mortgage debt

Rethinking the Economics of Land and Housing
by Josh Ryan-Collins , Toby Lloyd and Laurie Macfarlane
Published 28 Feb 2017

In the UK, banks create 97% of the money supply via their lending activity with the remaining amount created as cash by the Bank of England and Treasury. As shown in Figure 5.2, mortgage debt outstanding has increased from around 30% of real disposable income in 1987 to almost 100%, helping to drive up average house prices from four times disposable income per household to ten times. This of course disguises large regional variations – in more desirable areas such as London and the South East the ratio is up to twenty times (ONS, 2015c). Recent research shows that when housing costs (including mortgage debt and rents) are included in an assessment of changing living standards since 2002, over half of UK households across the working age population have seen falling or flat living standards (Clarke et al., 2016).

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Recent research shows that when housing costs (including mortgage debt and rents) are included in an assessment of changing living standards since 2002, over half of UK households across the working age population have seen falling or flat living standards (Clarke et al., 2016). Figure 5.2 House prices and mortgage debt compared to income in the UK (source: ONS, Nationwide and Bank of England; data de‹ated using 2010 prices) The impact of rising housing costs is not distributed equally across populations of course. In 2013, 1.17 million households had mortgage debts amounting to more than 4.5 times their disposable income – representing nearly one in seven (13.2%) households with mortgages (ONS, 2015a, p. 1). We turn to inequality in the next chapter.

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But before moving on to the history, it is first worth asking why policy makers and most economists did not, at least until the crisis of 2007–8, pay more attention to the divergence between mortgage debt, land and property prices and incomes. 5.3 Mortgage finance, the ‘lifecycle’ model and the role of collateral Since the 1960s up until the crisis of 2007–8, the dominant conception of the role of house purchase and mortgage debt in economic theory was the ‘lifecycle model’.5 Also described as the ‘permanent income’ hypothesis (Friedman, 1957), the theory suggests that individuals spread or smooth their consumption and savings behaviour over the entire course of their lives.

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again
by Atif Mian and Amir Sufi
Published 11 May 2014

Using a longer historical pattern (based on the household-debt-to-GDP [gross domestic product] ratio), economist David Beim showed that the increase prior to the Great Recession is matched by only one other episode in the last century of U.S. history: the initial years of the Great Depression.7 From 1920 to 1929, there was an explosion in both mortgage debt and installment debt for purchasing automobiles and furniture. The data are less precise, but calculations done in 1930 by the economist Charles Persons suggest that outstanding mortgages for urban nonfarm properties tripled from 1920 to 1929.8 Such a massive increase in mortgage debt even swamps the housing-boom years of 2000–2007. The rise in installment financing in the 1920s revolutionized the manner in which households purchased durable goods, items like washing machines, cars, and furniture.

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But in Spain a law from 1909 stipulated that most Spanish home owners remain responsible for mortgage payments—even after handing over the keys to the bank. If a Spaniard was evicted from his home because he missed his mortgage payments, he could not discharge his mortgage debt in bankruptcy. He was still liable for the entire principal.1 Further, accrued penalties and the liabilities followed him the rest of his life. And bankruptcy registers made it difficult for him to lease an apartment or even get a cell phone contract.2 As a result of these laws, mortgage-debt burdens continued to squeeze Spanish households even after they were forced out of their homes. Suzanne Daley of the New York Times reported on the story of Manolo Marban, who in 2010 was delinquent on his mortgage and awaiting eviction.

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In 2011 Harvard economist and president emeritus of the National Bureau of Economic Research Martin Feldstein wrote that the “only real solution” to the housing mess was “permanently reducing the mortgage debt hanging over America.”22 Top economists who met with the president and vice president in 2011 said that the president “could have significantly accelerated the slow economic recovery if he had better addressed the overhang of mortgage debt left when housing prices collapsed.”23 In 2011 Carmen Reinhart concluded that “a restructuring of U.S. household debt, including debt forgiveness for low-income Americans, would be most effective in speeding economic growth.”24 Lessons from History There are sound microeconomic and macroeconomic reasons for government intervention to restructure household debt during a levered-losses episode.

Walk Away
by Douglas E. French
Published 1 Mar 2011

The data showed that a borrower ... willing to invest with a risk level associated with the S & P 500 would benefit from a 30-year mortgage.” “Effect on Net Worth of 15- and 30-Year Mortgage Term.” Journal, Association for Financial Counseling and Planning Education, 2004. “The popular press, following conventional wisdom, frequently advises that eliminating mortgage debt is a desirable goal. We show that this advice is often wrong ... mortgage debt is valuable to many individuals.” “Mortgage Debt: The Good News.” Journal of Financial Planning, September 2004. “... U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice ... in the aggregate, these misallocated savings are costing U.S. households as much as $1.5 billion dollars per year.”

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But these building and loan associations paid high rates to savers and so in turn the mortgage loans were at high rates. Herbert Hoover pushed for mass homeownership on a large-scale with the aid of government coordination and regulation of development. During the roaring ‘20s residential mortgage debt tripled, but “much of this financing consisted of a crazy quilt of land contracts, second and third mortgages, high interest rates and loan fees, short terms, balloon payments, and other high risk practices,” explains Weiss. The presidential election of 1928 had Secretary of the Commerce Hoover vs.

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In October of that year as the housing bubble expanded, Bush told the nation, “We’re creating ... an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property.” However, the ownership society came with a huge debt burden. Mortgage debt in the U.S. more than doubled form $6.3 trillion at the start of the decade to $14.4 trillion by the end of 2009 two years after the market crashed. Nationwide, the price of housing rose 86 percent. “The economy became governed by a new exercise in make-believe, the notion that housing prices could never fall,” wrote Peter Goodman.

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

With no investment in the house, none of her money is exposed to the risk that the subsequent value of the house might not be enough to pay the mortgage debt; she can never lose, but she will gain if the house appreciates by more than is needed to pay the mortgage debt. The house will become a kind of money machine for Kate; allowing her to enjoy the full upside while facing no downside. The downside will be fully borne by Aunt Claire. Banks Have Uncle Sam The relation between Kate and Aunt Claire in the example is similar to the relation between banks that are too important to fail and taxpayers. Just as Aunt Claire steps in when Kate cannot pay her mortgage debt, governments often support banks when they cannot pay their debts.

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She saves 1 percent in interest on the loan of $270,000, which amounts to $2,700 for the year. This leaves Kate with more money after paying the mortgage debt. For example, if the house subsequently increases in value by 5 percent to $315,000, we saw in Chapter 8 that Kate will be left with $34,200, a 14 percent return on her equity investment, if she borrows at 4 percent. If she borrows at 3 percent and owes only $278,100, she will instead have $36,900 left, a 23 percent return on her equity investment, after selling the house for $315,000 and paying her mortgage debt. The saving of $2,700 in interest will also soften the blow should Kate lose some of her investment, assuming that she is still “above water” and able to pay her mortgage.

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How does the situation in which Kate invests only $10,000 instead of $30,000 in the house compare to that in which she invests $30,000? If Kate borrows $290,000 for a year at 3 percent, her interest payment is $8,700, so she owes $298,700. In this case, Kate will become underwater and will be unable to pay her mortgage debt from selling the house if the house subsequently sells for less than $298,700. For example, if the house sells for $285,000, Kate will default on her mortgage debt if she borrows $290,000. In this scenario, Aunt Claire will have to pay $13,700 to make sure the bank is paid the full $298,700 that is owed. By contrast, if Kate borrows only $270,000 and puts $30,000 in as a down payment, she will absorb the entire loss without needing the guarantees.

Borrow: The American Way of Debt
by Louis Hyman
Published 24 Jan 2012

The federal government’s role in housing in 1971, when federal programs subsidized 30 percent of housing starts, was shockingly higher than the 4.4 percent subsidized in 1961, and, according to Nixon administration officials, “much of the increase in housing units … occur[ed] in section 235.”8 Government-sponsored mortgage debt accounted for 20 percent of the overall increase in mortgage debt in 1971.9 While in operation, Section 235 marshaled mortgage-backed securities to transform hundreds of thousands of Americans from renters to owners. Section 235 created such an upswing in housing that by 1972, the president of MBA could declare it the “principal system” for low-income housing.10 Poor Americans across the country left rented quarters for what they believed would be a true piece of the American dream.

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A third of all American families who qualified for “relief” at the height of the Great Depression landed there by losing a construction job. Dick didn’t work in construction, but his business, building automobiles, was hit just as hard. The 1920s were similar to today in terms not only of young love and mortgage debt but of all forms of debt. In fact, it was the spread of automobile debt that had given Dick his job in the first place. Automobile finance emerged after World War I as one of the hottest industries, spreading its methods in just a few years to nearly all other household durables. Vacuum cleaners, washing machines, and oil burners could all be had on the installment plan.

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The Mortgage Bankers Association rolled out the ill-named “6–6–6 program” to reassure investors that with six guiding principles formulated over six months, the real estate bond market could be disciplined within a half year.23 Even amid these crises, Americans invested approximately $1 billion in mortgage bonds in 1926. At their peak, real estate bonds funded one-quarter of all urban mortgage debt, equal in volume to the bonds of industrial corporations. Particular examples of failure could not dampen most small investors’ faith in the reason of real estate. Yet by 1927, even conservative probusiness groups such as the Rotary Club found naysayers castigating mortgage bonds in the pages of their official publications.

Underwater: How Our American Dream of Homeownership Became a Nightmare
by Ryan Dezember
Published 13 Jul 2020

But when the U.S. housing market collapsed in 2007, the property’s value fell far below the amount I had borrowed to buy it. Walking away was never an option. I’d signed papers promising to pay the money back and I intended to do so one way or another. In case my moral compass ever needed a shake, laws in Alabama, as in many states, allow lenders to pursue the difference between the mortgage debt on a property and what it fetches in a foreclosure sale. For much of the next decade, that number kept growing. At one point, it would have been nearly $70,000. That was more than half of what we’d borrowed to buy the place. When I bought the house, I was a newlywed three years out of college who believed I had achieved a signature goal of most young Americans.

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A real estate agent in Alabama with whom I had been consulting said that if I fixed the house up and put it on the market in spring, when buyers were out and the yard was in bloom, I might be able to get $115,000 for it. That was $22,500 less than I’d paid, but it would be enough to wipe out the mortgage debt and cover most of the sale expenses. At the end of March I took a week off work, packed a rental car with tools and a sleeping bag, and headed south. 2 THE CONDO GAME Alabama’s beaches are among the most alluring in America. They are made of tiny bits of Appalachian quartz, glistening mountain dander that washed down to the Gulf of Mexico on glacial melt after the last Ice Age.

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Interest rates declined. A decades-long boom in homeownership and home prices ensued. By the time I was born, in 1980, to the proud new owners of a small postwar Cape Cod in a woodsy beach town in suburban Cleveland, nearly two-thirds of Americans were homeowners. They had taken on more than $1 trillion of mortgage debt to get there. But that was nothing compared with what was coming. In 1978, a bond trader named Lewis Ranieri was assigned to the nascent mortgage desk at the venerable Wall Street investment firm Salomon Brothers. The housing market was never the same. Ranieri was one of the “fat guy” mortgage traders who engaged in the trading floor feeding frenzies with sacks of cheeseburgers and tubs of guacamole portrayed by Michael Lewis in his chucklesome Wall Street tell-all Liar’s Poker.

Panderer to Power
by Frederick Sheehan
Published 21 Oct 2009

Household net worth had risen $2.8 billion from stock gains in 1995, $2.5 billion in 1996, $3.8 billion in 1997, $3.3 billion in 1998, and $4.75 billion in 1999.1 This does not count stock-option cash outs or the contribution of house sales and home equity. In the 1990s, total mortgage debt (commercial, residential, and farm) rose an average of $268 billion a year.2 In 1995, total mortgage debt increased $233 billion, and home mortgage debt increased $153 billion.3 1 Gloom, Boom & Doom Report, September 2000. 2 Doug Noland, “Credit Bubble Bulletin,” Prudent Bear Web site, March 9, 2007, p. 12. 3 Federal Reserve Flow-of-Funds Accounts, Z-1. 265 That was when Larry Lindsey told the FOMC, “[T]here has been a lot of easing of credit terms.

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The stock market bubble was needed as a supplement. In 2000, home mortgage debt rose $380 billion.4 Stock market collateral could, in part, explain how households were able to buy more and higher-priced houses. By 2001, though, the mirage of Internet wealth was collapsing. Median household incomes were falling (after having risen between 1994 and 2000),5 and layoffs were rising. Yet, Americans acquired $506 billion of new mortgage debt. By most standards, 2002 was an even worse year for Americans (stock prices and incomes continued to fall), but they added an additional $708 billion of mortgage debt. Greenspan’s Attempt to Block Fannie and Freddie The backbones of the government effort to stoke credit were Fannie Mae and Freddie Mac.

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In the same speech, Bernanke went on to discuss other data that should have caused a stir: “[T]he expansion of subprime lending has contributed importantly to the substantial increase in the overall use of mortgage credit. From 1995 to 2004, the share of households with mortgage debt increased 17 percent, and in the lowest income quintile, the share of households with mortgage debt rose 53 percent.” Reading the transcript, it appears Bernanke considered this to be good news. He did advise “greater financial literacy” for “borrowers with lower incomes and education levels.”19 The former South Carolina seventh-grade spelling bee champion often urged self-improvement. 15 Paul Muolo and Matthew Padilla, Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis (Hoboken, N.J.: Wiley, 2008), pp. 170–171.

The greatest trade ever: the behind-the-scenes story of how John Paulson defied Wall Street and made financial history
by Gregory Zuckerman
Published 3 Nov 2009

Paulson’'s team would pick a hundred or so mortgage bonds for the CDOs, the bankers would keep some of the selections and replace others, and then the bankers would take the CDOs to ratings companies to be rated. Paulson would buy CDS insurance on the mortgage debt and the investment banks would find clients with bullish views on mortgages to take the other side of the trades. This way, Paulson could buy protection on $1 billion or so of mortgage debt in one fell swoop. Paulson and his team were open with the banks they met with to propose the idea. “"We want to ramp it up,”" Pellegrini told a group of Bear Stearns bankers, explaining his idea.

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In 1758, Benjamin Franklin wrote: “"The second vice is lying; the first is running in debt.”"1 The dangers of borrowing were brought home in the Great Depression when a rash of businesses went bankrupt under the burden of heavy debt, scarring a generation. In the 1950s, more than half of all U.S. households had no mortgage debt and almost half had no debt at all. Home owners sometimes celebrated paying off their loans with mortgage-burning parties, setting loan documents aflame before friends and family. The practice continued into the 1970s; Archie Bunker famously held such a get-together in an episode of All in the Family.

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Instead, most traders prefer “"positive”" carry trades, or those where profits are immediate and clear. Banks, for example, borrow money at low interest rates and lend it out at higher rates. A borrower may go belly-up, of course, but on paper the move looks like a winner. There didn’'t seem to be a more surefire positive-carry trade than selling insurance on even risky mortgage debt. Insurance companies like American International Group, huge global banks, and countless investors locked in instant gains from the premiums that Paulson and other bears paid for their CDS insurance. These profits sometimes meant the difference between hitting a profit goal and missing out on a huge bonus.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
by Gillian Tett
Published 11 May 2009

In subsequent months, Duhon heard on the grapevine that other banks were starting to do CDS deals with mortgage debt, and she wondered how the other banks had coped with the data uncertainties that so worried her and Varikooty. Had they found a better way to track the correlation issue? Did they have more experience with dealing with mortgages? She had no way of finding out. Because the CDS market was unregulated, the details of deals weren’t available, and she had no good intel sources at the other banks. Like most of those working on Demchak’s team, she had spent her entire career at J.P. Morgan. The team did only one more BISTRO deal with mortgage debt, a few months later, worth $10 billion.

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Dimon declared to his staff, and there was one sector in particular in which the bank really needed to catch up: mortgage finance. J.P. Morgan should have been able to raise its profile in the repackaging of mortgage debt quickly. Inside the vast, sprawling empire of JPMorgan Chase sat Chase Home Finance, one of America’s largest home loan mortgage originators. But though the volume of mortgages Chase had offered had surged as the housing boom took off, they were being sold to Lehman Brothers, Bear Stearns, and others for their mortgage CDO and CDS assembly lines. That was partly because the J.P. Morgan side had less experience with mortgage debt than with corporate loans, and was so leery about the risks involved with BISTRO-like products made from mortgages.

