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Very Hot Topic (More than 25 Replies) What caused the housing bubble and bust in 2008? (Read 666 times)
BobK71
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Re: What caused the housing bubble and bust in 2008?
Reply #20 - May 22nd, 2019 at 12:38pm
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kaz wrote on May 20th, 2019 at 8:50am:
Maybe you could be a little more specific


It's really not possible to be specific and generic enough to be useful.  Most narratives about financial crises aren't generic enough.  They tell us what specific assets took down the economy (US stocks in 1929, banks in 1931, and mortgage-backed securities in 2008, etc.) but don't really tell us the real lesson to be drawn (basically, socialism in the monetary/financial system.)
  
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BobK71
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Re: What caused the housing bubble and bust in 2008?
Reply #21 - May 22nd, 2019 at 12:54pm
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A slightly more specific (and longer!) story about the 2008 crisis than my first post might go something like this:

The US and Chinese elites had decided by the early 90s to join forces to promote Chinese export growth and prop up dollars and Treasuries, by artificially cheapening the yuan.  This produced the superficially 'goldilocks' economy of the 90s and beyond, with low interest rates, low inflation, and low fiscal deficits in the US.

This was really no different from what the Western system has done with most developing countries, except that China is so big that the financial imbalances were able to threaten the entire world system by 2008.

As usual, Western elites benefited by leaving ever bigger problems for their successors, as incentivized by their pseudo-free-market system.

The 90s 'boom' created an explosion in financial wealth, wealth that had to work hard to find decent returns.  (The manipulation of the yuan down was done by buying dollars by the Chinese central bank and lending them back to America -- America became awash in paper wealth.)

So this paper wealth went into the 'internet boom' and created the dot-com bust of 2001, and then went into the 'housing boom' and created the 2008 bust.

It's all very predictable really.  All assets that are directly or indirectly propped up by the Western central authorities will crash, and have done so since the Spanish global empire.  Just be sure to live long enough if you want to bet against them!
  
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Jeff
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Re: What caused the housing bubble and bust in 2008?
Reply #22 - May 22nd, 2019 at 2:37pm
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SkyChief wrote on May 21st, 2019 at 7:33pm:
Yes.  Banks.
You don't think much of the way banks have behaved since the aftermath of the Great Depression has had to do with their being heavily regulated? I do.
  
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Jeff
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Re: What caused the housing bubble and bust in 2008?
Reply #23 - May 22nd, 2019 at 2:41pm
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BobK71 wrote on May 22nd, 2019 at 12:38pm:
It's really not possible to be specific and generic enough to be useful.  Most narratives about financial crises aren't generic enough.  They tell us what specific assets took down the economy (US stocks in 1929, banks in 1931, and mortgage-backed securities in 2008, etc.) but don't really tell us the real lesson to be drawn (basically, socialism in the monetary/financial system.)
Government involvement through regulation and the manipulation of interest rates and the money supply, but you can't call that "socialism".
  
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Jeff
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Re: What caused the housing bubble and bust in 2008?
Reply #24 - May 22nd, 2019 at 2:43pm
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BobK71 wrote on May 22nd, 2019 at 12:54pm:
A slightly more specific (and longer!) story about the 2008 crisis than my first post might go something like this:

The US and Chinese elites had decided by the early 90s to join forces to promote Chinese export growth and prop up dollars and Treasuries, by artificially cheapening the yuan.  This produced the superficially 'goldilocks' economy of the 90s and beyond, with low interest rates, low inflation, and low fiscal deficits in the US.

This was really no different from what the Western system has done with most developing countries, except that China is so big that the financial imbalances were able to threaten the entire world system by 2008.

As usual, Western elites benefited by leaving ever bigger problems for their successors, as incentivized by their pseudo-free-market system.

The 90s 'boom' created an explosion in financial wealth, wealth that had to work hard to find decent returns.  (The manipulation of the yuan down was done by buying dollars by the Chinese central bank and lending them back to America -- America became awash in paper wealth.)

So this paper wealth went into the 'internet boom' and created the dot-com bust of 2001, and then went into the 'housing boom' and created the 2008 bust.

It's all very predictable really.  All assets that are directly or indirectly propped up by the Western central authorities will crash, and have done so since the Spanish global empire.  Just be sure to live long enough if you want to bet against them!
This is a good short explanation, but the same sorts of things will happen to China.
  
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BobK71
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Re: What caused the housing bubble and bust in 2008?
Reply #25 - May 22nd, 2019 at 3:19pm
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Jeff wrote on May 22nd, 2019 at 2:41pm:
Government involvement through regulation and the manipulation of interest rates and the money supply, but you can't call that "socialism".


'Financial socialism' is a good name because the failings of this system are fundamentally the same as what we normally call 'socialism.'

Basically, power corrupts.  The centralization of power causes exploitation, which needs the suppression of press freedom to cover up.  At some point, military force is required to prop up the web of theft and deceit. 

The distinction is only in the location of power centralization, in the entire economy, vs. the core of that system, ie money and finance.
  
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Jeff
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Re: What caused the housing bubble and bust in 2008?
Reply #26 - May 22nd, 2019 at 7:58pm
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BobK71 wrote on May 22nd, 2019 at 3:19pm:
'Financial socialism' is a good name because the failings of this system are fundamentally the same as what we normally call 'socialism.'

So Mercantile systems were/are "socialism"?
  
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BobK71
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Re: What caused the housing bubble and bust in 2008?
Reply #27 - May 23rd, 2019 at 4:22pm
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Jeff wrote on May 22nd, 2019 at 7:58pm:
So Mercantile systems were/are "socialism"?


China's mercantile policies (with implicit co-operation from the US) were only one manifestation of the problems of the central planning of money.  Central planning of money was what allowed the People's Bank of China to print yuan to buy dollars.

And the only real difference between centrally planning money and centrally planning the entire economy is that the fundamental problems of power concentration are hidden in the former case.  The problems don't go away.

China (and the entire world) is no less financially socialist than the West; indeed even more so.
  
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Re: What caused the housing bubble and bust in 2008?
Reply #28 - May 23rd, 2019 at 5:39pm
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BobK71 wrote on May 23rd, 2019 at 4:22pm:
China's mercantile policies (with implicit co-operation from the US) were only one manifestation of the problems of the central planning of money.
Yeah yeah, blah blah. Are you calling China's mercantile policies "socialism" or not?

We can get back to that other crap later... Try not to forget!
  
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Jeff
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Re: What caused the housing bubble and bust in 2008?
Reply #29 - May 23rd, 2019 at 5:42pm
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BobK71 wrote on May 23rd, 2019 at 4:22pm:
China (and the entire world) is no less financially socialist than the West; indeed even more so.
You don't say? So you are saying that China's mercantile system is "socialism"...

Is it "Democratic Socialism"? Grin Grin Cheesy Cry Cry Cry

No. It's mercantile tyranny.
  
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