Friday, December 03, 2010
Dean Baker describes the housing bubble and how it hammered consumer demandEconomist Dean Baker shares his calculations of how the housing bubble ended up in the current depression (or Great Recession, if you prefer) in Beating Up On Brad DeLong TPM Cafe 11/28/2010:
The story of the bubble is painful, yet simple. Beginning in the mid-90s nationwide house prices diverged from a 100-year long trend. By the peak of the bubble in 2006, house prices were more than 70 percent above their trend level. This created more than $8 trillion in housing bubble wealth.If I read him correctly, his point is that the financial crisis of 2008 may have exacerbated the crisis. But the core of it is the collapse in consumer demand caused by the housing bubble. And I think there's a lot to be said for that view.
Tags: dean baker, us economy
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No subject for immortal verse
That we who lived by honest dreams
Defend the bad against the worse."
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