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When did the housing bubble begin?

 
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PostPosted: Tue Nov 17, 2009 2:23 pm GMT    Post subject: When did the housing bubble begin? Reply with quote

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Description: When did the housing bubble begin?
URL: http://bubblemeter.blogspot.com/2009/11/when-did-housing-bubble-begin.html?ref=b ...truncated...
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admin
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PostPosted: Tue Nov 17, 2009 2:26 pm GMT    Post subject: Reply with quote

Here's an excellent point from the post which hadn't occurred to me before:

Quote:
I notice that the Edward Pinto article blames the housing bubble on the Community Reinvestment Act (CRA). For Republicans who want to blame the bubble on the CRA and for Democrats who want to blame the bubble on bank deregulation, let me point out that the housing bubble was a global event. There was/is a simultaneous housing bubble in the United States, Australia, Britain, Ireland, and Spain, to name a few countries. The CRA does not explain why there was a bubble in Spain. Also, the November, 1999, passage of the Gramm-Leach-Bliley Act does not explain why real U.S. home prices began their ascent two years earlier.


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john p



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PostPosted: Tue Nov 17, 2009 10:40 pm GMT    Post subject: Reply with quote

I totally agree that the housing bubble is within a global context. The expansion of derivatives, cheap credit, and emerging markets kept the brakes from working in Capitalism and "trickle-down" economics never worked.

Imagine a rain cloud filling with water vapor and instead of it getting so dense that it starts to rain down (trickle-down economics), the atmosphere just expands and expands due to the growth in the money supply due to the expansion of credit (the inverted pyramid of liquidity).

What the Community Reinvestmemt Act did was allow poor people to get uprooted and sucked up into that tornado that sent the wealth to the rich.

http://seekingalpha.com/article/167119-on-the-rise-of-gold

http://www.organicdesign.co.nz/Bursting_of_the_global_liquidity_bubble

I don't care if Spain is irresponsible, I care that the United States is irresponsible.

The Democrats who pushed the CRA were honorable men who honestly cared and fought for poor people. Unfortunately, they don't believe in Capitalism and allow things to get unaffordable and trust that prices will naturally come back down to the affordable reach height. I believe in Capitalism and if you ask too much for a pizza, the pizza shop will get the message and lower their price. Instead, the Democrats allowed people to put the pizza on their credit cards so the pizza shops never had to lower their price.

The CRA kept the brakes from working. I don't think it was entirely to blame, but it was totally the wrong thing and it now has provided an excuse for irresponsibility because how can you get mad at a Investment Bank for buying what the US Government was guaranteeing?
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PostPosted: Wed Nov 18, 2009 10:05 pm GMT    Post subject: Reply with quote

I agree with what you are saying that the CRA was well intentioned but the wrong thing to do nevertheless. What I think the comment that I quoted makes a very good case for is that not only was the CRA not "entirely to blame" for the housing bubble, it wasn't even mostly to blame. Many other countries had a housing bubble in parallel with ours and the CRA could not have directly caused their bubbles. Unless you take the position that it was a mere coincidence that so many countries had such massive housing bubbles simultaneously, the most prominent causes cannot be things that were limited to a single country, like the CRA. (Which isn't to say that the CRA didn't make a bad situation worse.)

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