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He was a stickler for detail who loved to get things right, and that stubborn scrupulousness sometimes infuriated his colleagues, who were urgent to make deals. But Demchak always defended Varikooty. “Once, people shouted at Krishna and made him upset, and Demchak just went ballistic,” one of his teammates later recalled. Varikooty’s judgment on the mortgage debt was clear: he could not see a way to track the potential correlation of defaults with any level of confidence. Without that, he declared, no precise estimate of the risks of default in a bundle overall could be made. If defaults on mortgages were uncorrelated, then the BISTRO structure should be safe for mortgage risk, but if they were highly correlated, it might be catastrophically dangerous.

Aftershock: The Next Economy and America's Future
by Robert B. Reich
Published 21 Sep 2010

But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped. The borrowing had taken the form of mortgage debt on homes and commercial buildings, consumer installment debt, and foreign debt. Eccles understood that this debt bubble was bound to burst. And when it did, consumer spending would shrink. And so it did. When there were no more poker chips to be loaned on credit, debtors were forced to curtail their consumption.

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The drop in savings had its mirror image in household debt (including mortgages), which rose from 55 percent of household income in the 1960s to an unsustainable 138 percent by 2007. Ominously, much of this debt was backed by the rising market value of people’s homes. The years leading up to the Great Depression saw a similar pattern. Between 1913 and 1928, the ratio of private credit to the total national economy nearly doubled. Total mortgage debt was almost three times higher in 1929 than in 1920. Eventually, in 1929, as in 2008, there were “no more poker chips to be loaned on credit,” in Eccles’s words. And “when … credit ran out, the game stopped.” A third parallel: In both periods, richer Americans used their soaring incomes and access to credit to speculate in a limited range of assets.

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By 2007, as I said earlier, the typical American household owed 138 percent of its after-tax income. Americans borrowed from everywhere. Credit card solicitations flooded mailboxes; many American wallets bulged with dozens of cards, all amassing larger and larger debt loads. Auto loans were easy to come by. Students and their families went deep into debt to pay the costs of college. Mortgage debt exploded. And as housing values continued to rise, homes doubled as ATMs. Consumers refinanced their homes with even larger mortgages and used their homes as collateral for additional loans. As long as housing prices continued to rise, it seemed a painless way to get money (in 1980 the average home sold for $64,600; by 2006 it went for $246,500).

Debtor Nation: The History of America in Red Ink (Politics and Society in Modern America)
by Louis Hyman
Published 3 Jan 2011

The modern debt regime relied on this convertibility, not only to transform installment contracts into personal loans or credit card debts into home equity plans, but to turn the wages of labor into debt repayment as well. The transformation of labor into capital, and debt into other debt, is the crux of how the credit economy operates. To cordon off these transformations one from another, as we do when we, for instance, sanctimoniously discuss “non-mortgage debt” separately from “mortgage debt,” obscures the indispensable commutability of capital. For lenders, transforming capital into debt was the essence of their business. Capital ultimately comes from somewhere. When we need money, most of us wonder only if we can get it, and aside from the person who gives us the money, do not really care where the money comes from.

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The federal government’s role in housing in 1971, when federal programs subsidized 30 percent of housing starts, was shockingly higher than in 1961, when only 4.4 percent did, with “much of the increase in housing units . . . occur[ing] in section 235,” according to Nixon administration officials.16 Government-sponsored mortgage debt accounted for 20 percent of the overall increase in mortgage debt in 1971.17 While in operation, the Section 235 marshaled new financial instruments to transform hundreds of thousands of Americans from renters to owners. Section 235 created such an upswing in housing that by 1972 the president of the Mortgage Bankers’ Association could pronounce it the “principal system” for low-income housing.18 One prominent mortgage banker declared that Section 235 “answered the cry, ‘Burn, baby, burn’ with ‘Build, baby, build!”

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While these two events, the Tax Reform Act of 1986 and the first credit card asset-backed security, had nothing to do with one another, they both pushed all forms of consumer debt, in unexpected ways, toward complete interchangeability. Though the Tax Reform Act sought to differentiate credit card debt from mortgage debt, market forces and financial innovation like asset-backed securities pushed them back together. By the middle of the 1980s, credit cards and other non-mortgage debts were starting to be seen as something not to be encouraged. Owning a house, arguably, served a valuable social function by rooting home owners in a community, but auto loans, much less credit cards, did not. Yet taxpayers could deduct the interest that they paid on any and all consumer debt.

Stolen: How to Save the World From Financialisation
by Grace Blakeley
Published 9 Sep 2019

Members were bought out, becoming rich in the process, while new borrowers faced higher interest rates. Eventually many of these building societies — including Northern Rock — ended up undertaking the kind of sub-prime lending activities that caused the crisis. Throughout the 1980s, banks and former building societies issued millions of pounds worth of mortgage debt to allow people to purchase their own homes — many used this debt to purchase their council homes. This lending surge led to an increase in the UK’s broad money supply, which increased from around 40% of GDP in 1985 to 85% in 1990, mirrored by an increase in the amount of credit provided by financial institutions.40 There was now a wall of money chasing after the same amount of housing stock — and the inevitable consequence of such a scenario is house price inflation.

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Thatcher may have talked about freedom, but she created a society based on unfreedom: the non-choice between work at a wage below what one deserves and destitution. Similarly, Thatcher’s government never actually tackled inflation or the money supply, despite its monetarist rhetoric. The broad money supply increased dramatically over the course of the 1980s because of rising mortgage debt. Instead, they focused on curbing wage-inflation by cutting the size of the state and restricting collective bargaining. Asset prices — mainly houses and other financial assets — rose substantially under Thatcher, even as consumer price inflation was brought under control. The ideological battle between individual freedom and collective justice provided a smokescreen that allowed the neoliberals to stratify British society — co-opting middle earners by turning them into mini-capitalists and creating a margin-alised class of poorly-paid, precarious, and heavily indebted workers beneath them.

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New, giant international banks, based mainly in Wall Street and the City of London, were only too happy to oblige. These banks placed British and American mortgages at the heart of the global financial system by turning them into financial securities that could be traded on financial markets — a process called securitisation.8 The securitisation of Anglo-American mortgage debt was central to both the long pre-crash boom and the swift collapse of the banking system in 2008. The American aspect of this equation was many times larger than the Anglo part, and far more important to the global financial system, but relative to the size of their respective economies, both experienced a surge in securitisation.

The End of Wall Street
by Roger Lowenstein
Published 15 Jan 2010

The massive fiscal remedies evidenced both the failure of an ideology and the eclipse of Wall Street’s golden age. For years, American financiers had gaudily assumed more power, more faith in their ability to calculate—and inoculate themselves against—risk. As a consequence of this faith, banks and investors had plied the average American with mortgage debt on such speculative and unthinking terms that not just America’s economy but the world’s economy ultimately capsized. The risk grew from early in the decade, when little-known lenders such as Angelo Mozilo began to make waves writing subprime mortgages. Before long, Mozilo was to proclaim that even Americans who could not put money down should be “lent” the money for a home, and not long after that, Mozilo made it happen: homes for free.

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As a percentage of annual volume, subprimes now topped 16 percent—up from a mere 8 percent a couple of years earlier and hardly anything in the ’90s.4 The subprime onslaught was part of a broader and no less remarkable mortgage wave. Over those same two years, following the dot-com crash in 2001, total outstanding mortgage debt grew from $6 trillion to nearly $8 trillion—an extraordinary rise in a stable population.5 The most plausible explanation for this sudden surge lies in the country’s remarkably forgiving credit markets. Starting the week after New Year’s, 2001, the Fed lowered short-term interest rates thirteen times until, finally, in June 2003, rates touched 1 percent—their lowest level since the John F.

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To paraphrase the financial journalist Michael Lewis, synthetic CDOs had as much to do with real estate as fantasy football had to do with the NFL.19 They built no houses and painted no walls; they simply multiplied the Street’s gamble. Thanks to these derivative ventures, far more money was wagered on mortgage debt than the total of such debt in existence. In some cases, a single mortgage bond was referenced in dozens of synthetics.20 It was as if Wall Street, in all its mad, Strangelovian genius, had a found a way to clone armies of securities from a single strand of mortgage DNA. The subsurface multiplication of CDO exposure fooled many a forecaster.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
Published 31 Mar 2008

In 1977, Time saluted another symptom, credit card growth, with a lengthy analysis of how “the Affluent Society has become the Credit Society, and an insistence on buying only what can be paid for in cash seems as outmoded as a crew cut.”4 Since 1950, the U.S. consumer installment debt outstanding had soared twelvefold to roughly $179 billion, omitting mortgage debt, which had risen comparably. Lacy Hunt, an economist at Philadelphia’s Fidelity Bank, enthused that “the ability of the consumer to take on more debt will be the underpinning of the economy in 1977. This year is the year of consumer credit.”5 The mortgage debt that so impressed Greenspan, along with the credit card volume saluted by Hunt, slowed down as interest rates soared from 1979 to 1981, and it’s probably fair to say that the deep 1980-82 recession squeezed the debt hangover out of the U.S. economy while it hammered down the inflation rate.

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Foreclosing on the American Dream: Mortgage Finance and Housing The fifth vehicle of the financial sector’s mega-expansion, hardly a great disclosure, can be treated quickly, in light of the great 2000-2006 media focus on housing, mortgage finance, and related securitization. The buildup was huge, just like the eventual 2007-2008 implosion. As Figure 2.6 on page 51 shows, between the first quarter of 2001 and the first quarter of 2007, total mortgage debt in the United States doubled from $4.92 trillion to $9.96 trillion. As for mortgage origination, that had tripled from 1997 levels to reach a total of $2.5 trillion in the year 2006 alone (see pp. 112-119). United States banks, in the meantime, were moving into mortgage finance in a big way. Figure 2.2 on page 32 shows the mushrooming of the percentage of total bank earning assets that fell into the mortgage-related category.

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And on top of that, between 2001 and 2006, an unprecedented number of Americans used their homes as ATMs, turning huge chunks of residential equity into borrowed, but spendable, cash. Harvard economist Martin Feldstein, a former Republican chairman of the White House Council of Economic Advisers, calculated in 2007 that over “the past five years, the value of U.S. home mortgage debt has increased by nearly $3 trillion. In 2004 alone, it increased by almost $1 trillion.” He went on: “Net mortgage borrowing that year not used [my italics] for the purchase of new homes amounted to nearly $600 billion, or almost 7 percent of disposable personal income.”12 In short, borrowing against homes enabled stressed consumers to keep consuming.

Boom and Bust: A Global History of Financial Bubbles
by William Quinn and John D. Turner
Published 5 Aug 2020

The ratio of residential loans to GDP in the European Union as a whole was 36.4 in 2007; the equivalent figures for Ireland, Spain, the United Kingdom and the United States were 71.4, 59.8, 74.8 and 63.4 respectively.49 The ratio of mortgage debt to GDP in these four countries was higher than in any other country in the world, and they all had a relatively high proportion of lower-income households with mortgages.50 In the United States, mortgage debt climbed from $5.3 trillion in 2001 to $10.5 trillion in 2007 and mortgage debt per household rose from $91,500 in 2001 to $149,500 in 2007.51 To put this in context, mortgage debt in the United States rose almost as much in 6 years as it had in the period from 1776 to 2000! Similarly, in Ireland, the total mortgage debt went from €34 billion in 2001 to €123 billion in 2007, which meant that mortgage debt per household increased from about €27,000 to €87,000.52 How was such a large increase in mortgage debt possible?

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Similarly, in Ireland, the total mortgage debt went from €34 billion in 2001 to €123 billion in 2007, which meant that mortgage debt per household increased from about €27,000 to €87,000.52 How was such a large increase in mortgage debt possible? As discussed above, banks and mortgage lenders substantially reduced their lending standards. The simplest way of doing this was to relax the down payment constraint on mortgages – the loan-to-value ratio. This enabled creditconstrained lower-income households to enter the housing market for the first time.53 In the case of the United States, the subprime sector grew from 7.6 per cent of mortgage originations in 2001 to 23.5 per cent in 2006.54 The median loan-to-value ratio of subprime mortgages originating in the United States rose from 90 per cent in 2005 to 100 per cent in the first half of 2007.55 When comparing countries that experienced a housing bubble with those that did not, the relaxation of lending standards and securitisation is the common factor: it occurred in the United States, the United Kingdom, Ireland and Spain, but not to anywhere near the same extent in other major economies.56 Homes had become marketable objects of speculation and the banking system was supplying seemingly unlimited amounts of leverage to potential speculators.

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Few houses had been built during the war because industry had been reoriented towards munitions, resulting in a temporary shortage of new homes. After the war, construction increased to plug this gap: as Figure 7.1 shows, in 1925 work started on 937,000 new houses, up from 247,000 in 1920. This was accompanied by a nationwide increase in house prices of around 40 per cent.11 The primary source of finance for these new homes was mortgage debt, which was rapidly expanded by commercial banks, insurance companies and savings associations. In contrast to later housing booms, however, the easing of credit was relatively minor, and by today’s standards the mortgage terms were very restrictive. The boom was instead driven by a combination of easier access to existing credit and increased demand.12 Mortgages allowed investors to speculate on housing using credit, but many mortgages were also packaged into securities, thereby increasing their marketability.

The Two-Income Trap: Why Middle-Class Parents Are Going Broke
by Elizabeth Warren and Amelia Warren Tyagi
Published 17 Aug 2004

Today’s mothers are no longer working to get ahead; now they must work just to keep up. Somewhere along the way, they fell into a terrible trap. Out of the Housing Trap? Can families extract themselves from the two-income housing trap? We could make all the obvious suggestions here. Families should “downshift,” taking on no more mortgage debt than they can afford. If that means renting for another ten years or living in a neighborhood with lousy schools, well, that’s just too bad. This advice would certainly be sensible from a financial point of view. The problem is that families don’t find it particularly compelling. The experts have been dispensing these words of wisdom for at least a decade with no discernible effect, and we’re pretty sure that adding our own voices to the chorus would be useless.

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Just at the time when parents got caught in a vicious bidding war for middle-class housing, just as the cost of college tuition and health insurance shot into the stratosphere, just as layoffs increased and the divorce rate jumped, a new player appeared on the scene. A newly deregulated lending industry emerged, eager to lend a few bucks whenever the family came up short. Pick up almost any newspaper, and there will be a story about America’s most widespread addiction: the insatiable hunger for debt. Every year for the past decade, mortgage debt has set a new record.7 Home equity loans grew even faster, increasing by over 150 percent in just four years.8 And no one would dare leave home without a fistful of those little plastic cards. The news media rarely give any explanation for why all that debt piled up, leaving the reader to infer that the debt explosion is some sort of inevitable by-product of today’s moral and economic climate.

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The floodgates were opened, and families could get all the mortgage money they ever dreamed of to bid on that precious home in the suburbs—even if the price tag was more than they could realistically afford. Competition for houses in good neighborhoods has always been stiff, and overloading on mortgage debt to purchase a better home has long posed a temptation for young families. A generation ago, however, it simply wasn’t possible to give in to that temptation; mortgage lenders didn’t allow it. But today the game is different. It has become routine for lenders to issue unmanageable mortgages. The best evidence comes from the mortgage industry itself.

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better
by Andrew Palmer
Published 13 Apr 2015

Buying a house is easily the largest transaction of most people’s lives. The aggregate value of property held by American households in the peak house-price year of 2006 was $22.7 trillion, their biggest single asset by a wide margin (pension-fund reserves were next, at $12.8 trillion). The amount of mortgage debt in the United States almost doubled between 2001 and 2007, to $10.5 trillion. In Britain the sum total of every residential property in 2012 was a shade under £6 trillion, which (roughly) works out at an average of £96,500 for every person in the country. Globally, the Economist’s most recent best guess was that residential property in the rich world as a whole was worth about 126 percent of the rich countries’ combined GDP in 2010.

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Now politicians are looking at the way students are being funded through college and finding that it looks less and less sustainable. At a time when American households are paying down debt, student loans are the only form of consumer borrowing that has gone up since 2008. The total amount of student debt outstanding in the United States is now above $1 trillion. Only mortgage debt is bigger. Both the number of student borrowers and the average loan balance increased by 70 percent between 2004 and 2012. The Congressional Budget Office reckons that the government will loan students another $1.4 trillion over the next decade. This growth has been driven by a number of factors.

