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Old 10-29-2018, 09:41 AM
Kent Clark's Avatar
Kent Clark is offline
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Join Date: Apr 1999
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You can't silo economic activity like that. Let's suppose we want to set the residential housing industry in its own little corner. Then imagine the largest housing builder in - Phoenix, for instance - gets in financial trouble. The builder lays off all their craftsmen, who then look for jobs in commercial construction. The construction trades get into an argument with those contractors because the contractors are hiring laid off residential workers at a lower wage than the industrial craft workers.

The next thing you know, there's a strike in the construction industry, which drags down the entire economy of Phoenix. Businesses can't expand, which means their banks can't loan money for new construction. Those businesses stock prices slide, which drags down the entire industry, not just those businesses directly located in Phoenix.

As a real-life example, consider what used to be called the Savings & Loan industry. Those institutions were tightly regulated so that the majority of their business revolved around residential mortgages. The industry regularly had boom and bust cycles, and by 1980, it had convinced the Feds to make S&L institutions pretty much like banks. That caused even bigger turmoil, and pretty much destroyed "Savings & Loans" as a separate industry. This demonstrates the business principle known as "damned if you do, damned if you don't."