baker - false profits; recovering from the bubble economy (2010)

[...]... foreseen them After all, we’re only human, and no one can predict the future The foregoing is the main motive for writing this book It is a follow-up to my book explaining the origins of the bubble: Plunder and Blunder: The Rise and Fall of the Bubble Economy (PoliPointPress, 2009) The elites should not be allowed to perpetuate the falsehood that it was not their fault Their failure to recognize the housing... They also ignored the inevitability that this bubble would collapse and devastate the economy One can speculate about the reasons our economic leaders ignored this massive threat to the well-being of the economy and the country as a whole For a while, everything seemed fine, as long as the growth of the bubble expanded the economy and created jobs In addition, politically well-connected people in the. .. this country The basic story is that the people who failed to warn of the housing bubble are the people in charge of repairing the damage The people reporting on finance today are for the most part the same people who ignored the bubble in the years 2002–2007 They have little interest in admitting how easy it was to both recognize the bubble and predict the resulting damage from its collapse The economists... in the 1970s and early 1980s, when the baby boomers were first forming their own households, than in the bubble years By the mid-1990s, the overwhelming majority of the baby boomers who would ever be homeowners already owned a home These families were watching their children finish school and leave home By the end of the housing bubble, the oldest baby boomers were already in their 60s If anything, the. .. policymakers in the future The Story of the Housing Bubble The basic story of the housing bubble and its collapse is simple For 100 years, from 1895 to 1995, nationwide house prices in the United States tracked the overall rate of inflation This trend meant that, on average, house prices rose at the same rate as the price of other goods: food, cars, clothes, and so on 18 FALSE PROFITS Differences in the rate... aggravated the downturn, the current economic situation would be little changed if the financial system were instantly restored to perfect health The core problem is that the economy developed serious imbalances as a result of the growth of the housing bubble In the short term, the only way to offset the loss of demand caused by the collapse of the housing bubble is through massive deficit spending In the. .. America The basic story of the economic crisis is that the top economic leaders acted as though they were ignorant of third-grade arithmetic The fact is, they are not—these are intelligent people—but they ignored enormous imbalances in the U.S economy that could have been easily detected with nothing more than a third-grade education and common sense Specifically, they ignored the growth of a housing bubble. .. routinely refer to the recession as a “financial crisis.” The implication is that the financial system is at the root of the problem and that fi xing the financial system is the way to restore the economy to its normal growth path Although the failings of financial regulation certainly allowed the bubble to grow much larger than otherwise would have been possible, and the troubles in the financial system... IS THEIR FAULT 15 blown the whistle were looking for something more The top executives of Citigroup, Lehman Brothers, Bear Stearns, and other financial institutions central in providing the financing that propped up the bubble had no interest in bringing the party to an early end What about after the fact? Once the bubble burst and the damage had been done, we would expect the people who failed at their... actually built into the system The Fed is structured so that the private-sector banks dominate the boards that control the 12 Fed district banks that comprise the Federal Reserve System, along with the Board of Governors located in Washington DC These boards then select the Fed district bank presidents These 12 bank presidents sit on the Fed’s Open Market Committee, which determines interest-rate policy, .  - -  -  - (alk. paper) PDF e-book ISBN  - -  -  - IDPF e-book ISBN  - -  -  - Mobi e-book ISBN  - -  -  -  - Production management: BookMatters Book and Cover design:. ordering. Berrett-Koehler and the BK logo are registered trademarks of Berrett-Koehler Publishers, Inc. First Edition Paperback Print eidtion, ISBN  - -  -  - (alk. paper) PDF e-book ISBN  - -  -  - IDPF. housing bubble to grow unchecked. Arguably, the Fed even fostered the bubble s growth, see- ing it as the only source of dynamism in an economy that was su ering from the a ershocks of the collapse