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Mortgage growth was driven by the less creditworthy borrower.4 Once in their homes, households could unlock yet more credit by borrowing against the equity. A 2013 study by the Federal Reserve Bank of New York showed that on average for every 1 percent rise in house prices, home owners increased their mortgage debt by 1 percent. As fast as the value of their equity rose, home owners turned it into debt.5 All that has changed. Mortgages and equity withdrawal are no longer the freely available options they once were. Other forms of credit (except for student loans) are also constrained. Between September 2008 and September 2012, American household debt dropped by 11 percent, to $11.3 trillion, partly because of write-offs, partly because of greater saving, and partly because of tighter credit standards.

Slowdown: The End of the Great Acceleration―and Why It’s Good for the Planet, the Economy, and Our Lives
by Danny Dorling and Kirsten McClure
Published 18 May 2020

The Federal Reserve of New York publishes quarterly figures on home loans. Its most recent series began in 2003 when the total mortgage debt of U.S. households stood at just below $5 trillion. As house and apartment prices both rose, as more were built to be purchased with debt, and as the population of the United States continued to rise, mortgage debt continued to grow and grow, at first at an accelerating pace. The acceleration dampened a little in early 2004, but by the autumn of that year outstanding U.S. household mortgage debts had passed the $6 trillion mark. More households were taking out larger loans, much larger than the ones that other people were paying off, to the tune of around $200 billion net a quarter being added to the national mortgage bill.

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More households were taking out larger loans, much larger than the ones that other people were paying off, to the tune of around $200 billion net a quarter being added to the national mortgage bill. During 2005 the increases in U.S. mortgage debt grew, the acceleration increased, and the $7 trillion mark was passed in the autumn of that year. By spring 2006 over $300 billion was being added each quarter, and the $8 billion threshold was breached in autumn 2006. Growth in new loans slowed slightly then, but accelerated for one final burst upward in spring 2007. The $9 trillion mark was reached in autumn 2007, but by then a fundamental change was afoot. 8. U.S. mortgage debt, 2003–18 (billions of dollars). (Data adapted from the Federal Reserve Bank of New York [US], “Quarterly Report on Household Debt and Credit [HHD_C_Report_2018Q3],” retrieved from the Center for Microeconomic Data, accessed 28 December 2018, https://www.newyorkfed.org/microeconomics/databank.html.)

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When there is great economic inequality, trying to be or stay rich often appears the best aim to have. But only a small minority can ever be rich. It is not that difficult to build a house or an apartment; human beings have been doing it for a very long time. It is, however, hard to control speculation and inflation. Just after the Second World War, in 1949, all outstanding U.S. mortgage debt, including the borrowings of landlords as well as those of households, stood at only $54 billion.12 By 1953 it had more than doubled, to $112 billion. It doubled again to $227 billion by 1960, and again to $450 billion by 1969. It hit $1 trillion in 1977, $2 trillion in 1984, $4 trillion in 1992, and $8 trillion in 2002.

J.K. Lasser's Your Income Tax
by J K Lasser Institute
Published 30 Oct 2012

See Treasury Regulation Section 1.1038-2 for further details. 31.13 Foreclosure on Mortgages Other Than Purchase Money If you, as a mortgagee (lender), bid in on a foreclosure sale to pay off a mortgage that is not a purchase money mortgage, your actual financial loss is the difference between the unpaid mortgage debt and the value of the property. For tax purposes, however, you may realize a capital gain or loss and a bad debt loss that are reportable in the year of the foreclosure sale. Your bid is treated as consisting of two distinct transactions: - - - - - - - - - - Planning Reminder Voluntary Conveyance Instead of forcing you to foreclose, the mortgagor may voluntarily convey the property to you in consideration for your cancelling the mortgage debt. Your loss is the amount by which the mortgage debt plus accrued interest exceeds the fair market value of the property.

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The basis allocation rules for determining gain on a bargain sale apply even if the annual deduction ceilings (14.17) bar a deduction in the year of the donation and in the five-year carryover period. EXAMPLE The Hodgdons contributed real estate valued at $3.9 million but subject to mortgage debt of $2.6 million. The IRS treated the mortgage debt as sales proceeds and figured gain based on the difference between the debt and the portion of basis allocated to the sale element. The Hodgdons claimed that the basis allocation rule, which increased the amount of their gain, should not apply. Earlier in the year, they had made another donation that used up their charitable deduction ceiling for that year as well as for the following five-year carryover period.

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Note: If the property had been Jones’s principal residence, the exclusion for qualified principal residence indebtedness (11.8) would be available and he would not have to report the $12,000 income from the debt cancellation as income on his return. 31.10 Restructuring Mortgage Debt Rather than foreclose on a mortgage, a lender (mortgagee) may be willing to restructure the mortgage debt by cancelling either all or part of the debt. As a borrower (mortgagor), do not overlook the tax consequences of the new debt arrangement. If the lender agrees to a “workout,” under which part of your loan principal is reduced as part of a loan modification, or if you pay off the loan early in return for a “discount” that reduces the debt, and you keep the collateral, the reduction or discount is canceled debt, reportable as ordinary income (cancellation of debt income) unless an exception applies.

J.K. Lasser's Your Income Tax 2014
by J. K. Lasser
Published 5 Oct 2013

See Treasury Regulation Section 1.1038-2 for further details. 31.13 Foreclosure on Mortgages Other Than Purchase Money If you, as a mortgagee (lender), bid in on a foreclosure sale to pay off a mortgage that is not a purchase money mortgage, your actual financial loss is the difference between the unpaid mortgage debt and the value of the property. For tax purposes, however, you may realize a capital gain or loss and a bad debt loss that are reportable in the year of the foreclosure sale. Your bid is treated as consisting of two distinct transactions: - - - - - - - - - - Planning Reminder Voluntary Conveyance Instead of forcing you to foreclose, the mortgagor may voluntarily convey the property to you in consideration for your cancelling the mortgage debt. Your loss is the amount by which the mortgage debt plus accrued interest exceeds the fair market value of the property.

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Basis allocation applies even if a deduction is barred by the annual ceiling The basis allocation rules for determining gain on a bargain sale apply even if the annual deduction ceilings (14.17) bar a deduction in the year of the donation and in the five-year carryover period. EXAMPLE The Hodgdons contributed real estate valued at $3.9 million but subject to mortgage debt of $2.6 million. The IRS treated the mortgage debt as sales proceeds and figured gain based on the difference between the debt and the portion of basis allocated to the sale element. The Hodgdons claimed that the basis allocation rule, which increased the amount of their gain, should not apply. Earlier in the year, they had made another donation that used up their charitable deduction ceiling for that year as well as for the following five-year carryover period.

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Note: If the property had been Jones’s principal residence, the exclusion for qualified principal residence indebtedness (11.8) would be available and he would not have to report the $12,000 income from the debt cancellation as income on his 2013 return. 31.10 Restructuring Mortgage Debt Rather than foreclose on a mortgage, a lender (mortgagee) may be willing to restructure the mortgage debt by cancelling either all or part of the debt. As a borrower (mortgagor), do not overlook the tax consequences of the new debt arrangement. If the lender agrees to a “workout,” under which part of your loan principal is reduced as part of a loan modification, or if you pay off the loan early in return for a “discount” that reduces the debt, and you keep the collateral, the reduction or discount is canceled debt, reportable as ordinary income (cancellation of debt income) unless an exception applies.

J.K. Lasser's Your Income Tax 2016: For Preparing Your 2015 Tax Return
by J. K. Lasser Institute
Published 19 Oct 2015

The seller must report as income previously received payments that were not taxed (they were excluded under the home sale exclusion). 31.13 Foreclosure on Mortgages Other Than Purchase Money If you, as a mortgagee (lender), bid in on a foreclosure sale to pay off a mortgage that is not a purchase money mortgage, your actual financial loss is the difference between the unpaid mortgage debt and the value of the property. For tax purposes, however, you may realize a capital gain or loss and a bad debt loss that are reportable in the year of the foreclosure sale. Your bid is treated as consisting of two distinct transactions: Planning Reminder Voluntary Conveyance Instead of forcing you to foreclose, the mortgagor may voluntarily convey the property to you in consideration for your cancelling the mortgage debt. Your loss is the amount by which the mortgage debt plus accrued interest exceeds the fair market value of the property.

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Apart from the gain or loss on the deemed sale, if you are personally liable on the loan (recourse debt) and the amount of the debt cancelled by the lender exceeds the fair market value of the property, you have cancellation of debt income that must be reported as ordinary income unless one of the exclusions discussed below applies. The lender will report fair market value of the property in Box 7 Form 1099-C. State law may treat home mortgage debt as nonrecourse. Some states have “anti-deficiency” statutes that treat a loan used to purchase a principal residence as a “nonrecourse” loan. In these states, a lender has no recourse against a homeowner for a deficiency judgment following a foreclosure or lender-approved short sale. Where a mortgage debt subject to one of these state laws is forgiven, the taxpayer does not realize cancellation of debt income, as the income rule applies only to the cancellation of recourse debts for which there is personal liability.

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The basis allocation rules for determining gain on a bargain sale apply even if the annual deduction ceilings (14.17) bar a deduction in the year of the donation and in the five-year carryover period. EXAMPLE The Hodgdons contributed real estate valued at $3.9 million but subject to mortgage debt of $2.6 million. The IRS treated the mortgage debt as sales proceeds and figured gain based on the difference between the debt and the portion of basis allocated to the sale element. The Hodgdons claimed that the basis allocation rule, which increased the amount of their gain, should not apply. Earlier in the year, they had made another donation that used up their charitable deduction ceiling for that year as well as for the following five-year carryover period.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

The former referred to the sheer amount of buying the central bank could do, the latter concerned an attempt to lower interest rates in specific markets, such as mortgage debt and corporate credit. So this was a policy initiated and decided upon by the Bank, but with considerable input from the government. At the top of the Treasury the assumption was that the structure created would be used, as was the case in the USA, to buy a wide range of commercial, government and mortgage debt, but that operational decisions regarding such purchases would be left to the Bank. And so, on 5 March 2009, quantitative easing was launched in Britain, accompanied by a cut in the base rate from 1 per cent to an unprecedented 0.5 per cent.

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Large increases in supply over demand, as in the USA, Spain and Ireland after the crisis, and prices go down. Simple enough. Except, of course, this simple model is entirely misleading. The housing market is not really a market for houses. The housing market is driven principally by the availability of finance, mainly mortgage debt, but sometimes bonuses, inheritances, or hot money from abroad – London in particular has become the preferred residence of the world’s wealthiest people, from Russian oligarchs to Arab oil sheikhs. Let’s start with Britain. There are 27 million dwellings in the UK. The short-term supply is basically fixed.

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The credit feeding frenzy in suburban Britain during this time was feeding off itself. But one innovation casts a particularly long shadow. Increasing multiples, decreasing deposits, allowing self-certification and stretching the term of a mortgage are all rather tame compared to never actually expecting the repayment of mortgage debt. That was the strategy behind ‘interest-only’ mortgages. In finance, a loan where the entire principal of the loan is due at the end of the term is known as a ‘bullet loan’, but that name might have conjured the wrong image. Interest-only loans are controversial. Forget trying to get one in Canada.

J.K. Lasser's Your Income Tax 2022: For Preparing Your 2021 Tax Return
by J. K. Lasser Institute
Published 21 Dec 2021

Where the bid price equals the mortgage debt plus unreported but accrued interest, you report the interest as income. But where the accrued interest has been reported, the unpaid amount is added to the collection expenses. Planning Reminder Voluntary Conveyance Instead of forcing you to foreclose, the mortgagor may voluntarily convey the property to you in consideration for your canceling the mortgage debt. Your loss is the amount by which the mortgage debt plus accrued interest exceeds the fair market value of the property. If, however, the fair market value exceeds the mortgage debt plus accrued interest, the difference is taxable gain.

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Apart from the gain or loss on the deemed sale, if you are personally liable on the loan (recourse debt) and the amount of the debt canceled by the lender exceeds the fair market value of the property, you have cancellation of debt income that must be reported as ordinary income unless one of the exclusions discussed below applies. The lender will report fair market value of the property in Box 7 Form 1099-C. State lawmay treat home mortgage debt as nonrecourse. Some states have “anti-deficiency” statutes that treat a loan used to purchase a principal residence as a “nonrecourse” loan. In these states, a lender has no recourse against a homeowner for a deficiency judgment following a foreclosure or lender-approved short sale. Where a mortgage debt subject to one of these state laws is forgiven, the taxpayer does not realize cancellation of debt income, as the income rule applies only to the cancellation of recourse debts for which there is personal liability.

…

The basis allocation rules for determining gain on a bargain sale apply even if the annual deduction ceilings (14.17) bar a deduction in the year of the donation and in the five-year carryover period. EXAMPLE The Hodgdons contributed real estate valued at $3.9 million but subject to mortgage debt of $2.6 million. The IRS treated the mortgage debt as sales proceeds and figured gain based on the difference between the debt and the portion of basis allocated to the sale element. The Hodgdons claimed that the basis allocation rule, which increased the amount of their gain, should not apply. Earlier in the year, they had made another donation that used up their charitable deduction ceiling for that year as well as for the following five-year carryover period.

Firefighting
by Ben S. Bernanke , Timothy F. Geithner and Henry M. Paulson, Jr.
Published 16 Apr 2019

A tidal wave of foreign money was pouring into the United States, as global investors frustrated by low interest rates and scarce investment opportunities at home looked abroad for better and safer yields. Ben called this seemingly insatiable demand for assets that generated decent returns a “global savings glut,” and it created a lot of dry tinder. The greatest part of the credit boom took place in the U.S. mortgage market. Mortgage debt per U.S. household soared 63 percent from 2001 to 2007, much faster than household incomes. Some of this new debt was beneficial, helping people buy homes or take cash out of their homes for worthy purposes. But some of the new lending veered into dangerous, unexplored territory, where the underwriting standards, especially for higher-risk subprime mortgages to lower-income borrowers, eroded dramatically.

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IndyMac’s failure was a sign that the fire was burning hotter again, but it didn’t seem to threaten the core of the system. Our main concerns that week were Fannie Mae and Freddie Mac, the government-sponsored mortgage giants that together were more than fifty times the size of IndyMac—and more than four times the size of Bear. They held or guaranteed more than $5 trillion worth of mortgage debt, and were also the last major source of mortgage financing in the United States, backing three of every four new home loans. That meant their collapse would halt production of new mortgages and crush the already battered housing market, which would mean more foreclosures on Main Street and more panic about mortgage securities on Wall Street.

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They were basically the corporate embodiment of moral hazard, enjoying the upside of their risk taking while taking comfort that taxpayers would cover any downside. They did not cause the crisis, as some critics have suggested; until late in the boom, the underwriting for mortgages they bought and backed was relatively conservative for the industry. But they did relax their standards before the bust, and by guaranteeing so much mortgage debt in the first place, they did help facilitate the tsunami of foreign money into U.S. real estate that set the stage for the crisis. All three of us, like our predecessors, had been deeply concerned about Fannie Mae and Freddie Mac for years; we had all supported sweeping reforms of their business model and stricter regulation of their risk taking.

The New Depression: The Breakdown of the Paper Money Economy
by Richard Duncan
Published 2 Apr 2012

To put that into perspective, consider that over the preceding 70 years, the U.S. government had fought World War II, the Korean War, the Cold War, the Vietnam War, and two Gulf Wars, had carried out numerous social welfare programs, and had sent a man to the moon, but had accumulated only a total of $5 trillion in debt in the process. What did Fannie and Freddie and the ABS issuers do with all the money they borrowed? They lent it to the household sector in the form of mortgages and consumer credit. Between 1982 and 2007, the mortgage debt of the household sector rose ten times to $10.5 trillion. Consumer credit increased six times over the same period to $2.5 trillion. (See Exhibit 3.4.) EXHIBIT 3.4 Home Mortgages and Consumer Credit Source: Federal Reserve, Flow of Funds Accounts of the United States, second quarter 2011 Relative to the overall size of the economy, the financial sector’s debt rose from 21 percent of GDP in 1980 to 116 percent in 2007.

