The causes of the economic and financial crisis of 2008 have been made worse by governmental economic policies. In order to escape the consequences, government applied more of the same poison that led to the crisis. Their actions provided temporary relief at the cost of an inevitably more serious illness in the not-too-distant future. Financial markets and the economy were not healed, they were made worse.
Free markets produce self-equilibrating conditions and what Hayek described as “spontaneous order.” Government interventions create disincentives and distortions that lead to dis-equilibriums. These disequilibriums are then addressed by more interventions in an attempt to make the system function.
In the early stages of this process, the interventions are small and directed at only a few markets. Interventions cannot succeed because they represent attempts to suppress what willing buyers and sellers want to do. Economic actors find ways around the interventions, making further interventions necessary. The subsequent intervention is always needed to remedy the adverse outcomes produced by the prior intervention. Each intervention produces adverse outcomes requiring even more and larger interventions.
The free market disappears in such a process, displaced by central planning. Each intervention makes the economy less efficient. After decades, economies are unable to function properly. This video explains why: