The big short, the housing bubble and the financial crisis

http://cepr.net/blogs/beat-the-press/the-big-short-the-housing-bubble-and-the-financial-crisis

by pilooch • 11 years ago

30 6 11 years ago

cepr.net

danmaz74• 11 years ago

Working cached link: http://webcache.googleusercontent.com/search?sourceid=chrome...

klenwell• 11 years ago

On this topic, I always like to point to this illustration from The New York Times:

http://graphics8.nytimes.com/images/2005/06/15/business/arm3...

Notice the date: 2005. That was around the time I started asking around, "How can I short the housing market?"

I felt relieved reading The Big Short because it revealed that there wasn't any way to do so at the time, especially for a little schmuck like me. And even the guy who eventually figured out how to do it, Michael Burry, ended up fantastically wealthy and, according to Michael Lewis, deeply embittered.

On this article, I agree that trying to treat the Housing Bubble and Financial Crisis as independent events seems disingenuous. (Are there really serious people trying to do this?)

Nevertheless, I question this claim:

We are supposed to feel good about this because it saved us from a Second Great Depression. But there was nothing about the collapse of these banks which would have condemned us to a decade of double-digit unemployment.

I abhor Wall St. and the industrial-finance complex it has created almost as much as any Teapartier or Wall-Street-Occupier. But I don't understand the scenario where those firms collapse and civilization as I know isn't put in, if not serious peril, then unnecessary peril.

toolz• 11 years ago

If those giants were allowed to fall, there would be a vacuum that will be filled faster than we would even notice. The only real problem is if the collapse causes enough uncertainty that people stop spending money, but really, are you more confident now that the giants are being propped up than you would be if they were replaced?

echochar2• 11 years ago

"8 trillion (@ 60 percent of GDP) in ephemeral housing equity"

"loss of 8 trillion in housing wealth"

Is this true?

How do you create 8 trillion in wealth?

If it was "lost" then who has the 8 trillion now?

ArkyBeagle• 11 years ago

http://www.merriam-webster.com/dictionary/ephemeral

echochar2• 11 years ago

https://en.wikipedia.com/wiki/Monetary_circuit_theory

The big short, the housing bubble and the financial crisis

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