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He began by quoting from an article published in Fortune magazine in 1956: “Consumer short-term debt . . . is approaching a historical turning point . . . It must soon adjust itself to the nation’s capacity for going in hock, which is not limitless,” declared Fortune in March 1956. A month later, the magazine added, “The same general observations apply to mortgage debt—but with double force.” Greenspan then added, “Today, nearly fifty years later, the ratio of household debt to income is still rising, and critics are still wringing their hands. In fact, I do not recall a decade free of surges in angst about the mounting debt of households and businesses. Such fears ignore a fundamental fact of modern life: in a market economy, rising debt goes hand in hand with progress.”2 Exhibit 6.3 puts Greenspan’s comments into perspective.

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It shows household debt as a ratio of household disposable income from 1946 to 2010. EXHIBIT 6.3 Ratio of Household Debt to Disposable Personal Income Source: Federal Reserve, Flow of Funds Accounts of the United States, second quarter 2011, Table B.100 Notice that this ratio had hit 53 percent and was rising rapidly at the time Fortune expressed concern about mortgage debt in 1956. Then, from the mid-1960s to the mid-1980s it flattened out around 70 percent. Alan Greenspan became Fed chairman in August 1987. Soon thereafter, household debt relative to disposable income began to rise sharply. That ratio peaked at nearly 140 percent in 2007, just as Greenspan was expounding on the role of rising debt and the facts of life.

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover
by Katrina Vanden Heuvel and William Greider
Published 9 Jan 2009

Purchases of existing homes hit a record of 6.1 million in 2003, more than 500,000 above the previous record set in 2002. Each home purchase is accompanied by thousands of dollars of closing costs, plus thousands more spent on furniture and remodeling. The indirect impact of the housing bubble is at least as important. Mortgage debt rose by an incredible $2.3 trillion between 2000 and 2003. This borrowing has sustained consumption growth in an environment in which firms have been shedding jobs and cutting back hours, and real wage growth has fallen to zero, although the gains from this elixir are starting to fade with a recent rise in mortgage rates and many families are running out of equity to tap.

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What it is depends on whether other sectors pick up some of the slack—say, if businesses were to start hiring and investing rather than hoarding their plentiful cash or distributing it to their stockholders. If they don’t, things could get quite unpleasant. So many households have taken on so much mortgage debt that if prices merely stop rising, they’re going to find themselves under water. And the broad economy has become so dependent on home-equity credit that its withdrawal could come as a terrible shock. Maybe the economy will finally have to face the consequences of the collapse of the 1990s stock-driven boom that it managed to avoid by speculating on housing instead.

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Record house prices were supported by a tidal wave of speculation, as millions of people suddenly became interested in investment properties. As prices soared, financing arrangements became ever more questionable. Down payments went out of style. Adjustable-rate mortgages and interest-only loans, even negative amortization loans (in which mortgage debt grows month by month), became common. The worst of the speculative financing was in the subprime market, where moderate-income home buyers were persuaded to take out adjustable-rate mortgages, which generally feature very low “teaser rates,” typically reset after three years, often to levels that are five or six percentage points higher.

Shaky Ground: The Strange Saga of the U.S. Mortgage Giants
by Bethany McLean
Published 13 Sep 2015

In all these cases, American society’s big reach also generates big controversies, and in the business of homeownership the controversies are both domestic policy battles—why do we need the government in our mortgage markets at all?—and potential international policy issues, because many billions of dollars of U.S. mortgage debt are owned by other governments that very much want to see it as a stable investment. Most people who weren’t paying close attention probably date the beginning of the global financial crisis at September 15, 2008, the day Lehman Brothers declared bankruptcy. But a few days earlier, on September 6, the U.S.

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In large part because of their perceived safety as an investment, American mortgages became catnip to global investors. By the 1990s, it wasn’t just Boston bankers investing in Arizona mortgages, but Chinese workers and their savings accounts enabling Americans in Kansas to buy homes. By the 2000s, foreign central banks and other foreign investors were financing over a trillion dollars of American mortgage debt via their ownership of GSE securities. It was Hank Paulson, the former Goldman Sachs executive who served as Treasury Secretary from 2006 until January 20, 2009, who orchestrated the government takeover of Fannie and Freddie during the financial crisis. Something that he says “took his breath away” happened during the summer of 2008, when he was at the Beijing Olympics.

…

The analysis was very similar to that in a paper called “Fannie Mae Insolvency and Its Consequences” that was circulating among senior officials at the National Economic Council and the Treasury. Even the language was similar. “A government seizure is inevitable,” it began. It noted the same accounting concerns, and even ended with a version of the same conclusion: “A fully government owned guarantor of mortgage debt might be exactly what is called for given the current housing crisis . . . without the need to satisfy a fiduciary duty to shareholders, Fannie might finally be able to perform its affordable housing mission in a helpful and proactive manner.” The Monday after the Barron’s story ran, Fannie’s stock fell 13 percent.

Rebel Cities: From the Right to the City to the Urban Revolution
by David Harvey
Published 3 Apr 2012

The buildings we see around us in New York City, they poignantly note, represent "more than an arch itectural movement; they were largely the manifestation of a widespread financial phenomenon:' Noting that real estate securities in the 1 920s were every bit as "tox ic as they are now:· they went on to conclude: The New York skyline is a stark reminder of securitization's ability to connect capital from a sp eculative public to building ventures. An increased understanding of the early real estate securities market has the 60% Annual rate of change in mortgage debt in the Un ited States, 1 9 5 5 - 76 40 20 1959 1967 1 963 1971 $500 S h are prices of real estate investment trusts in the US, 1 975 1 9 66-75 400 300 200 100 0 +-----.-----,--, 1 973 1 967 1 969 1971 4 00 Property share price index in the UK, 1 96 1 -75 300 � "0 .s 200 100 1 962 1 964 1 966 1 968 1 970 Year Source: US De.

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In the case of developing countries such as Th ailand-where housing mort­ gages, if the World B ank Report is right, are equivalent to only l 0 percent of GDP- a property crash could certainly contribute to, but not likely totally power, a m acroeconomic collapse (of the sort that occurred in 1 9 97-98), whereas in the United States, where housing mortgage debt is equivalent to 40 percent of GDP, it m ost certainly could and did gen erate a crisis in 2007- 09. 50 .. 4 0 "" c 'ij '5 .., 30 j 20 '0 E ::s z 10 0 ������ 1 9 70 1 890 1910 1930 1 950 1 990 2010 Year Source: after William Godzmamt and Fran/c. Newman. "Securitization i u the 1 920s.,• NBER W"'rking Papn 1 5650 Figu re 2 Tall Buildings Constructed in New Yo rk City, 1 890-2 0 1 0 T H E U R BAN ROOTS OF CAP I TALI ST C R I S E S 35 TH E M A RX I ST P E RS P ECTIVE Since bourgeois theory, if not totally blind, at best lacks insights in relating urban developments to macroeconomic disruptions, one would have thought that M arxist critics, with their vaunted historical­ materialist methods, would h ave had a field day with fierce denun­ ciations of soaring rents and the savage dispossessions characteristic of what M arx and Engels referred to as the secondary forms o f exploita­ tion visited upon the working classes in their living places by merchant capitalists and landlords.

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A lot o f credit-based activity may indeed be spe culative froth, and a disgusting excrescence of human lust for gold and pure money power. But much o f it is fundamental and abso ­ lutely necessary to the functioning of capital. Th e b oundaries b e tween what is necessary and what is (a) necessarily fictitious (as in the case of state and mortgage debt) and (b) pure excess, are not easy to define. Clearly, to try to analyze the dynamics of the recent crisis and its after­ math without reference to the credit system (with mor tgages standing at 40 percent o f G D P in the United States) , consumerism (70 percent of the driving force in the US economy compared to 3 5 percent in China), and the state of competition (monopoly power in financial, real estate, retail­ ing, and many other markets) would b e a ridiculous enterprise.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

Incredibly, products like option adjustable rate mortgages (ARMs) effectively allowed US homebuyers to borrow more than the value of the house; borrowers were allowed to pick their own interest rate, with any shortfall being added to the size of the loan. Potential homebuyers were allowed to borrow greater multiples of their income and, in some cases, not required to provide any proof of their income at all (so-called ‘liar loans’). There was a rapid rise in mortgage debt after the 1980s; in both the UK and the US, mortgage debt rose from a little over 30 per cent of GDP in 1983 to around 80 per cent by 2006. Surprisingly, mortgage debt-to-GDP ratios were even higher, at nearly 100 per cent of GDP, in Denmark and the Netherlands. Meanwhile, the world of unsecured credit changed irrevocably with the advent of the credit card. As we have already seen, consumer credit developed steadily through the nineteenth and early twentieth centuries.

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My favourite (possibly apocryphal) story of the 1930s was of the lady who bought a washing machine on hire purchase and refused to use it until all the instalments had been paid. Economists generally agree that consumer credit is very useful for the economy. Some countries have too little consumer debt. In Russia, for example, mortgage debt is just 3 per cent of GDP. The ability to borrow allows people to smooth consumption over their lifetime; families can borrow money when the children are young, and pay off the debt when they leave home. This should mean that consumption is less prone to sudden swings, and thus recessions less severe.

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So when the newly elected Obama administration reacted to the crisis in classic Keynesian fashion, unveiling a near $800 billion stimulus plan, it faced a wave of public opposition. The ‘tea party’ campaign took its name from the revolutionary movement that protested against British taxes by dumping tea in Boston harbour. It seems to have started with a rant by Rick Santelli, a correspondent for the CNBC financial channel, about a US government plan to help those with mortgage debts. The movement channelled a number of areas of public discontent. Apart from the unpopularity of the bank bailout, there was a general feeling that it was ‘un-American’ to use public money to bail out businesses, even the auto companies with their hundreds of thousands of employees, on the grounds that people should stand on their own two feet.

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

Cayne,’ May 3, 2007. 8 Data available from the Federal Reserve. Go to the website (www.federalreserve.gov) and search for ‘Mortgage debt outstanding.’ 9 John Gittelsohn, ‘Shiller says U.S. home-price declines of 10% to 25% “wouldn’t surprise me”,’ Bloomberg, June 9, 2011. 10 ‘Rooms with a view,’ The Economist, July 7, 2011. 11 Mortgage data from European Mortgage Federation. Go to the website (www.hypo.org), click on ‘Facts and figures,’ then look for ‘Value of mortgage debt.’ The data in the table are for 2009, the most recent figures available. I’ve used an exchange rate of €1 = $1.371 to convert to US dollars. 12 Tracy Alloway, ‘Under-reported – and non-performing – assets at US banks,’ Financial Times, ‘Alphaville’ blog, June 17, 2011.

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We’d just won the Cold War, the economy was on a roll: debt should have been trending down to zero. Likewise, at the end of the 1980s, a decade when leveraged buyouts were all the rage on Wall Street, people were anxious that corporations had taken on so much debt that investment and growth would be inevitably impaired. People were worried about the incessant increases in credit card and mortgage debt, and the changes in culture that went along with that increase. These worries were neither flippant nor ill-founded. They were the right ones to have. Trouble is, our policymakers and regulators didn’t respond when it would have been easy and relatively costless to do so. They were too toothless, too inert, too dumb, too cowardly.

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The financial sector in Britain wasn’t as utterly out of control as its counterpart in the US‌—‌no subprime horrors, no CDOs of CDOs‌—‌but being ‘better managed than Wall Street’ is hardly a badge of managerial excellence. On pretty much every metric you care to look at, Britain has too much debt. Too much government debt. Too much household debt. Too many large and leveraged banks. Way too much mortgage debt. Even its corporations are too ready to borrow. Having said all that, however, Britain is still in better shape than the troubled economies of southern Europe. It doesn’t have the hideous government debt of Greece or Italy. It doesn’t have the structural rigidities of Spain. It’s still Europe’s chief magnet for inward investment.

The Enigma of Capital: And the Crises of Capitalism
by David Harvey
Published 1 Jan 2010

