>"I've only done graduate level courses in economics and finance. If they know what they are doing why do we still have financial crises?"

Then you're ahead of me education-wise; we lend money until the default rate gets above a threshold, which causes a "crisis" of deleveraging. Then we lever up again. All of this happens around a long-term, upward growth trend. It's the business cycle. It's hard to time, but most people understand how it works.

How can you prevent crises when their foundations can come from anywhere, including natural disasters? It's impossible. But the powers-that-be do their best to soften the blow. And they have been very successful in this last recession. I know it's hard to convince people that it could have been worse, but it could have been worse.

Already they're working on the next problem: how do we not become Japan? Unlike some of the hard-sciences, economists get one kick at the can. If they miss, they have a new problem to solve.

Why not counter cycle the lending activity instead of exacerbating the business cycle?

Oh wait we're economists - free markets are sacrosanct and they are efficient - if there is an arbitrage opportunity to short surely the rational investors will price it correctly. Not.

>"Why not counter cycle the lending activity instead of exacerbating the business cycle?"

That's easier said than done. Most of it is politics. But they do.

The Fed began tightening monetary policy back in 2004, when rates went from just below 2% to 5.5%. They did so to start to "cool" the economy, and it essentially popped the housing bubble.

If physicists know what they're doing, why don't I have a flying car?

edit: physicists ugh too early in the morning

We do - if you're willing to pay for it.

And their called physicists.

Yes, and it's spelled "they're". See Muphry's (sic) law on wikipedia.

Did you include the "sic" as a joke? If so well played my friend, if not the streak continues. Including "sic" is grammatically incorrect because you are not transcribing an error or misspelling something on purpose.

I believe you to be mistaken. I did not include it as a joke, and using "sic" in this context is literally correct. The reference is to "Muphry's" law (carefully note the spelling), and almost everyone would assume that I had mis-spelled that, intending instead "Murphy's" law. Using "sic" indicates that it is written as I intended.

Quoting Wikipedia:

    The Latin adverb sic ("thus"; in full:
    sic erat scriptum, "thus was it written")
    ...
    The usual purpose is to inform the reader
    that any errors or apparent errors in the
    transcribed material do not arise from
    transcription errors, ...

http://en.wikipedia.org/wiki/Sic

I did read closely, given the context it is readily apparent that you are not referring to Murphy's law.

But others, who do not read as closely as you apparently do, need the extra information provided by the "(sic)". More than once when quoting Muphry's Law I've been "corrected".

Because politicians run the country. Not economists.