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It's true. FIRE did break the economy, and recessions caused by financial system failures are always much worse than when caused by declines in other sectors.  However, as at least one of the economists in the list in this diary have shown -- Schiller -- the reason that FIRE can do so much damage to the economy is precisely because people think it is much more critical than it really is. When the farming sectors faces trouble, the rest of the economy doesn't worry, even though it potentially means a threat to local food supplies.  But when banking goes bad, everyone goes crazy, even though the worst thing that can happen is that some people won't get their loans repaid.  Go figure.
by santiago on Sun Jul 12th, 2009 at 10:13:41 PM EST
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