.: Limits to Growth 72 meat-based diets 73, 74 Medicare 28–9, 224 Mellon, Andrew 11, 98 mercantilism 206 merchant capitalists 40 mergers 49, 50 forced 261 Merrill Lynch 12 Merton, Robert 100 methane gas 73 Mexico debt crisis (1982) 10, 19 northern Miexico’s proximity to the US market 36 peso rescue 261 privatisation of telecommunications 29 and remittances 38 standard of living 10 Mexico City 243 microcredit schemes 145–6 microeconomics 237 microenterprises 145–6 microfinance schemes 145–6 Middle East, and oil issue 77, 170, 210 militarisation 170 ‘military-industrial complex’ 91 minorities: colonisation of urban neighbourhoods 247, 248 Mitterrand, François 198 modelling of markets 262 modernism 171 monarchy 249 monetarism 237 monetisation 244 money centralised money power 49–50, 52 a form of social power 43, 44 limitlessness of 43, 47 loss of confidence in the symbols/quality of money 114 universality of 106 monoculture 186 Monopolies Commission 52 monopolisation 43, 68, 95, 113, 116, 221 Monsanto 186 Montreal Protocol (1989) 76, 187 Morgan Stanley 19 Morishima, Michio 70 Morris, William 160 mortgages annual rate of change in US mortgage debt 7 mortgage finance for housing 170 mortgage-backed bonds futures 262 mortgage-backed securities 4, 262 secondary mortgage market 173, 174 securitisation of local 42 securitisation of mortgage debt 85 subprime 49, 174 Moses, Robert 169, 171, 177 MST (Brazil) 257 multiculturalism 131, 176, 231, 238, 258 Mumbai, India anti-Muslim riots (early 1990s) 247 redevelopment 178–9 municipal budgets 5 Museum of Modern Art, New York 21 Myrdal, Gunnar 196 N Nandigram, West Bengal 180 Napoleon III, Emperor 167, 168 national debt 48 National Economic Council (US) 11, 236 national-origin quotas 14 nationalisation 2, 4, 8, 224 nationalism 55–6, 143, 194, 204 NATO 203 natural gas 188 ‘natural limits’ 47 natural resources 30, 71 natural scarcity 72, 73, 78, 80, 83, 84, 121 nature and capital 88 ‘first nature’ 184 relation to 121, 122 ‘the revenge of nature’ 185 ‘second nature’ 184, 185, 187 as a social product 188 neocolonialism 208, 212 neoliberal counter-revolution 113 neoliberalism 10, 11, 19, 66, 131, 132, 141, 172, 175, 197, 208, 218, 224, 225, 233, 237, 243, 255 Nepal: communist rule in 226 Nevada, foreclosure wave in 1 New Deal 71 ‘new economy’ (1990s) 97 New Labour 45, 255 ‘new urbanism’ movement 175 New York City 11 September 2001 attacks 41 fiscal crisis (1975) 10, 172, 261 investment banks 19, 28 New York metropolitan region 169, 196 Nicaragua 189 Niger delta 251 non-governmental organisations (NGOs) 35, 253–4 non-interventionism 10 North Africa, French import of labour from 14 North America, settlement in 145 North American Free Trade Association (NAFTA) 200 Northern Ireland emergency 247 Northern Rock 2 Norway: Nordic cris (1992) 8 nuclear power 188 O Obama, Barack 11, 27, 34, 210 Obama administration 78, 121 O’Connor, Jim 77, 78 offshoring 131 Ogoni people 251 oil cheap 76–7 differential rent on oil wells 83 futures 83, 84 a non-renewable resource 82 ‘peak oil’ 38, 73, 78, 79, 80 prices 77–8, 80, 82–3, 261 and raw materials prices 6 rents 83 United States and 76–7, 79, 121, 170, 210, 261 OPEC (Organisation of Oil-Producing Countries) 83, 84 options markets currency 262 equity values 262 unregulated 99, 100 Orange County, California bankruptcy 100, 261 Organisation for Economic Cooperation and Development (OECD) 51 organisational change 98, 101 organisational forms 47, 101, 121, 127, 134, 238 Ottoman Empire 194 ‘over the counter’ trading 24, 25 overaccumulation crises 45 ozone hole 74 ozone layer 187 P Pakistan: US involvement 210 Palley, Thomas 236 Paris ‘the city of light’ 168 epicentre of 1968 confrontations 177, 243 Haussmann’s rebuilding of 49, 167–8, 169, 171, 176 municipal budget crashes (1868) 54 Paris Commune (1871) 168, 171, 176, 225, 243, 244 Partnoy, Frank: Ubfectious Greed 25 patents 221 patent laws 95 patriarchy 104 pensions pension funds 4, 5, 245 reneging on obligations 49 Péreire brothers 49, 54, 98, 174 pesticides 185, 186, 187 petty bourgeois 56 pharmaceutical sector 129, 245 philanthropy 44 Philippines: excessive urban development 8 Phillips, Kevin 206 Pinochet, General Augusto 15, 64 plant 58 Poland, lending to 19 political parties, radical 255–6 politics capitalist 76 class 62 co-revolutionary 241 commodified 219 depoliticised 219 energy 77 identity 131 labour organizing 255 left 255 transformative 207 pollution air 77 oceanic 74 rights 21 ‘Ponts et Chaussées’ organisation 92 Ponzi schemes 21, 114, 245, 246 pop music 245–6 Pope, Alexander 156 population growth 59, 72, 74, 121, 167 and capital accumulation 144–7 populism 55–6 portfolio insurance 262 poverty and capitalism 72 criminalisation and incarceration of the poor 15 feminisation of 15, 258 ‘Great Society’ anti-poverty programmes 32 Prague 243 prices commodity 37, 73 energy 78 food grain 79–80 land 8, 9, 182–3 oil 8, 28, 37–8, 77–8, 80, 82–3, 261 property 4, 182–3 raw material 37 reserve price 81–2 rising 73 share 7 primitive accumulation 58, 63–4, 108, 249 private consortia 50 private equity groups 50 private property and radical egalitarianism 233, 234 see also property markets; property rights; property values privatisation 10, 28, 29, 49, 251, 256, 257 pro-natal policies 59 production expansion of 112, 113 inadequate means of 47 investment in 114 liberating the concept 87 low-profit 29 offshore 16 production of urbanisation 87 reorganisation and relocation of 33 revolutionising of 89 surplus 45 technologies 101 productivity agreements 14, 60, 96 agricultural 119 cotton industry 67 gains 88, 89 Japan and West Germany 33 rising 96, 186 products development 95 innovation 95 new lines 94, 95 niches 94 profit squeeze 65, 66, 116 profitability constrains 30 falling 94, 131 of the financial sector 51 and wages 60 profits easy 15 excess 81, 90 falling 29, 72, 94, 116, 117 privatising 10 rates 70, 94, 101 realisation of 108 proletarianisation 60, 62 property markets crash in US and UK (1973–75) 8, 171–2, 261 overextension in 85 property market-led Nordic and Japanese bank crises 261 property-led crises (2007–10) 10, 261 real estate bubble 261 recession in UK (after 1987) 261 property rights 69, 81–2, 90, 122, 179, 198, 233, 244, 245 Property Share Price Index (UK) 7 property values 171, 181, 197, 248 prostitution 15 protectionism 31, 33, 43, 211 punctuated equilibrium theory of natural evolution 130 Putin, Vladimir 29, 80 Q Q’ing dynasty 194 quotas 16 R R&D (research and development) 92, 95–6 race issues 104 racism 61, 258 radical egalitarianism 230–34 railroads 42, 49, 191 Railwan, rise of (1970s) 35 rare earth metals 188 raw materials 6, 16, 37, 58, 77, 101, 113, 140, 144, 234 RBS 20 Reagan, Ronald 15, 64, 131, 141 Reagan-Thatcher counter revolution (early 1980s) 71 Reagan administration 1, 19 Reagan recession (1980–82) 60, 261 Real Estate Investment Trusts (US) 7 recession 1970s 171–2 language of 27 Reagan (1980–82) 60, 261 Red Brigade 254 reforestation 184 refrigeration 74 reinvestment 43, 45, 66–7, 110–12, 116 religious fundamentalism 203 religious issues 104 remittances 38, 140, 147 rentiers 40 rents differential rent 81, 82, 83 on intellectual property rights 221 land 182 monetisation of 48, 109 monopoly 51, 81–2, 83 oil 83 on patents 221 rising 181 reproduction schemas 70 Republican Party (US) 11, 141 reserve price 81 resource values 234 Ricardo, David 72, 94 risks, socialising 10 robbery 44 Robinson, Joan 238 robotisation 14, 136 Rockefeller, John D. 98 Rockefeller brothers 131 Rockefeller foundation 44, 186 Roman Empire 194 Roosevelt, Franklin D. 71 Rothschild family 98, 163 Royal Society 91, 156 royalties 40 Rubin, Robert 98 ‘rule of experts’ 99, 100–101 Russia bankruptcy (1998) 246, 261 capital flight crisis 261 defaults on its debt (1998) 6 oil and natural gas flow to Ukraine 68 oil production 6 oligarchs 29 see also Soviet Union S Saddam Hussein 210 Saint-Simon, Claude Henri de Rouvroy, Comte de 49 Saint-Simonians 87, 168 Salomon Brothers 24 Samuelson, Robert 235, 239 Sandino, Augusto 189 Sanford, Charles 98 satellites 156 savings 140 Scholes, Myron 100 Schumer, Charles 11 Schumpeter, Joseph 46 Seattle battle of (1999) 38, 227 general strike (1918) 243 software development in 195 Second World War 32, 168–70, 214 sectarianism 252 securitisation 17, 36, 42 Sejong, South Korea 124–6 service industries 41 sexism 61 sexual preferences issues 104, 131, 176 Shanghai Commune (1967) 243 shark hunting 73, 76 Shell Oil 79, 251 Shenzhen, China 36 shop floor organisers (shop stewards) 103 Silicon Valley 162, 195, 216 Singapore follows Japanese model 92 industrialisation 68 rise of (1970s) 35 slavery 144 domestic 15 slums 16, 151–2, 176, 178–9 small operators, dispossession of 50 Smith, Adam 90, 164 The Wealth of Nations 35 social democracy 255 ‘social democratic’ consensus (1960s) 64 social inequality 224 social relations 101, 102, 104, 105, 119, 121, 122, 123, 126, 127, 135–9, 152, 240 loss of 246 social security 224 social services 256 social struggles 193 social welfarism 255 socialism 136, 223, 228, 242, 249 compared with communism 224 solidarity economy 151, 254 Soros, George 44, 98, 221 Soros foundation 44 South Korea Asian Currency Crisis 261 excessive urban development 8 falling exports 6 follows Japanese model 92 rise of (1970s) 35 south-east Asia: crash of 1997–8 6, 8, 49, 246 Soviet Union in alliance with US against fascism 169 break-up of 208, 217, 227 collapse of communism 16 collectivisation of agriculture 250 ‘space race’ (1960s and 1970s) 156 see also Russia space domination of 156–8, 207 fixed spaces 190 ‘space race’ (1960s and 1970s) 156 Spain property-led crisis (2007–10) 5–6, 261 unemployment 6 spatial monopoly 164–5 special drawing rights 32, 34 special economic zones 36 special investment vehicles 36, 262 special purpose entities 262 speculation 52–3 speculative binges 52 speed-up 41, 42 stagflation 113 stagnation 116 Stalin, Joseph 136, 250 Standard Oil 98 state formation 196, 197, 202 state-corporate nexus 204 ‘space race’ (1960s and 1970s) 156 state-finance nexus 204, 205, 237, 256 blind belief in its corrective powers 55 ‘central nervous system’ for capital accumulation 54 characteristics of a feudal institution 55 and the current crisis 118 defined 48 failure of 56–7 forms of 55 fusion of state and financial powers 115 innovation in 85 international version of 51 overwhelmed by centralised credit power 52 pressure on 54 radical reconstruction of 131 role of 51 and state-corporate research nexus 97 suburbanisation 171 tilts to favour particular interests 56 statistical arbitrage strategies 262 steam engine, invention of 78, 89 Stiglitz, Joseph 45 stimulus packages 261 stock markets crash (1929) 211, 217 crashes (2001–02) 261 massive liquidity injections (1987) 236, 261 Stockton, California 2 ’structural adjustment’ programmes vii, 19, 261 subcontracting 131 subprime loans 1 subprime mortgage crisis 2 substance abuse 151 suburbanisation 73, 74, 76–7, 106–7, 169, 170, 171, 181 Summers, Larry 11, 44–5, 236 supermarket chains 50 supply-side theory 237 surveillance 92, 204 swaps credit 21 Credit Default 24, 262 currency 262 equity index 262 interest rate 24, 262 Sweden banking system crash (1992) 8, 45 Nordic crisis 8 Yugoslav immigrants 14 Sweezey, Paul 52, 113 ‘switching crises’ 93 systematic ‘moral hazard’ 10 systemic risks vii T Taipei: computer chips and household technologies in 195 Taiwan falling exports 6 follows Japanese model 92 takeovers 49 Taliban 226 tariffs 16 taxation 244 favouring the rich 45 inheritance 44 progressive 44 and the state 48, 145 strong tax base 149 tax rebates 107 tax revenues 40 weak tax base 150 ‘Teamsters for Turtles’ logo 55 technological dynamism 134 technologies change/innovation/new 33, 34, 63, 67, 70, 96–7, 98, 101, 103, 121, 127, 134, 188, 193, 221, 249 electronic 131–2 ‘green’ 188, 221 inappropriate 47 labour fights new technologies 60 labour-saving 14–15, 60, 116 ‘rule of experts’ 99, 100–101 technological comparative edge 95 transport 62 tectonic movements 75 territorial associations 193–4, 195, 196 territorial logic 204–5 Thailand Asian Currency Crisis 261 excessive urban development 8 Thatcher, Margaret, Baroness 15, 38, 64, 131, 197, 255 Thatcherites 224 ‘Third Italy’, Bologna 162, 195 time-space compression 158 time-space configurations 190 Toys ‘R’ Us 17 trade barriers to 16 collapses in foreign trade (2007–10) 261 fall in global international trade 6 increase in volume of trading 262 trade wars 211 trade unions 63 productivity agreements 60 and US auto industry 56 trafficking human 44 illegal 43 training 59 transport costs 164 innovations 42, 93 systems 16, 67 technology 62 Treasury Bill futures 262 Treasury bond futures 262 Treasury instruments 262 TRIPS agreement 245 Tronti, Mario 102 Trotskyists 253, 255 Tucuman uprising (1969) 243 Turin: communal ‘houses of the people’ 243 Turin Workers Councils 243 U UBS 20 Ukraine, Russian oil and natural gas flow to 68 ultraviolet radiation 187 UN Declaration of Human Rights 234 UN development report (1996) 110 Un-American Activities Committee hearings 169 underconsumptionist traditions 116 unemployment 131, 150 benefits 60 creation of 15 in the European Union 140 job losses 93 lay-offs 60 mass 6, 66, 261 rising 15, 37, 113 and technological change 14, 60, 93 in US 5, 6, 60, 168, 215, 261 unionisation 103, 107 United Fruit Company 189 United Kingdom economy in serious difficulty 5 forced to nationalise Northern Rock 2 property market crash 261 real average earnings 13 train network 28 United Nations 31, 208 United States agricultural subsidies 79 in alliance with Soviet Union against fascism 169 anti-trust legislation 52 auto industry 56 blockbusting neighbourhoods 248 booming but debt-filled consumer markets 141 and capital surplus absorption 31–2 competition in labour markets 61 constraints to excessive concentration of money power 44–5 consumerism 109 conumer debt service ratio 18 cross-border leasing with Germany 142–3 debt 158, 206 debt bubble 18 fiscal crises of federal, state and local governments 261 health care 28–9 heavy losses in derivatives 261 home ownership 3 housing foreclosure crises 1–2, 4, 38, 166 industries dependent on trade seriously hit 141 interventionism in Iraq and Afghanistan 210 investment bankers rescued 261 investment failures in real estate 261 lack of belief in theory of evolution 129 land speculation scheme 187–8 oil issue 76–7, 79, 80, 121, 170, 210, 261 population growth 146 proletarianisation 60 property-led crisis (2007–10) 261 pursuit of science and technology 129 radical anti-authoritarianism 199 Reagan Recession 261 rescue of financial institutions 261 research universities 95 the reversing origins of US corporate profits (1950–2004) 22 the right to the city movement 257 ‘right to work’ states 65 savings and loan crisis (1984–92) 8 secondary mortgage market 173 ‘space race’ (1960s and 1970s) 156 suburbs 106–7, 149–50, 170 train network 28 unemployment 5, 6, 60, 168, 215, 261 unrestricted capitalist development 113 value of US stocks and homes, as a percentage of GDP 22 and Vietnam War 171 wages 13, 62 welfare provision 141 ‘urban crisis’ (1960s) 170 urban ‘heat islands’ 77 urban imagineering 193 urban social movements 180 urbanisation 74, 85, 87, 119, 131, 137, 166, 167, 172–3, 174, 240, 243 US Congress 5, 169, 187–8 US Declaration of Independence 199 US National Intelligence Council 34–5 US Senate 79 US Supreme Court 179 US Treasury and Goldman Sachs 11 rescue of Continental Illinois Bank 261 V Vanderbilt family 98 Vatican 44 Veblen, Thorstein 181–2 Venezuela 256 oil production 6 Vietnam War 32, 171 Volcker, Paul 2, 236 Volcker interest rate shock 261 W wage goods 70, 107, 112, 162 wages and living standards 89 a living wage 63 national minimum wage 63 rates 13, 14, 59–64, 66, 109 real 107 repression 12, 16, 21, 107, 110, 118, 131, 172 stagnation 15 wage bargaining 63 Wal-Mart 17, 29, 64, 89 Wall Street, New York 35, 162, 200, 219, 220 banking institutions 11 bonuses 2 ‘Party of Wall Street’ 11, 20, 200 ‘War on Terror’ 34, 92 warfare 202, 204 Wasserstein, Bruce 98 waste disposal 143 Watt, James 89 wealth accumulation by capitalist class interests 12 centralisation of 10 declining 131 flow of 35 wealth transfer 109–10 weather systems 153–4 Weather Underground 254 Weill, Sandy 98 Welch, Jack 98 Westphalia, Treaty of (1648) 91 Whitehead, Alfred North 75 Wilson, Harold 56 wind turbines 188 women domestic slavery 15 mobilisation of 59, 60 prostitution 15 rights 176, 251, 258 wages 62 workers’ collectives 234 working hours 59 World Bank 36, 51, 69, 192, 200, 251 ‘Fifty Years is Enough’ campaign 55 predicts negative growth in the global economy 6 World Bank Development Report (2009) 26 World Trade Organisation (WTO) 200, 227 agreements 69 street protests against (Seattle, 1999) 55 TRIPS agreement 245 and US agricultural subsidies 79 WorldCom 8, 100, 261 worldwide web 42 Wriston, Walter 19 X X-rays 99 Y Yugoslavia dissolution of 208 ethnic cleansings 247 Z Zapatista revolutionary movement 207, 226, 252 Zola, Émile 53 The Belly of Paris 168 The Ladies’ Paradise 168

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At the epicentre of the problem was the mountain of ‘toxic’ mortgage-backed securities held by banks or marketed to unsuspecting investors all around the world. Everyone had acted as if property prices could rise for ever. By autumn 2008, near-fatal tremors had already spread outwards from banking to the major holders of mortgage debt. United States government-chartered mortgage institutions Fannie Mae and Freddie Mac had to be nationalised. Their shareholders were destroyed but the bondholders, including the Chinese Central Bank, remained protected. Unsuspecting investors across the world, from pension funds, small regional European banks and municipal governments from Norway to Florida, who had been lured into investing in pools of ‘highly rated’ securitised mortgages, found themselves holding worthless pieces of paper and unable to meet their obligations or pay their employees.

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This means either state involvement or a financial system robust enough to assemble the capital and deploy it with the desired long-term effects and wait patiently for the returns. This has usually meant radical innovations in the state–finance nexus. Since the 1970s, financial innovations such as the securitisation of mortgage debt and the spreading of investment risks through the creation of derivative markets, all tacitly (and now, as we see, actually) backed by state power, have permitted a huge flow of excess liquidity into all facets of urbanisation and built environment construction worldwide. In each instance innovation in the state–finance nexus has been a necessary condition for channelling surpluses into urbanisation and infrastructural projects (e.g. dams and highways).

