My inner tinfoil hatter has caused me to wonder from time to time if there isn’t some actual, strategic reason to have encouraged such apparent malinvestment. We are not alone in having grossly overbuilt, look to the so-called “ghost cities” of China. Some looming, known natural catastrophe perhaps.
I’m giving bureaucrats way too much credit, I know. It’s just so utterly stupid, what we’ve allowed to befall ourselves. I can’t help but look for some logical reason, and there aren’t any. This goes beyond simple greed.
“My inner tinfoil hatter has caused me to wonder from time to time if there isn’t some actual, strategic reason to have encouraged such apparent malinvestment.”
I think it’s better explained by epidemic bad judgement on Wall Street. The mortgage and derivatives market began generating huge returns for financial firms, and they ignored warnings from their risk managers because the money was too good.
And more than that, the CEOs barely understood what their traders were doing to generate that profit. It was built on a lot of complex mathematics developed by the quants that they employed. To make matters worse they all began relying on the same misapplied formula, David X Li’s Gaussian copula function, which led the entire industry to think that they had passed off risk when they hadn’t:
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all