Common sense, key to clairvoyance

Alan Greenspan is apparently shocked that the financial crisis was so broad reaching.

Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.

A quick question: did nobody in the banking industry stop to ask whether doubled home prices might cause a problem for future homebuyers?

Did they really think that Generation X and Y would start their lives with massive student loans and a $500,000 starter home?

Nobody even pondered whether doubling home prices would have a impact on other systems. All it would have taken is to talk with a young person and ask them if they can imagine purchasing such a home.

Not everyone is so blind to the broader implications:

“It wasn’t deregulation that allowed this crisis,” Rep. Tom Davis, a Virginia Republican said. “It was the mish-mash of regulations and regulators, each with too narrow a view of increasingly integrated national and global markets.”

Broad thinking is the answer. Short-term, parochial thinking locked in the current business model leads to missing even the biggest trends.