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril
by Satyajit Das
Published 9 Feb 2016

The ratio of household debt to disposable personal income rose to 127 percent at the end of 2007, up from 77 percent in 1990. Consumers had become over-leveraged as they saved less and borrowed more to finance consumption. Between 2001 and 2007, households borrowed around US$5 trillion against their homes as they rose in value. Mortgage debt in 2008 was 73 percent of GDP, up from an average of 46 percent during the 1990s. The debt was made even riskier because of looser credit conditions, weak creditworthiness of borrowers, and predatory lending practices. The same phenomenon was observable in the UK, Canada, Australia, and some European countries.

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China's debt levels have risen rapidly, quadrupling between 2007 and 2014 from US$7 trillion to US$28 trillion. Business, household, and government debt have all grown. Only the financial sector in developed markets has reduced leverage. Businesses have borrowed not to invest, but to repurchase their own shares or buy other companies. Household borrowing, around 74 percent of which is mortgage debt, has increased in 80 percent of countries. Based on risk measures, such as debt-to-income ratios, debt service ratios, and house price changes, households in Canada, the Netherlands, Sweden, Australia, Malaysia, and Thailand are potentially vulnerable. Since 2007, government debt has grown globally by US$25 trillion, to US$58 trillion.

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South Korea, Malaysia, Indonesia, India, Thailand, Brazil, South Africa, and a number of Eastern European nations, like Hungary and Poland, also showed significant increases in debt, which was at levels considered high for developing nations. Belying the country's reputation for thrift, Chinese household debt has also risen sharply, nearly quadrupling since 2007, from US$1 trillion to US$3.8 trillion. Mortgage debt has grown by 21 percent per year, in parallel to a 60 percent rise in urban property prices since 2008. During the same period, consumer credit grew strongly in Brazil and many Asian countries. Under Brazil's parcelas (installments) culture, cars, consumer goods, holidays, plastic surgery, and funerals were available on credit.

Finance and the Good Society
by Robert J. Shiller
Published 1 Jan 2012

We know that securitizers were creating new investment vehicles based on mortgages. But what is the di erence, really, whether one invests in RMBSs or in shares in banks that own mortgages, as was the practice before Freddie and Fannie started issuing these? Securitization was indeed never really popular in most parts of the world. The movement toward securitization of home mortgage debt became particularly strong in the United States thanks to powerful impetus from government support. But, lacking the subsidy e ectively given by the U.S. government via Fannie Mae and Freddie Mac, mortgage securitization has not been common anywhere else.6 Before the crisis of 2007 nance theorists saw clear innovation in mortgage securitization.

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Claire Hill, in her article “Securitization: A Low-Cost Sweetener for Lemons,” written before the crisis, argued persuasively that an important reason the securitization and CDO market can function well is that it helps solve the lemons problem.9 Bundling mortgages into securities that are evaluated by independent rating agencies, and dividing up a company’s securities into tranches that allow specialized evaluators to do their job, e ciently lowers the risk to investors of getting stuck with lemons. They should be able to trust the higher-tranche CDOs more than any pool of mortgages or any share in a complex and difficult-to-understand mortgage-lending institution. So there was a valid theory as to why the splitting of securitized mortgage debt into tranches was a good idea. Of course it turns out not to have worked superbly well in practice, but this is largely because of the erroneous assumption noted earlier—that everyone, including the rating agencies, thought home prices just couldn’t fall. That mistake, and not any flaw in the logic of Claire Hill’s theory, was the real problem.

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Hence there are massive di erences across countries in average levels of indebtedness, and in propensity to save and build wealth. Leverage in the U.S. Financial Crisis of 2007 During the boom in the United States just prior to the severe nancial crisis, between 2001 and 2007, household debt, including mortgage debt and credit card debt, doubled from $7 trillion to $14 trillion. Household debt as a fraction of income rose to a level not seen since the onset of the Great Depression. After the decline in home prices began, strapped households began to curtail their consumption, setting a course toward a severe recession.

Just Keep Buying: Proven Ways to Save Money and Build Your Wealth
by Nick Maggiulli
Published 15 May 2022

For example, research published in the Journal of Economic Psychology found that British households with higher levels of outstanding credit card debt were “significantly less likely to report complete psychological well-being.”³⁷ However, no such association was found when examining households with mortgage debt. Researchers at Ohio State echoed these findings when they reported that payday loans, credit cards, and loans from family and friends caused the most stress, while mortgage debt caused the least.³⁸ On the physical health front, a study in Social Science & Medicine found that high financial debt relative to assets among American households was associated with “higher perceived stress and depression, worse self-reported general health, and higher diastolic blood pressure.”

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For example, if you work at (or start) a company that provides equity compensation, you may one day find that a significant portion of your wealth is in a single security. In this case, congratulations on your gains! However, you will probably want to sell at least a portion of this position down over time. How much should you sell? It depends on your goals. For example, if you have mortgage debt and a large, concentrated position in one security, it may make sense to sell down enough of this security to pay off your mortgage. From a return perspective this is probably sub-optimal since your concentrated asset will probably rise in value more quickly than your home. However, from a risk perspective this can make lots of sense.

The City
by Tony Norfield

In response, US Treasury Secretary William Simon visited the Saudi Arabian Monetary Authority in July 1974 to sell them US Treasury securities.5 This was part of a more general deal with Saudi Arabia, the main OPEC oil producer, including lucrative weapons contracts for US companies and a US promise to give Saudi Arabia military protection.6 By the end of 1977, Saudi Arabia accounted for 20 per cent of all Treasury notes and bonds held by foreign central banks, which at that time was astonishing for a ‘developing country’. Following a US Commerce Department trip to Saudi Arabia, Saudi money was also invested in government-backed mortgage securities. Selling US mortgage debt to foreign investors had a long history well before the 2007–8 financial crisis! Political and economic negotiations with the Saudis and other Middle Eastern OPEC states also kept the price of oil denominated in US dollars. The US supported Saudi Arabia’s political ambition to secure a larger IMF quota (and enhanced IMF voting rights) at the same time as plans to shift the oil price from the dollar were dropped.7 This was despite a June 1975 agreement between the OPEC countries to peg oil prices to a group of major currencies, not just the dollar, as a means of protecting themselves from falls in the dollar’s value.

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In 2005, 15 per cent of the UK population, or around nine million people, owned equities either directly or via mutual funds.33 Other data show that UK individuals directly owned 11.5 per cent of the value of UK equities at the end of 2010, worth £204.5bn, excluding any holdings via investment funds, etc.34 While the median net financial wealth of UK households in 2010–12 was estimated at just below £6,000, including cash savings, bond and equity holdings minus financial liabilities (but excluding mortgage debt), there were many households with significant assets. Most financial wealth is held in the form of bonds and equities; only a small proportion is in the form of cash deposits. In 2010–12, a quarter of all households in Britain had zero or negative net financial wealth, in other words, net debts.

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From an estimated $68bn in 2000, annual global CDO issuance increased nearly eightfold to a peak of $521bn in 2006.19 Alongside this, profits reported by the US financial sector, the source of most CDO issuance, more than doubled over the same period – before the collapse that occurred shortly afterwards when mortgage defaults soared in the US. The banks’ sale of mortgage securities played a major role in the expansion of mortgage debt to more and more borrowers, including in the end to those who were in no position to pay that debt back. Banks also create other kinds of security, known as derivatives, for hedging and speculative purposes. These include interest rate swaps, and futures and options on interest rates and currency values.

The Oil Factor: Protect Yourself-and Profit-from the Coming Energy Crisis
by Stephen Leeb and Donna Leeb
Published 12 Feb 2004

In essence, inflation will beget further inflation as policymakers find their hands tied by the existence of so much consumer debt. Home Sweet Home A major portion of total consumer debt—about 70 percent—is in the form of home mortgages, whose growth is displayed in figure 5c, “Mortgage Debt Outstanding.” According to the Federal Reserve, nonmortgage debt (credit cards, bank loans, etc.) payment as a percentage of disposable income has declined since 1980. During the same period, mortgage debt payments, as figure 5c shows, have risen by over 40 percent. There’s a good reason why homes account for so much of overall consumer debt—banks are more willing to lend money for a home than for almost anything else.

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Holding the S&P 500 (figure 2b) Oil’s Buy and Sell Signals (figure 2c) Our Ongoing Oil Habit (figure 2d) Declining Domestic Oil Production (figure 3a) Declining Saudi GDP (figure 3b) Real Oil Prices, 1949-2002 (figure 4a) Debt as Percentage of GDP (figure 5a) Soaring Bankruptcy Petitions (figure 5b) Mortgage Debt Outstanding (figure 5c) Natural Gas Prices (figure 6a) Government Spending and the CPI, 1901-2002 (figure 8a) Energy and Inflation (figure 9a) Inverse Relationship (figure 9b) Inflation and Markets (figure 10a) Sailing Through the 1970s (figure 10b) Silver (figure 13a) Palladium (figure 13b) Defense Expenditures (figure 14a) Weather-Related Woes (figure 15a) Bonds in the Depression (figure 17a) Defying the Market Portfolio Performance (figure 18a) Model Portfolios (figure 18b) Preface Investing is a tough business, whether you do it simply for your own account or professionally.

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay
by Emmanuel Saez and Gabriel Zucman
Published 14 Oct 2019

For most Americans, wealth primarily consists of housing and retirement savings on the asset side, and mortgage debt, consumer credit, and student loans on the liability side.16 Public policies directly affect each of these forms of assets and liabilities. In the post–World War II decades, regulations encouraged firms to provide funded pensions to their employees. The federal government sponsored the creation of thirty-year mortgages, providing an effective tool to save over a lifetime—because paying down your mortgage debt and building home equity, now that’s saving. After the 1980s, by contrast, student loans boomed as public funding for higher education retreated.

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After the 1980s, by contrast, student loans boomed as public funding for higher education retreated. Financial deregulation made it easier for people to get into debt, for example by facilitating the perpetual rollover of mortgage debt through refinancing, or by boosting the supply of consumer credit. This is perhaps the main lesson of behavioral economics, the fast-growing field of research that strives to take a more realistic view of human behavior than the standard, hyper-rational economic model: when it comes to influencing the saving rate, nontax policies swamp tax incentives.17 Take default options, for example. Newly hired workers are four times more likely to enroll in a 401(k) retirement savings account—the now dominant form of retirement saving in the United States—when that’s the default option offered to them (80%, in that case, do enroll) than when they have to voluntarily opt in (20%).18 Default options not only boost retirement saving, they increase the overall saving rate of workers: the money put in retirement saving accounts does not crowd out other forms of wealth accumulation (such as the reimbursement of housing debt).

The Meritocracy Myth
by Stephen J. McNamee
Published 17 Jul 2013

In 1890, 72 percent of American home owners owned their own homes outright. By 1990, the corresponding figure had dropped to only 35 percent (Devaney 1994), then shrank again to only 29.3 percent by 2012 (Hopkins 2013). In short, more Americans live in “owner-occupied housing,” but a higher portion of them have gone into debt to do so. Mortgage debt reached crisis proportions in 2008, precipitating a general financial meltdown, record numbers of foreclosures and bankruptcies, as well as a series of bank failures leading to a massive $700 billion federal bailout. The uptick in home-ownership rates, as it turned out, was largely an illusion fueled by the housing bubble that produced unrealistic and unsustainable debt levels.

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By late 2007, the financial sector was on the edge of economic collapse, reminiscent of the banking collapse that triggered the Great Depression in 1929. The full explanation of the causes of the subsequent Great Recession is still being debated (Davies 2010; Fligstein and Goldstein 2011), but there is widespread consensus that it was immediately triggered by a massive mortgage debt crisis. Following the structural shifts in the economy associated with globalization and deindustrialization, the U.S. economy was kept partially afloat by the dot-com bubble of the 1980s and 1990s, which crashed in 2000, driving stock market prices down sharply. To help stimulate the economy in the aftermath of this downturn, the Federal Reserve reduced interest rates (the costs of money to lenders) to practically zero.

