WASHINGTON -- In a new book on the housing bubble published by the Cato Institute, Swedish writer Johan Norberg likens the financial crisis that erupted last year to the confluence of a high-pressure system from northern Canada, a low-pressure system over the coast of New England and a nearby hurricane that in 1991 came together to produce a monster storm with 75-mile winds and waves as high as 100 feet.

Four key elements, he thinks, converged behind the housing bubble in the United States. First, a loose monetary policy that in 2001 brought down interest rates from 6 percent to 1.75 percent and did not take them back up to 5 percent until 2006. Second, the political peddling of homeownership, which by the end of 2007 resulted in Fannie Mae and Freddie Mac having only $1.2 of equity for every $100 they had guaranteed or lent through securities linked to mortgages. Third, the perversion of a sensible practice -- the securitization of debts as a means of spreading risk -- because of regulatory incentives that led banks to remove assets from their balance sheets in order to elude capital requirements. And finally, the government-created oligopoly of credit-rating agencies that assigned stellar status to worthless paper.

Although Norberg places the biggest responsibility on government policy, he does not ignore the behavior of private parties and countless ordinary individuals who partook in this, well, fiasco. Nobody forced people to take loans they could not afford, or banks that invested in "structured" securities to disregard the inherent risks, or business people to mistake an obvious bubble for real growth.

But the merit of the book -- "Financial Fiasco" -- does not lie in apportioning blame or defending the thesis that government interventionism, not unbridled markets, was the principal cause of the tragic events whose consequences still haunt us. Others have defended the same thesis here and there over the past couple of years, although Norberg's book does a good job of bringing the arguments together and providing us with a full canvas. What is especially compelling is the evidence that this bubble was in essence no different from previous ones and, more eerily, that various governments are busy incubating the next one.

The four elements mentioned above are alive and kicking. They may not be apparent to the superficial eye just yet, simply because the lingering excesses of the last bubble are still weighing down the intensity of economic activity. But they are there.

Monetary policy and fiscal policy are even more inflationary than they were between 2001 and 2006. Rather than remove the political incentives for seeking and giving unjustified loans, the politicians, stung into action by the populist chorus, have increased them. The regulations that led market players to seek ways to circumvent them in obscure ways within the boundaries of the law are being compounded by new ones. And the rules that make credit agencies semiofficial entities forcing large blocks of investment capital to abide by their ratings are not even being questioned.

The reason for all this is what Norberg calls the tendency of bureaucrats, like generals, to fight the last war. "Before we give politicians, central bankers and bureaucrats more power over the economy," the author asks, "shouldn't we first examine what they did with all the power and resources they already had when the biggest financial bubble in history was being inflated?"

The absence of regulation was not the cause of the bubble. In Washington alone, more than 12,000 people work at regulating the financial system, and what good did that do? Most of the regulations they were supposed to enforce were the result of political reactions to past financial crises whose causes the decision-makers of the hour, and the audiences to which they catered, did not find it politically convenient to understand.

"Capitalism without bankruptcy is like Christianity without hell -- it loses its ability to motivate humans through their prudence and fears," states Norberg. It is an apt summary of his thesis on the roots of this and perhaps future recessions. Post-bubble policy in the U.S. and the rest of the world has aimed to remove as much uncertainty as possible from the economy by trying to decouple the behavior of economic agents from the consequences of their actions. The idea is to save us from our own sins.

But how exactly are we going to strive for paradise if we are led to believe that hell has been abolished?