Huffington Post blog post by Jean Michel Giraud, President & CEO Friendship Place
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Only Good Things Should Bubble Up
Christine Lagarde, former French Finance Minister and now head of the IMF, has spoken about the importance of measuring when it comes to financial systems. She used the example of water consumption. If you think that water is free because no price has been set for it, you might just leave all the taps in your house on. Simply put, prices and guidelines help economic and financial systems stay on track.
As we have seen in the aftermath of the 2008 financial crisis, regulations make it more difficult to exploit the system for individual gains that result in collective debt. The case for adequate safeguards in financial systems is easy to make in the aftermath of the Great Recession. If nothing else, regulations help control individual behavior and prevent potential abuse.
Bursting bubbles can leave big messes.
In the last 9 years, California and many other states have dealt with a mammoth-size housing crisis, the costs of which will linger for several generations. As people’s homes became commodities – financial products that investment firms volleyed around – the true meaning of home and the human impact were lost.
While some California markets were flooded with an oversupply of new homes, the number of foreclosures also rose dramatically. This would strike anybody as a paradox: more empty homes and more homeless people. This was the result of a system run amok.
The story is still unfolding and the full impact is yet unknown but growing street homelessness in some urban centers is not a good sign.
Competing economic interests brought about the housing crisis, and the bulk of the negative impact was felt by economically disempowered folks in the lower income brackets.
Trends like this tend to have the strongest impact on the most vulnerable among us and can change society for more than one generation.
Lagarde warned that we should draw lessons-learned from the crisis and build safety guards. However, with signs of the next housing bubble growing in markets like California, it is fair to wonder just how far the lesson went.
About the author: A leading voice in the effort to combat homelessness with innovative solutions, Jean Michel has been been a contributor for the Huffington Post for since 2012.