“Securitization soared between 2003 and 2006 when US current account deficit skyrocketed to nearly $800 billion per year. That’s when ‘America’s banks discovered that they could borrow money cheaply from Asia and lend it out in higher-yielding domestic mortgages while using sophisticated financial engineering to wall off and strictly control their risks.’(Brad Delong)
“The US was consuming $800 billion more per year than it was producing, but the damage remained invisible because foreign governments and investors were recycling their savings back into US Treasurys, GSE bonds (Fannie Mae), and mortgage-backed securities (MBS). It was a windfall for Wall Street that put the investment banks and hedge funds deep in the clover.”
We used to make products in America. Now we only make “money”. Or used to, anyway.