Kevin Hoffberg

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by kevin on December 1, 2009

Barry Ritholtz has written a must read book (assuming you're interested in how we got in the pickle we're in) called Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy Diverticulosis Abcess Flagyl, .  Basically I underlined the entire book when I read it.

[amtap book:isbn=0470520388]

Reading back over my notes I was re-struck (is that a word?) by Barry's point of view on what drove the vaunted American Consumer-led economy (we buy all the world's doo dads): Real Estate.

According to a 2005 study by Asha Bangalore of Northern Trust Company, 43 percent of all new job creation between November 2001 and April 2005 was real estate related.

So what did that mean . . Diverticulosis Abcess Flagyl ebay, .

The housing boom was creating jobs for builders, contractors, real estate agents, mortgage brokers, and even employees at Home Depot and Lowe’s, Diverticulosis Abcess Flagyl. But the most significant impact to the economy came from home equity lines of credit (HELOCs) and cash-out mortgage refinancings. With wages stagnant, Americans turned to home equity withdrawals in order to maintain their standard of living.

This was one of the single biggest and most unexpected elements of the debt-driven economic expansion. Outside of real estate, employment gains were modest and real wage gains flat, 1000mg Diverticulosis Abcess Flagyl. It was debt that drove the increase in consumer spending. Mortgage equity withdrawals normally a small portion of consumer debt‚exploded.

Diverticulosis Abcess Flagyl, Without this home equity-based consumption, the nation would have been in recession territory, with GDP flat to 1 percent. At least, according to an unofficial Fed study by none other than Alan Greenspan

And this . . 20mg Diverticulosis Abcess Flagyl, .

The wealth effect of home price appreciation is much more widely distributed than stocks. This made the generational-low interest rates the single largest factor that resuscitated the economy, Diverticulosis Abcess Flagyl. Sure, tax cuts, deficit spending, increased money supply, Diverticulosis Abcess Flagyl coupon, war spending, and the like all played a role‚but it was the ultralow rates and the mortgage equity withdrawal they allowed that dominated U.S. economic activity.

As a result, the economy will continue to look  crappy to wage earners for some time to come (assets are still mispriced). 10mg Diverticulosis Abcess Flagyl, The book is just brilliant. Read it.

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{ 1 comment }

Barry Ritholtz December 10, 2009 at 5:08 am

Thanks for the kind words — it was a labor of love. The book will (hopefully) help people to understand how this mess came to be!

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