This comes up often in arguments with deregulationists. They say: just because we made these 5 or 6 major changes in the financial system and then went into the worst economic crisis since the Great Depression, it does not prove that those changes caused the crisis. The more erudite throw the latin phrase from the post title out. The more bombastic will sputter along the lines of:
You connect vaguely related associations (this happened, then later on, this happened!! See!! See!! Rivers cause beaver dams!!) ... and thus you think that "proves" *a* causes *b*.
Correlation is not causation.But the phrase Post hoc ergo propter hoc is used for a specific reason: to combat a sometimes erroneous confusion of correlation and cause. Why? Because the mind typically looks for sequences of changes to a system and subsequent changes in the behaviour of that system to be linked - because that is the normal course of events.
There is a reason the mind does this. I am a geek. I work on networks of routers and switches and servers and PCs. These all have configurations that can be changed. And when something "goes wrong" - when a system that previously worked suddenly stops working - the very first question everyone asks (after checking for hardware failures and rebooting Windows machines) is: "What changes have been recently made to the system?". And guess what? In a remarkable number of cases it is a recent, intentional change - with unintended consequences - that caused the problem. Frequently it is the most recent change.
So, in the real world, recent changes to a previously working system are always the first suspect when that system breaks. And for very good reason.
That's how it naturally works in the real world, not in the fantasy worlds of deregulationists - in which fantasy world, you let slip the dogs of greed, by destroying the leashes or intentionally making shitty collars, and then disclaim responsibility when the economy gets mauled.
So we went 60 years from the end of the first Great Depression with no huge financial crises.
Then in 1999 deregulationists passed and signed Gramm-Leach-Bliley, which eliminated Depression-era barriers that separated parts of the financial system from each other. A driving force in the passing of this law was to legitimize the creation of CitiGroup - which is currently being dismantled due to the financial crisis and has been to the public trough twice for more than $45 Billion.
In 2000 deregulationists passed and signed another Phil Gramm abomination that enshrined the wholly unregulated status of Credit Default Swaps (CDS) - clearly a form of insurance that should have been regulated as such. Currently, we apparently cannot allow any large organization to fail, because CDS has turned the the financial system and big parts of the economy into a huge booby-trap of explosives massively interconnected by tripwires of unknown and unknowable CDS lines.
These moves were supported and aided by deregulationists in the Clinton administration, inluding Clinton himself. Billary have long been bought and paid for.
The Greenspan Fed lowered it's Fed Funds rate to historic lows and kept it there for a long time. Alan Greenspan was an arch deregulationist and did nothing to rein in abusive lending practices and other questionable activities. He has since pronounced himself "shocked, I tell you, shocked" at the crisis and conceded that his faith that financial entities would guard shareholder value was misplaced.
In 2001, GW Bush appointed rabidly deregulationist "regulators" throughout his administration. They did the following:
They pre-empted state attempts to regulate predatory lending, and did no regulation of their own. Predatoruy lending went on to new highs.
In 2004, the Bush SEC allowed the big 5 Investment Banks to "self-regulate".
In 2004, the Bush SEC allowed the big 5 Investment Banks to increase their leverage of loans to real equity from roughly 10:1 or 12:1 to as high as 40:1.
(Of those big 5 Investment Banks, none are in the same form they were in prior to the crash. FRB/Treasury had to guarantee $39 Billion of dodgy securities to get JPM to tyake over Bear Stearns and just today BAC came back for $20 Billion more from TARP and guarantees of $118 billion in loans and other assets to complete the takeover of Merrill Lynch.)
The Bush SEC did nothing while the 3 NRSROs (Fitch, Moody, S&P) took money from the issuers of toxic securities, and then rated those toxic securities AAA. These very same toxic securities, now much downgraded after the fact, are at the center of our financial crisis.
(The Bush SEC further proved it's deregulatory mettle by not discovering the Madoff ponzi scheme until Madoff confessed, in spite of multiple detailed warnings.)
Only the self-delusionary can claim that these were not hugely significant changes in a system that previously worked and is now self-destructing. Clearly the changes led to or aggravated the breakdown.
The deregulationists can spout all the latin they want. Commonsense shows that they were wrong and are wrong.