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W., 1 , 2 Bush, George W., 1.1-1.2 , 2 , 3 C Calvinism, 1 , 2 capitalism as a continuum, 1 entrepreneurial capitalists, 1 , 2 , 3 free-market expression, 1 , 2 hard work and self-denial as aspects of, 1 human capital, 1 risk, 1 , 2 , 3 turn-of-the-century capitalists, 1 , 2 venture capitalists, 1 wealth inequality in capitalist societies, 1 Carnegie, Andrew, 1 , 2 Catholics and Catholicism, 1 , 2 , 3 , 4.1-4.2 , 5 Chambliss, William, 1 charitable giving, 1 , 2 , 3 , 4 , 5.1-5.2 children American Dreams for, 1 , 2.1-2.2 cost of raising, 1 cultural capital and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 in culture-of-poverty theory, 1.1-1.2 discrimination and, 1 , 2.1-2.2 , 3 , 4 , 5 downward mobility, insulation from, 1.1-1.2 education and parental influence, 1.1-1.2 , 2 , 3 , 4 , 5.1-5.2 , 6 , 7 , 8 health issues, 1 , 2 as heirs, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6 , 7.1-7.2 , 8 , 9 , 10 , 11 of immigrants, 1 numbers, declining, 1.1-1.2 , 2 , 3.1-3.2 , 4 parental occupation, effects on, 1 of the privileged, 1 , 2 , 3 , 4 , 5 , 6 , 7 proposed reforms benefiting, 1 , 2.1-2.2 in a pure meritocratic system, 1 social class, education affected by, 1 social mobility and, 1 , 2 Clinton, Hillary, 1 , 2 cognitive elite, 1 , 2 Coleman, James S., 1 , 2 college American dream, as part of, 1 , 2 aptitude tests, 1 , 2 cognitive elect sorted out by, 1 credentialism, 1.1-1.2 , 2.1-2.2 employment during attendance, 1 enrollment, 1.1-1.2 , 2 funding accounts, 1 hiring practices, 1.1-1.2 income, effects on completion, 1.1-1.2 job prospects, 1.1-1.2 legacy admissions, 1.1-1.2 , 2 student debt, 1 , 2.1-2.2 tracking, effects of, 1.1-1.2 types of colleges and social standing, 1.1-1.2 , 2 the wealthy and, 1 , 2 , 3 Collins, Randall, 1 , 2 , 3 Coming Apart: The State of White America, 1960–2010 (Murray), 1.1-1.2 competition capitalism and, 1 , 2 destructive vs. constructive forms, 1.1-1.2 discrimination reducing, 1 , 2 , 3 at elite colleges, 1 , 2 foot race metaphor, 1 foreign business competition, 1.1-1.2 large corporations discouraging, 1 , 2 , 3 , 4 , 5 reforms enhancing, 1 , 2 women and, 1 , 2 , 3 , 4 T The Competition Paradigm (Rosenau), 1.1-1.2 C conflict theory of inequality, 1.1-1.2 , 2 corporations, large American economy, dominating, 1 , 2 ascent of, 1.1-1.2 competition, discouraging, 1 , 2 , 3 , 4 , 5 highly concentrated industries, 1 , 2 , 3 labor unions and, 1 , 2 megamergers, 1.1-1.2 , 2 reform suggestions, 1 restructuring, 1.1-1.2 , 2 self-employment affected by, 1 , 2 , 3 small businesses, vs., 1.1-1.2 , 2.1-2.2 , 3 Countrywide financial corporation, 1 , 2 Creating a Class: College Admissions and the Education of Elites (Stevens), 1 credentials credential underemployment, 1 cultural credentials, 1 , 2 , 3 , 4 , 5 , 6 importance of, 1.1-1.2 , 2 , 3 inflation of, 1 , 2.1-2.2 , 3 nonvalidated, 1 opportunities to earn, 1 cultural capital acquisition of, 1.1-1.2 defined, 1 , 2 , 3 discrimination and, 1 , 2 educational inequalities, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 elite circles, acceptance into, 1 employers impressed with, 1.1-1.2 government programs leveling field, 1 information access, 1 inheritance and, 1 , 2 media portrayals, 1 nouveau riche, 1 right attitude, 1 social climbing, 1.1-1.2 , 2 transmission settings, 1.1-1.2 U.S. presidents, exemplifying, 1.1-1.2 culture-of-poverty theory, 1.1-1.2 , 2 D debt as a coping strategy, 1.1-1.2 Great Recession, during, 1 , 2 , 3 housing/mortgage debt, 1 , 2 as a liability, 1 student loans, 1 , 2.1-2.2 democracy, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8.1-8.2 Democracy in America (de Tocqueville), 1.1-1.2 disabled Americans, 1.1-1.2 , 2 , 3 discrimination affirmative action as a remedy, 1.1-1.2 ageism, 1.1-1.2 , 2 American Dream, affecting, 1.1-1.2 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8.1-8.2 , 9.1-9.2 , 10.1-10.2 , 11 continuing effects of, 1.1-1.2 , 2 the disabled, experiences of, 1.1-1.2 , 2 , 3 in education, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6 expansion of opportunity and, 1 heterosexist prejudices, 1.1-1.2 , 2 , 3 in-group solidarity, 1.1-1.2 institutional favoritism, 1.1-1.2 , 2 , 3.1-3.2 legal and political injustice, 1.1-1.2 , 2 , 3.1-3.2 occupational unfairness, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 the physically attractive as favored, 1.1-1.2 racial bigotry, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5.1-5.2 , 6 , 7 , 8 reform movements combating, 1.1-1.2 , 2 religious intolerance, 1.1-1.2 , 2 , 3 , 4 residential inequity, 1.1-1.2 , 2 women, experiences of, 1 , 2 , 3 , 4 , 5.1-5.2 , 6.1-6.2 , 7.1-7.2 , 8.1-8.2 , 9.1-9.2 Domhoff, William, 1 , 2 Duncan, Otis Dudley, 1 E education affirmative action and, 1 , 2 African Americans, educational issues of, 1.1-1.2 , 2.1-2.2 , 3 American Dream, as part of, 1 , 2.1-2.2 , 3 , 4 , 5 , 6 cognitive elite and educational attainment, 1 credentials, importance of, 1.1-1.2 , 2 , 3 , 4.1-4.2 discrimination affecting, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6 educational endogamy, 1 government spending on, 1.1-1.2 , 2 human capital theory, 1 , 2 income affected by, 1 individualism, aiding in, 1 inequalities and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 occupational opportunities, linked to, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6.1-6.2 , 7.1-7.2 , 8.1-8.2 , 9.1-9.2 , 10 , 11.1-11.2 , 12 , 13.1-13.2 parental circumstances affecting, 1 , 2 , 3 , 4 , 5 , 6 school completion, 1 school quality and school funding, 1.1-1.2 social/cultural capital and, 1 , 2 , 3 , 4 , 5 , 6 , 7.1-7.2 , 8 , 9 , 10 , 11 success, as a factor in, 1 , 2 , 3 , 4 teacher salary discrepancies, 1 , 2 women and, 1.1-1.2 , 2 See also college T The Education-Jobs Gap (Livingstone), 1 E employment See occupations endogamy, 1.1-1.2 entrepreneurs and entrepreneurialism American respect for, 1 , 2 , 3 , 4 education vs., 1 , 2.1-2.2 entrepreneurial capitalists, 1 , 2 , 3 entrepreneurial traits, 1 , 2 franchisees not considered as entrepreneurs, 1 irregular economy, participation in, 1.1-1.2 luck as part of success, 1 , 2 random-walk hypothesis, 1 social capital, use of, 1 , 2 , 3 upward mobility, aiming for, 1 , 2 See also self-employment Etcoff, Nancy, 1.1-1.2 ethics See moral character F Forbes magazine income listings, 1.1-1.2 , 2.1-2.2 , 3 franchises, 1.1-1.2 , 2 free-market economy, 1.1-1.2 , 2 T The Frontier in American History (Turner), 1.1-1.2 F frontier influence in America, 1 , 2 , 3 , 4 functional theory of inequality, 1 G gambling, 1 , 2 , 3 , 4.1-4.2 , 5 Gates, Bill, 1 , 2 , 3 , 4.1-4.2 , 5 Gendall, Murray, 1 Gilded Age, 1 , 2 , 3 Gini coefficient, 1.1-1.2 Gladwell, Malcolm, 1 , 2 glass ceiling, 1 , 2 , 3.1-3.2 , 4 government programs education funding, 1 , 2 , 3 health care, 1 , 2 highway subsidies and suburb development, 1 , 2 home ownership, encouraging, 1 , 2 land giveaways, 1 the poor as targets of, 1 , 2 , 3 proposed asset-building policies, 1.1-1.2 “thousand points of light” as alternative, 1 transfer payment, 1 Granovetter, Mark, 1.1-1.2 Great Depression, 1 , 2 , 3 Great Recession African Americans affected by, 1 , 2 age discrimination during, 1 class issues resulting from, 1 debt and bankruptcies, rise of, 1.1-1.2 factors leading to, 1.1-1.2 home ownership during, 1.1-1.2 , 2 mortgage debt as contributor, 1 retirement delays caused by, 1 self-employment increase, 1 white-collar crime leading to, 1 H Hamermesh, Daniel S., 1.1-1.2 , 2 hard work beauty achieved through, 1 capitalism, associated with, 1 , 2 consumption as reward, 1 as determinant of inequality, 1 increased work hours as a coping strategy, 1.1-1.2 modest effects of, 1 self-made men and, 1 as a success factor, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 health health care plans, 1.1-1.2 , 2 , 3 , 4.1-4.2 , 5 , 6 older workers, 1 wealth affecting, 1 , 2 , 3.1-3.2 , 4 , 5 Herrnstein, Richard, 1.1-1.2 , 2 hierarchy-of-needs theory, 1 , 2 higher education See college hiring practices, 1.1-1.2 , 2 , 3 Hispanics, 1 , 2 , 3 , 4 , 5 , 6 , 7 Hochschild, Jennifer, 1 hockey player success, 1.1-1.2 Home Advantage (Lareau), 1.1-1.2 home ownership, 1.1-1.2 , 2.1-2.2 , 3 , 4.1-4.2 homosexuality and discriminatory practices, 1.1-1.2 , 2 human capital, 1 , 2.1-2.2 , 3 , 4 , 5 , 6 I IBM, 1.1-1.2 immigrants, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 individualism as culturally dominant, 1 democracy, expressed through, 1 , 2.1-2.2 as greatly valued, 1 , 2 immigrants and, 1.1-1.2 as part of the entrepreneurial personality, 1 pioneer spirit reinforcing, 1 through self-employment, 1 self-help books promoting, 1 inequalities charitable giving as a means of reducing, 1.1-1.2 conflict and functional theories of, 1.1-1.2 economic inequalities, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 , 7 , 8 educational system and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 gender inequality, 1.1-1.2 government spending as a factor, 1 , 2 ideologies of, 1.1-1.2 labor unions working to reduce, 1 matrix of domination, 1 residential inequalities, 1 , 2 taxes and, 1.1-1.2 , 2 in wages and income, 1.1-1.2 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6.1-6.2 in wealth, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 inheritance advantages of wealth inheritance, 1 , 2.1-2.2 , 3 attitudes towards, 1 , 2 baby boomers and, 1.1-1.2 , 2 conflict theories, within, 1 cultural capital and, 1 , 2.1-2.2 , 3 , 4 domestic partnerships and, 1 estate and inheritance taxes, 1.1-1.2 , 2 of estates, 1 , 2 Forbes magazine, heirs listed in, 1.1-1.2 inequalities, perpetuating, 1 , 2 , 3 luck and, 1 as a natural right, 1 nepotism and, 1.1-1.2 as a nonmerit factor, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 , 8 old money and, 1.1-1.2 parental motivation, 1.1-1.2 , 2 primogeniture, 1 relay race, compared to, 1 , 2.1-2.2 , 3 , 4 , 5 wealth distribution through, 1 women and inheritance of wealth, 1 In Praise of Nepotism: A Natural History (Bellow), 1.1-1.2 A An Inquiry into the Nature and Causes of the Wealth of Nations (Smith), 1 I integrity, 1 , 2.1-2.2 inter vivo transfers, 1.1-1.2 , 2 , 3 , 4 investments, economic, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11.1-11.2 , 12 , 13 IQ and IQ tests, 1.1-1.2 , 2.1-2.2 , 3 , 4 , 5 , 6 irregular economy, 1 , 2.1-2.2 , 3 , 4 J Jencks, Christopher, 1 , 2 jobs See occupations Jones, Janelle, 1.1-1.2 K Kildall, Gary, 1.1-1.2 Kozol, Jonathan, 1 L labor unions, 1 , 2 , 3.1-3.2 Lareau, Annette, 1.1-1.2 Lears, Jackson, 1 Lewis, Oscar, 1.1-1.2 Livingstone, David W., 1 , 2 lookism, 1 , 2 , 3 , 4 , 5 , 6 lottery, 1 , 2 , 3.1-3.2 , 4 lower class See working class luck denial of, 1.1-1.2 , 2 with gambling, 1 getting ahead, as a factor in, 1 , 2 , 3.1-3.2 lottery and, 1 , 2 as a nonmerit factor, 1 as part of capitalism, 1 in striking it rich, 1 , 2 wealth attainment and, 1 , 2.1-2.2 , 3 M marriage career interruptions due to, 1 marrying into money, 1 , 2 the poor and, 1 , 2.1-2.2 sexual discrimination and, 1.1-1.2 , 2 trailing partners and hiring practices, 1 upper class and, 1 , 2 , 3 , 4.1-4.2 , 5 Marx, Karl, 1 Maslow, Abraham, 1 , 2 Massey, Douglas S., 1 , 2 Matthew effect, 1 , 2 matrix of domination, 1.1-1.2 Medicare, 1 , 2.1-2.2 mentors, 1 , 2.1-2.2 , 3 , 4 , 5.1-5.2 meritocracy affirmative action and, 1 American promotion of merit, 1.1-1.2 , 2 , 3.1-3.2 , 4 , 5 , 6 coping strategies, 1 , 2 credentials, lack of as a barrier, 1.1-1.2 as a desired outcome, 1 discrimination as the antithesis of merit, 1.1-1.2 , 2.1-2.2 , 3 , 4 , 5 , 6 , 7.1-7.2 , 8 , 9.1-9.2 , 10 , 11 education as a merit filter, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 employment opportunities, 1.1-1.2 , 2.1-2.2 , 3 entrepreneurial success, 1 fairness of the system, 1 , 2.1-2.2 , 3 , 4 , 5 folklore of, 1 government spending and, 1.1-1.2 , 2 in the hiring process, 1.1-1.2 , 2 human capital factors, 1 , 2 , 3 income based on merit, 1 inheritance as a nonmerit factor, 1 , 2.1-2.2 , 3 , 4 , 5.1-5.2 , 6 , 7.1-7.2 , 8 , 9 , 10 , 11 , 12 , 13.1-13.2 intergenerational wealth transfers, 1.1-1.2 legacy preferences as nonmerit based, 1.1-1.2 , 2 luck as a nonmerit factor, 1 , 2 , 3 , 4 , 5.1-5.2 market trends, 1.1-1.2 meritocratic aristocracy, 1.1-1.2 nepotism as nonmeritorious, 1.1-1.2 the new elite as extra-meritorious, 1 noblesse oblige increasing potential for, 1 nonmerit factors suppressing merit, 1 , 2 , 3 , 4 , 5 Barack Obama as example of, 1.1-1.2 , 2 the past, reverence for, 1 physical attractiveness as a nonmerit factor, 1 , 2 pure merit system, 1.1-1.2 reform movements and, 1 , 2 self-employment as an expression of, 1 social and cultural capital as nonmerit factors, 1.1-1.2 , 2 , 3 , 4.1-4.2 , 5.1-5.2 , 6 , 7 , 8.1-8.2 , 9 , 10 , 11 structural mobility and, 1.1-1.2 talents and abilities of the merit formula, 1 , 2 , 3 , 4 , 5 , 6 taxes and nonmerit advantages, 1.1-1.2 Mexican Americans and Mexican immigrants, 1 , 2 , 3 , 4 Microsoft, 1.1-1.2 middle class America as not middle class, 1 asset building, 1 cultural capital, 1.1-1.2 deferment of gratification, 1 education and, 1 , 2 , 3 Great Recession affecting, 1 home ownership, 1 inner cities, flight from, 1 , 2 Barack Obama, background of, 1.1-1.2 old class vs. new, 1.1-1.2 precarious status of, 1.1-1.2 sports choices of, 1 upper-middle class, 1 , 2 T The Millionaire Mind (Stanley), 1 M millionaires, 1 , 2 , 3 minority groups affirmative action, 1.1-1.2 , 2.1-2.2 asset accumulation, 1.1-1.2 core employment, underrepresentation in, 1 disadvantages of, 1 discrimination experiences, 1 , 2.1-2.2 , 3 , 4.1-4.2 , 5 , 6.1-6.2 , 7 , 8 , 9 , 10 education issues, 1.1-1.2 as inner city dwellers, 1 opportunities expanding, 1 , 2 , 3 self-employment and, 1 social capital, lack of, 1 , 2 , 3 moral character, 1.1-1.2 , 2 Mormons, 1 Murray, Charles, 1.1-1.2 , 2 , 3.1-3.2 Muslims, 1.1-1.2 N National College Athletic Association (NCAA), 1 nepotism, 1.1-1.2 , 2 net worth affirmative action and, 1 defined, 1 by income group, 1 of minority groups, 1 of Barack Obama family, 1 of one percenters, 1 , 2 , 3 of Walton heirs, 1.1-1.2 wealth scale, 1.1-1.2 new elite, 1 , 2.1-2.2 noblesse oblige, 1.1-1.2 O Obama, Barack, 1.1-1.2 , 2 , 3 , 4 Obama, Michelle, 1.1-1.2 occupations attitude as a factor, 1 , 2 blue-collar jobs, 1 , 2 , 3 , 4 , 5 CEO salaries, 1.1-1.2 , 2 changes in opportunities, 1.1-1.2 , 2 cultural capital and, 1.1-1.2 , 2 the disabled and employment difficulties, 1 discrimination, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 downsizing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 education linked to, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6.1-6.2 , 7.1-7.2 , 8 , 9.1-9.2 , 10.1-10.2 , 11 , 12.1-12.2 , 13 , 14.1-14.2 fastest growing jobs, 1.1-1.2 , 2.1-2.2 health hazards, 1 nepotism and, 1 , 2 occupational mobility, 1.1-1.2 , 2 occupational segregation, 1 , 2.1-2.2 outsourcing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 physical attraction and occupational success, 1 self-employment and, 1 self-made men, 1.1-1.2 social capital and occupational opportunities, 1 , 2 , 3 , 4 wages, 1.1-1.2 , 2 , 3 , 4 , 5.1-5.2 , 6.1-6.2 , 7.1-7.2 , 8 white-collar jobs, 1 , 2 , 3 , 4 , 5 , 6 Occupy Wall Street (OWS), 1 old boy networks, 1 , 2 , 3.1-3.2 old money, 1.1-1.2 , 2.1-2.2 Outliers: The Story of Success (Gladwell), 1 , 2 outsourcing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 ownership class, 1 , 2 , 3 , 4 P Paterson, Tim, 1 Peale, Norman Vincent, 1.1-1.2 pensions, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 pink-collar ghetto, 1.1-1.2 poverty children affected by, 1 , 2 culture-of-poverty theory, 1.1-1.2 , 2 full-time work below poverty level, 1 as a matter of attitude, 1 meritocracy and, 1 , 2 minority rates of, 1 , 2 poverty threshold, 1 regional variations in poverty rates, 1.1-1.2 , 2 senior citizens and poverty rates, 1 U.S. poverty rates, 1 T The Power of Positive Thinking (Peale), 1.1-1.2 P Protestants and the Protestant ethic, 1.1-1.2 , 2 , 3 , 4 , 5 Puritan values, 1.1-1.2 R racism and racial issues affirmative action, 1.1-1.2 athletes and, 1 crime and the legal system, 1.1-1.2 disabilities, disproportionate experience of, 1 discrimination and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5.1-5.2 , 6 , 7 , 8 in education, 1.1-1.2 employment, affecting, 1 Great Recession worsening racial equality, 1 home ownership, 1 ideologies of inequality, as part of, 1 income gaps, 1 language skills and, 1 Obama, election of, 1 , 2 scientific racism, 1.1-1.2 segregation, 1 , 2.1-2.2 , 3 social capital and, 1 , 2 , 3 , 4 white flight, 1 , 2 random-walk hypothesis, 1 recession See Great Recession references, 1 , 2 , 3 retirement as part of the American Dream, 1 , 2 delayment as a coping strategy, 1 , 2.1-2.2 , 3 home ownership and funding of, 1 as jeopardized, 1 , 2.1-2.2 proposed supplementation, 1 self-employment and, 1 , 2 , 3 right attitude, 1 , 2.1-2.2 , 3 , 4 , 5 , 6 , 7 T The Rise of Meritocracy, 1870–2033:An Essay on Education and Equality (Young), 1 , 2 R Rivera, Lauren, 1 Rosenau, Pauline Vaillancourt, 1.1-1.2 S Schmitt, John, 1.1-1.2 schools See education segregation educational, 1 , 2 , 3 occupational, 1 , 2 , 3 , 4.1-4.2 racial, 1 , 2.1-2.2 , 3 , 4 , 5 residential, 1 , 2 , 3.1-3.2 of the wealthy, 1.1-1.2 white flight, 1 See also discrimination self-employment American Dream, as exemplifying, 1 franchises, 1 freelancing, 1 , 2 income, 1.1-1.2 irregular economy and, 1.1-1.2 , 2 , 3 , 4 petty bourgeoisie and, 1 psychological characteristics, 1 rates of, diminished, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 , 7.1-7.2 , 8 risk, 1 , 2 , 3.1-3.2 , 4 subcontractors, 1 taxes, 1.1-1.2 , 2 women and minorities, 1.1-1.2 self-help books, 1 , 2 self-made individuals, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 sexual harassment, 1.1-1.2 Shapiro, Thomas, 1 , 2.1-2.2 slaves and slavery, 1 , 2 , 3 , 4 , 5 , 6 , 7 small businesses, 1 , 2 , 3 , 4 , 5.1-5.2 , 6 , 7.1-7.2 , 8 , 9 Smith, Adam, 1 social capital benefits of, 1.1-1.2 , 2 defined, 1 , 2 , 3 discrimination and, 1 , 2 economic opportunities, having access to, 1 , 2 , 3 education and, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 mentorship as a form of, 1 nepotism and, 1.1-1.2 , 2 racism and lack of, 1 , 2 , 3 , 4 restricted access, effects of, 1.1-1.2 , 2.1-2.2 social climbing, 1 , 2 , 3.1-3.2 , 4 of U.S. presidents, 1.1-1.2 weak ties, 1.1-1.2 social climbing, 1 , 2 , 3.1-3.2 , 4 social clubs, 1 , 2 , 3.1-3.2 social mobility athletic and artistic abilities, associated with, 1 , 2.1-2.2 , 3 cultural capital as a factor in, 1 education link, 1 , 2 , 3 hard work as a factor, 1 individual merit, 1 integrity hindering, 1.1-1.2 marrying for money, 1 reduction of opportunities, 1 , 2 during Republican administrations, 1 role of government, 1 , 2 social climbing, 1.1-1.2 , 2 status attainment, 1 through self-employment, 1 social reform movements, 1.1-1.2 Social Register, 1 social reproduction theory, 1.1-1.2 , 2 Social Security, 1.1-1.2 , 2 , 3 , 4 , 5.1-5.2 Something for Nothing: Luck in America (Lears), 1.1-1.2 T the South, 1 , 2.1-2.2 , 3 , 4 , 5 S Stanley, Thomas, 1 status-attainment theory, 1.1-1.2 Stevens, Mitchell, 1 stock market, 1 , 2 , 3 , 4 student loans, 1 , 2.1-2.2 success athletic success, 1 , 2.1-2.2 attitudes associated with, 1 , 2 , 3.1-3.2 birth timing and, 1.1-1.2 , 2 cultural capital, 1 , 2 , 3 , 4 discrimination, achieving success through, 1 education, as a factor in, 1 , 2 , 3 , 4 , 5 entrepreneurial success, 1 , 2 , 3 God’s grace, success as sign of, 1 , 2 hard work and, 1 , 2 , 3.1-3.2 , 4 , 5 human capital factors, 1 individualism as key to, 1 intelligence as a determinant, 1 luck as important, 1 meritocracy myth and, 1 mind-power ethic as success formula, 1.1-1.2 moral character and, 1 , 2 , 3.1-3.2 , 4 parental involvement, 1.1-1.2 , 2 , 3.1-3.2 the right stuff, being made of as key, 1.1-1.2 , 2.1-2.2 , 3 , 4 small businesses and, 1 social capital increasing likelihood of, 1 , 2 , 3 suburban living as marker of, 1 10,000 hour rule, 1 women and, 1 , 2 supply side, 1 , 2 , 3 , 4 , 5 , 6.1-6.2 Survival of the Prettiest (Etcoff), 1.1-1.2 Swift, Adam, 1.1-1.2 T talent and abilities American aristocracy, 1 American Dream, leading to, 1 of athletes and celebrities, 1 education enhancing, 1 , 2 , 3.1-3.2 functional theory of inequality, 1 jobs matched to talent, 1 success achieved through, 1 , 2 , 3 , 4 , 5 , 6 talent-use gap, 1 upward mobility and, 1 , 2.1-2.2 , 3.1-3.2 taxes capital gains, 1.1-1.2 estate taxes, 1 , 2 , 3.1-3.2 government policies linked with, 1 , 2 incentives and credits, 1.1-1.2 income taxes, lowered by Republicans, 1 irregular economy, avoiding, 1.1-1.2 progressive taxation, 1.1-1.2 , 2 , 3 , 4 property taxes and school funding, 1.1-1.2 self-employment and, 1.1-1.2 , 2 Social Security affected by, 1 , 2 the South and lower taxes, 1 tax breaks for the wealthy, 1 , 2 , 3 , 4.1-4.2 of urban areas, 1 , 2 Thurow, Lester, 1 , 2.1-2.2 Tocqueville, Alexis de, 1.1-1.2 , 2 tracking, 1 , 2.1-2.2 , 3 , 4 Turner, Frederick Jackson, 1.1-1.2 U Unequal Childhoods (Lareau), 1 upper class charitable giving and, 1 cultural capital, holders of, 1 , 2 , 3.1-3.2 , 4.1-4.2 , 5 deferred gratification, capability of, 1 distinctive lifestyle, 1.1-1.2 , 2 education, 1 , 2 endogamy, tendency towards, 1.1-1.2 as exclusive, 1.1-1.2 , 2 as isolated, 1.1-1.2 one percenters as members, 1 Plymouth Puritans as wellspring, 1 political power, 1.1-1.2 social clubs, frequenting, 1.1-1.2 virtues found in, 1 WASP background of, 1 women of, 1 , 2 , 3 upward mobility attitudes as affecting, 1 barriers to, 1 through college education, 1 credentialism and, 1 downward mobility, vs., 1 through entrepreneurialism, 1 glass ceiling as limiting, 1 integrity as suppressing, 1.1-1.2 irregular economy, as avenue, 1 marriage as a means of, 1.1-1.2 Michelle Obama as example, 1 slowing rates of, 1 See also social climbing See also social mobility V Vedder, Richard, 1 , 2 virtue, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 W Walmart, 1 Walton, Sam, 1 , 2 , 3 wealth accumulation gaps, 1 , 2 , 3 advantages of wealth inheritance, 1 , 2.1-2.2 capital investments, 1 charitable giving and the wealthy, 1 , 2.1-2.2 culture of, 1 , 2 discrimination and, 1 , 2 distribution as skewed, 1.1-1.2 Forbes magazine listings, 1.1-1.2 gambling, attainment through, 1 government intervention, 1.1-1.2 , 2 Great Recession affecting, 1 guilt feelings, 1.1-1.2 hard work as negligible, 1 inequalities of, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 lottery, wealth attainment through, 1 luck as a factor, 1 , 2.1-2.2 , 3 marriage rates, affecting, 1 nepotism aiding in transference of, 1 old money, 1.1-1.2 , 2.1-2.2 one percenters, 1 , 2 , 3 , 4 , 5 ostentatious displays of, 1 political power, 1.1-1.2 property ownership producing, 1 , 2 pursuit of as a moral issue, 1.1-1.2 , 2 race affecting, 1 social and cultural capital, converted to, 1 , 2 the superwealthy, 1 , 2 , 3 , 4.1-4.2 tax breaks for the wealthy, 1 taxes on, 1.1-1.2 transfers of, 1.1-1.2 , 2 , 3.1-3.2 women and, 1 See also inheritance See also self-employment Weber, Max, 1.1-1.2 welfare, 1 , 2 , 3 , 4 , 5 , 6 , 7 white Anglo-Saxon Protestants (WASPs), 1.1-1.2 , 2 white-collar crime, 1.1-1.2 , 2 Wilson, William Julius, 1 , 2 Winfrey, Oprah, 1.1-1.2 Wisconsin school, 1.1-1.2 women attractiveness as a success factor, 1 , 2 , 3.1-3.2 discrimination against, 1 , 2 , 3 , 4 , 5.1-5.2 , 6.1-6.2 , 7.1-7.2 , 8.1-8.2 , 9.1-9.2 , 10 economic disparities, 1 , 2 , 3.1-3.2 educational attainment, 1.1-1.2 , 2 family concerns, 1.1-1.2 , 2.1-2.2 , 3.1-3.2 glass ceiling, experiencing, 1 , 2 , 3.1-3.2 , 4 inferiority, feelings of, 1.1-1.2 labor force participation, increasing, 1.1-1.2 , 2 mentorships, access to, 1 , 2.1-2.2 occupational disparities, 1 , 2 , 3.1-3.2 , 4.1-4.2 , 5.1-5.2 political underrepresentation, 1.1-1.2 self-employment and, 1.1-1.2 as trailing partners, 1 of the upper class, 1 , 2 , 3 working class American Dream and, 1 cultural capital, lack of, 1.1-1.2 , 2 economic instability, 1.1-1.2 education issues, 1 , 2 , 3 hard work and, 1 health risks, 1 home ownership, 1 lower class value stretch, 1 nepotism, effect of, 1 the new lower class, 1 women and incomes, 1 work See hard work See occupations Y Young, Michael, 1 , 2 About the Authors Stephen J.

