PALO ALTO — A toxic mix of politics, policy and bad regulation flushed trillions of dollars down the drain in the Panic of 2008, putting America’s role as the global economic leader at risk.

If we are really lucky, we will not experience a Japanese-style housing deflation that lasts another decade. If we are not so lucky, we may endure a terrible bout of inflation in the next few years, followed by another systemic breakdown and another panic.

That’s the sobering news from two top experts who spoke at Stanford University’s Hoover Institution on Oct 20. I was fortunate – if you want to call it that – to have been invited to attend this quarterly forum as a media fellow.

First, the politics. Property rights expert Richard Epstein views the crisis as the result of a political train wreck involving both parties. The Bush administration seized on home ownership as a key initiative of its ill-fated “ownership society” initiative after the 2004 election victory.

The congressional Democrats, were pressing for increased home ownership among poor and minority borrowers to increase their voting constituency.

To view this column and all other full stories and offerings in the Business Times, see this week’s print version or SUBSCRIBE for $49.99 today.