Markets are not magic

John Taylor, Mary and Robert Raymond professor of economics at Stanford University, recently noted that arguments about the causes of the current economic crisis usually fall into one of two viewpoints: a) the market did it; or b) the government did it.1 Taylor himself leans strongly towards 'the government did it' view. He emphasises the maintenance of historically low interest rates from late 2001 into early 2004 laid the groundwork for an unsustainable housing bubble. An alternative view is