Thursday , February 25 2021
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What caused the 2008 housing market "crash."

Summary:
It was a failure of a proper response. It could have been avoided. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/mmt-trader/?s2-ssl=yes/ Download my podcasts! New one every week. https://www.buzzsprout.com/1105286 Mike Norman Twitter https://twitter.com/mikenorman

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It was a failure of a proper response. It could have been avoided. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/mmt-trader/?s2-ssl=yes/ Download my podcasts! New one every week. https://www.buzzsprout.com/1105286 Mike Norman Twitter https://twitter.com/mikenorman What caused the 2008 housing market "crash."
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

16 comments

  1. It wasn't mismanagement Mike they knew exactly what they were doing.

  2. Mike is gonna join Trump's new Patriot Party in 2024 as Treasury Secretary

    • Trump is starting a new political party? Please no, not that! As a liberal, I would surely feel so owned. That would be worse than even being thrown in the briar patch.

    • @NoExitLoveNow your opinion has zero value !!! get lost and start your own comment

  3. great video thanks – what do you think of long island real estate going from here? should I buy or wait? thanks

  4. The 2008 recession was a traditional recession but the current recession is a digital recession the problem is that many people are in debt but have digital assets
    Eg digital collateral etc but banks dont value or accept digital assets as digital collateral and as such wont lend to people that have digital collateral so a person with digital collateral cannot use their digital colateral to refiinance themselves to pay off traditional debt so they end up staying needlessly in debt through the banks inability to recognise the value of digital assets

  5. Mike – Like the format of the question thing. I have been studying MMT now for about 6 years (thanks for stumbling across Mr Mosler) and I have a question and would be really grateful if you could answer it. There are some economists that now except that banks create 'money' when extending a loan. This was confirmed in the BoE paper 'Money creation in a modern economy' too. Can you explain the ratio of how this commercial bank created 'book money' varies in relation to government created money via deficit spending please? Is it cyclical like when Clinton ran a surplus…would this mean the commercial banks would create more book money based on demand and the government less? In a recession, does this reverse and the ratios tip? I think I get this ratio idea and how it varies but an explanation would be great as it's one part I still struggle to get my head around. All I remember the UK chancellor at the time was telling banks to increase lending at the time and I can only assume that the government had to step in to counter-balance the reduction in commercial bank created money? (I'm from the across the pond BTW).

  6. It is true the sub prime was only a tiny fraction, but it was a tip of a private debt iceberg. The notion that increasing deficit spending would have solved the problem is imo incorrect, as far as it does it only exacerbates private debt lending, as we know public debt does not 'crowd out' private debt but adds to it's momentum so all other things being equal it would have made the situation worse. Public debt should not be their to sustain systemic problems in the economy, but to sustain genuine growth and recovery from and such problems. Adding to the huge oversupply of speculative units ( largely condos) would have only made the situation worse.
    So governments must both allow a massive shift in private debt, a fall in land/house prices without cratering the financial and real economy. Adding to public debt in the midst of a speculative bubble must then be mitigated by even stronger measures to eliminate that systemic problem.
    Real estate moves slowly, prices peaked in 06 in the US and most of the fall occurred till 09 though they didn't begin to recover till 2011/12. Of course austerity prolongs the dip in the economy and public debt must be facilitated in the recovery but it cannot be at ever higher land/house prices. Telling both banks whose collateral is mostly real estate, and the population that their house prices must fall 20% rather than letting the market fall is no easy feat for even the most authoritarian governments, that is why the economy crashes and doesn't even have a chance of recovering until prices are sustainable.

    Governments around the world are cutting lending requirements for mortgages, creating 'first time buyer' subsidies, Australia is even paying foreign buyers to 'invest' in ie speculate on the price of real estate.
    Australia are a good example of an economy that avoided the worst of the GFC, they sent everyone stimulus checks, they had the benefit of strong links to China and their credit expansion, they also had higher IR's which allowed them a mechanism for house price growth though now they are near Zirp like much of the rest of the world.
    But this economic miracle of the lucky country came at a cost, because house prices only fell moderately, they have one of the highest private debt burdens in the world, it is now impossible they will avoid the worst effects of the next major housing crash
    The US has a prime age labour force bump from 2020-24, that is very bullish too. US housing has been very strong throughout the pandemic, though it will moderate price growth this year that is temporary and the resilience of the sector will attract more speculation and another construction oversupply.
    This boom will I am sure lead to another GFC around 2026/7 as I see nothing in policy (land value tax would do it) to mitigate the private debt fuelled land speculation that always parasitically jumps on the back of the recovery and absorbs the gains for the 1%.

  7. And the private sector deficit (government surplus) and raising interest rates popped the dot com bubble. Wealth inequality, asset price inflation and populism can always grow in this messed up system we live in. Great country if you own financial assets. The Plebs clearly don’t like it

  8. Neoclassical economics doesn’t think there is such a thing as unearned income….

  9. That's The Recipe

    exit ur positions mate, they are gonna tank the markets for their "great reset"

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