaults could no longer cover the obligations. At that point, the house of cards started crumbling.
Now, we have the opposite of unwarranted optimism. We have unwarranted defeatism. Our industry and our homes and our physical and economic infrastructure are all worth pretty close to what they were worth before, but for that unwarranted optimism. We have an enormously strong and complex economy. We can work our way out of this abyss. But in the future, we will have to be much more risk averse. I thank my lucky stars that I’ve always been risk averse, and never used borrowed money to invest with.