They Told Us So.... The few who predict the mess tell us whats next. (Photo: China Photos/Getty Images) “We are now the largest debtor nation in the history of the world. We owe $13 trillion, and we get $1 trillion further into debt every fifteen months. That's the world giving up on America.†-Jim Rogers, investor, who has predicted a stock-market fall and commodities boom (Photo: Anna Summa/Getty Images) “The house next to mine in Florida sold for $105,000 in 1998, $765,000 seven years later. My guess is that it may more properly be worth around $275,000. Getting from $765,000 to $275,000, if it happens, is going to involve a lot of pain.†-Andrew Tobias, investment guru, who has warned of a real-estate bubble since 2002 (Photo: Rick Maiman/AFP/Getty Images) “The American consumer is toast. We're talking a multiyear adjustment, at least two or three years, maybe more. Does that mean America is over? Does that mean we have a whole new world order? The jury's out on that.†-Stephen Roach, former chief economist at Morgan Stanley, who in 2004 warned of impending economic “Armageddon†(Photo: Eric Thayer/Getty Images) “I think we are maybe 10 percent into this crisis. The economic distortions have been building for longer than we've seen in the history of the world. Never have we had such confidence falsely placed in a reserve currency.†-Ron Paul, former presidential candidate, who advocates a return to the gold standard
Peter Schiff also nailed it. It's real unfortunate the public still thinks it was deregulation that caused our economic collapse.
Wasn't the crisis mainly caused by poor investment choices by consumers as well as large firms? Why wouldn't stricter oversight of said firms have helped?
The best argument is that without the original government kool-aid these people wouldn't have acted irrationally. Bubble-drunk economies start at the Federal Reserve, our economy was over-regulated the minute we adopted our 3rd central bank in 1913 and became a centrally planned economy. Things got especially bad in 1971 when the government was forced to de-peg the dollar completely from gold to save their shitty economic foundation they had been building. We've been riding the US dollar reserve bubble since then, and it is bound to collapse as it is a currency backed by nothing but GUNS. The biggest problem with the Federal Reserve is it removes the element of risk from the economy, and that is the most essential aspect of capitalism. It creates a "moral hazard", and these institutions lend to people they shouldn't be lending to because they know they will have the Fed as "lender of last resort".
The crisis was caused by a plethora of things, so I'll just address your second question. But yeah, bad investments were a big factor in the crisis. But stricter oversight would not of avoided it, because it was government involvement that allowed (and sometimes even forced) these companies to make stupid investments and then not face the punishments (by bailing them out). Without governmental involvement, the companies that make stupid investments are punished by the free market. Simple as that. And further government involvement wouldn't of stopped the Fed from manipulating interest rates and devaluing the dollar, two other factors that have put is in the position we're in. Government's role in an economy is to set up laws that protect people's rights (like creating laws against predatory lending, for example). It's not to micromanage the way the market works. Edit - seems aaronman provided a pretty good answer