Dean Baker: >> The politicians and the media continue to refer to the economic downturn >> as being the result of a financial crisis. This is wrong. We have 15 million >> people out of work because the housing bubble that drove the economy since >> the last recession finally burst. The financial crisis may have been good >> entertainment for those who like to see huge banks collapse, but it was a >> sidebar. The real story was the rise and demise of the housing bubble.
Doug: > So why the housing bubble? What about very low interest rates combined with > a financially stressed household sector that turned to mortgage borrowing > and housing speculation to compensate for stagnant labor market income? > Longer term, what about the "solution" to the profitability crisis of the > 1970s that required an assault on working class living standards, but needed > debt as a way of maintaining aggregate demand and political legitimacy? Give Dean a little slack. After all, he was a key person who was calling the bubble a "bubble" long before anyone else (except for those who learned from him, such as yours truly). That makes him a little obsessed with how he was right and the official economists were wrong or downright stupid. It's true, as Doug points out, that the US needed a housing bubble to prop up consumer demand, however, in the absence of other stimuli (such as rising real wages). Dean's discussion is quite narrow-gauge compared to say, that of LBO. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
