Credit Crisis 2008

Debt Financing crisis of 2008

It may look like a crisis, but it's only the end of an illusion.

kicked off by the Sub-Prime mess?

Thomas Palley says it's the outcome of the "GreatModeration" - the flattening of Business Cycle (downsides) at the cost of a retreat from Full Employment combined with the transitional factors of disinflation, asset price inflation (Real Estate, CommoditIes, end of Cheap Oil), and increased consumer borrowing (Consumer Debt)

Peter Kaminski summary

Aug'2014: Brad De Long thinks it's time to call this a Depression.


My policy recommendations (Mar'2009)

Stabilize Debt Financing market (Bail-Out?)

Stabilize Mortgage Debt market (Sub-Prime)

  • nobody really deserves rescuing here

  • but some sort of managed-WorkOut needs to be imposed z2009-02-12-BankForeclosureBattle to reduce fear/panic (the mortgage holders don't really want to end up sitting on a bunch of empty houses - they're just playing chicken)

  • wind down FannieMae and FreddieMac

  • provide subsidy to turn of some of the empty space into Third Place-s [z2009-03-14-HeifermanSocialStimulus]

Economic Stimulus: what is worth adding to National Debt?

Meta-issue: this is really just a financial-system symptom of an underlying Economic Transition. So cleaning up the Financial System breakage might reduce its drag on the future, that won't necessarily "solve the problem".


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