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Originally Posted by Blade";p="
If you google that phrase, you'll find all kinds of chowder heads saying this proves "capitalism doesn't work". Actually, it proves how well it works. What we're seeing now (except for the ill-conceived government bailout) is capitalism efficiently removing from the market lenders who make very risky loans, and borrowers who take out loans they can't pay. Problem? No problem.
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One way that pure capitalism can cause problems is when a decision has positive or negative externalities. For the market to be perfectly efficient, the decision to take a risky loan or not shouldn't have negative or positive consequences on anyone except the creditor and the debtor. The fact that the stock market and economy in general has been taking a beating from this disaster shows that their are negative externalities coming from making risky loans. Thus one could argue that some sort of minimum government intervention could make the market more efficient by attempting to transfer the negative externalities back to the debtor and creditor. This could be done through a variety of regulations.