there's a somewhat deeper issue here; while blaming the CRA is clearly asinine talking points, in my opinion, the whole project of looking for micro explanations of what was clearly a macro phenomenon is screwed.
If you run a current account deficit then (by accounting identity), domestic consumption/investment is growing faster than domestic saving. If domestic consumption/investment is growing faster than domestic saving, then, in nearly any normal situation in the financial sector, banking sector loans will grow faster than banking sector deposits. The financial sector intermediates the current account deficit - that's a large part of its purpose in a globalised financial sector. If you run such a situation in large size and for a prolonged period, banking sector loans will exceed banking sector deposits by a very great amount, and the banking sector will have large balances relative to GDP which are funded on global wholesale markets. Thus far, we've basically established it all via accounting identities or very obvious behavioural equations. The question now is whether you close the model by taking banking sector behaviour as exogenous and saying that the current account deficit is the residual (the result of the banks' decision to expand lending), or whether you close the model by taking the current account as exogenous and saying that the loan and deposit growth is the residual (ie that the debt buildup is the result of the current account deficit). Frankly, it's much more in the tradition of mainstream economics to say that the banking sector is the residual and the model should be closed by looking at the causes of the current account deficit (basically, tax cuts and war). I'm quite surprised that so many people have decided on a very non-standard, somewhat post-Keynesian closure of the model where the decisions of the banking sector drove the whole shebang and shooting match. None of which is to excuse particular individual decisions on lending and structuring, btw; just to say that these are equivalent to the no doubt obvious fact that many of those made unemployed during the Depression were the lazier and less productive workers - that is, it's probably true, but it's missing the point as to why there were so many unemployed. best dd _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
