http://www.nydailynews.com/money/2008/12/01/2008-12-01_despite_advance_warnings_of_financial_cr.html

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

A revealing headline in Science Magazine ($$$): Humans aren't rational, as the recent economic crisis shows. So why should financial theories assume that they are?

A case in point:

Iceland’s Meltdown

Iceland’s neophyte bankers no doubt wish they’d paid more attention to this warning.

Click the image above to view a larger version of this map.

Then in the bottom right-hand corner click on a (vanishing) icon that says "Expand to regular size"

Courtesy of http://www.theatlantic.com/doc/200812/map-iceland

Another case in point: Why Wall Street Always Blows It

But most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational—or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people. http://www.theatlantic.com/doc/200812/blodget-wall-street

Originally written by Liliana Boladz-Nekipelov on December 12, 2008 5:39 PM Nothing is rational.

That's exactly why we have wars and nothing, especially religion which is irrational itself, can help that. Don't you agree?

Jacek

Originally written by David Kallans on December 13, 2008 8:47 AM People do not need to believe more in themselves

What I meant, David, was that people should rely more on their common sense rather than believe that a certain theory or  ideology can save them. One of the examples is the theory that a free market always works, no matter what. 

We told you so
Progressives were right about the financial crisis but were ignored. Will they be listened to now?
By David Sirota

The author's last name meaning 'orphan' in Polish, the whole piece sounds like an orphan voice crying in the wilderness to me...