Ping!
“The present slump wasn’t brought on by a downturn in the business cycle or a mismatch in supply and demand.”
If the demand was driven by cheap credit, wouldn’t that make it mismatched to supply? If one is not able to purchase something, without cheap credit, then was there really demand there in the first place?
Debt securitization is a foundation of the “free trade” system promoted by the Bush Clinton Bush administrations. It allowed foreigners to ‘invest’ in the US economy, one of the ‘bargaining chips’ in the many “free trade” secretariats.
“free trade” is a tool for the destruction of the US domestic economy, and nothing more.
Securities created out of the asset based securitization process is only as good as the debt paper that goes into them. Securitization was fine until they started loading up the pools with subprime debt. From my regulator friends, the worst of it occurred between 2003 and 2007. With the correct qualitative controls, securitization can, and should, live and serve us well again.
” This transformation in the way credit is supplied has made it difficult for the Federal Reserve to reignite credit growth through massive expansion of the Federal Reserve balance sheet, which was the supposed 1930’s style antidote.
” The old-style banking system, in which banks kept the loans they made on their balance sheets, would have responded quickly to Bernanke’s interest rate cuts and aggressive injections of excess reserves.”
Wrong!
It emerged with the fiat creation of Fannie Mae as part of FDR's New Deal in 1934.
Gee, somebody should have put a stop to that. Oh, well.
yet NOBODY is reporting how this started.
Banks were forced to make loans to unacceptable risks. The Politicians and activists that forced the risks did not think, at all. The politicians and activists did not and do not understand that banks do not have to keep the promisory note. banks sold those forced hih risk loans ASAP.
The banks then discovered if they used inflated prices they got more in the ASAP sale. The politicians were forced to go along because the high risk sales were caused by them. It became a feedback loop.
The snowflake that started the avalanch. Obama is just firing cannons into the mountain to keep the avalanch going.
Domestic manufacturing has been trending downward since '98. Any little uptick since then & now were glitches against the trend.