Big Debt Crises
by Ray Dalio
Published 9 Sep 2018

Over the second half of 1930, the economy clearly began to weaken. From May through December, department store sales fell 8 percent and industrial production fell 17.6 percent. Over the course of the year, the rate of unemployment rose by over 10 percent (to 14 percent) and capacity utilization fell by 12 percent (to 67 percent). Housing and mortgage debt collapsed. Still, at that point, the decline in the economy was more akin to a shallow recession. For example, levels of consumer spending remained above the lows of previous recessions and many industries were not yet suffering from severe declines. The charts below show how both department store sales and industrial production had slipped but had not yet collapsed to the lows of the prior recession (the gray bars highlight 1930).

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In other words, the market was tranquil and priced to stay that way. Problems emanating out of subprime mortgage lenders—those that focused on mortgages for less credit-worthy borrowers—continued to grow, with some facing considerable losses, but they did not affect the broader economy and markets. Still, bigger banks were starting to report a rise in bad mortgage debts. We summarized the situation (in our March 13 Daily Observations) as follows: (BDO) March 13: Subprime Mortgage Fallout Subprime mortgages have been grabbing the headlines, with several of the larger subprime mortgage lenders teetering on the edge of bankruptcy. The story of how the subprime mortgage sector is blowing up even with a relatively strong economy relates closely to the liquidity that is bubbling up in markets around the world.

…

I especially admired how the Chinese creditors approached this situation analytically and with a high level of consideration. Ironically the larger the GSEs grew, the more “systemically important” they became, which in turn all but guaranteed a government rescue if needed, making them safer and further fueling their growth. Although Fannie and Freddie were supposed to generate revenue primarily through insuring mortgage debt, by 2007 about two-thirds of their profits came from holding risky mortgage-backed securities. The problems associated with having these exposures were made worse by lax regulation. Congress only required Freddie and Fannie to keep 0.45 percent of their off-balance-sheet obligations and 2.5 percent of their portfolio assets in reserves, meaning that they were significantly undercapitalized, even when compared with commercial banks of equivalent size, which were also severely undercapitalized (meaning that it only took a modest loss to make them go broke).

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

Official statisticians argue that they are trying to separate the consumption and investment aspects of housing; though people do speculate in primary residences, hoping to make a killing on a well-timed purchase or sale, most of these gains are rolled into the acquisition of a new house. FoF accountants, free of the prejudice that only businesses invest, continue to treat housing purchases as investment, but shift most activity to the household sector. One practical advantage of this is to expose the sharp increase in mortgage debt relative to the underlying value of the housing. In 1945, home mortgages outstanding were 14% of the value of all owner-occupied housing; this rose steadily to 34% in 1965, fell gently into the high 20s in the late 1970s and early 1980s, and then rose with hardly a pause to a record 43% in 1997.

…

WALL STREET But unless people are willing to sell their houses, or turn them over to the bank, that equity is even more purely fictitious than a stock option, especially if house prices are stagnant or declining. If the owner-occupier loses his or her job, the inadequacy of the home as capital asset comes quickly clear: it demands cash without producing any in return. You can't pay the mortgage banker with imputed rent. Or as the Fed puts it, the increase in mortgage debt has been "unrelated to new capital formation" (Federal Reserve Board 1980, p. 31), a formulation that if carried to the extreme suggests inflation, insolvency, or some unpleasant combination of both as its ultimate resolution. Carried short of that apocalyptic resolution, it suggests strains on personal housing budgets for all but the most affluent.

…

The rich need a place to earn interest on their surplus funds, and the rest of the population makes a juicy lending target. Just how this works out can be seen in data from the 1983 survey, unfortunately, the Fed didn't publish the 1995 survey data in sufficient detail. In 1983, leaving aside the primary residence and mortgage debt on it, over half of all families were net debtors, and fewer than 10% accounted for 85% of the household sector's net lending (Avery et al. 1984). As William Greider (1987, p. 39) put it, the few lend to the many. At the end of 1997, U.S. households spent $1 trillion, or 17% of their after-tax incomes, on debt service — just a smidgen below 1989's record of 17.4% (unpublished Federal Reserve staff estimates).

J.K. Lasser's New Tax Law Simplified: Tax Relief From the HIRE Act, Health Care Reform, and More
by Barbara Weltman
Published 30 Nov 2010

The benefit can be in the form of a tax reduction or tax rebate. In most places, the tax break is tied to home ownership in the form of a property tax reduction or rebate. Alert This break runs only for 2008, 2009, and 2010, unless it is extended; check the Supplement for details. Cancellation of Mortgage Debt You may be “underwater” with your mortgage (what you owe is more than your home is now worth). If some or all of the remaining balance on the loan is forgiven because of a foreclosure, a mortgage workout, or a short sale (which avoids the need for foreclosure), the amount forgiven usually is treated as taxable income.

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See High-deductible health plan (HDHP) Head of household, tax rate schedule, 114 Health care, expiring tax laws, 166–167 Health coverage: children under 27, 23–24 displaced workers, credit, 35 enhanced credit, 166 health insurance premium assistance credit, 23 mandatory, 21–22 planning strategies, 22–23 on W-2 form, 24 Health coverage credit, displaced workers, 35–36 Health reimbursement accounts (HRAs), 29–30 Health savings accounts (HSAs): eligibility for, 28 HDHP limits for 2010/2011, 28 online planning tools, 171 planning strategies, 28–29 triple tax benefit, 27 High-deductible health plan (HDHP), 27, 28 High-income taxpayers: additional Medicare tax, 100, 148–149 itemized deductions and, 168 personal and dependency exemptions, 10 High-low substantiation rates, 137 Hiring incentives, 139–143 Home: energy credits, 6–7 energy improvements, 165–166 expiring tax laws, 165–166 loss on sale of residence, 9 mortgage debt cancellation, 8–9 online planning tools, 171 Homebuyers’ tax credit: amount/expiration date of, 165 claiming of, 4–5 conditions to meet, 2 deadline/occupancy dates, 1–2 MAGI and, 2–3 planning strategies, 6 recapture, 5 types of, 2 Home office deduction, 139 Hope credit, 36, 37 Household employees, 18–19 HSAs.

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See also FICA additional, in 2013, 18, 91, 100, 148–149 paying additional tax, 100–101 planning strategies, 101 self-employment tax and, 150 Mid-quarter convention, 130–131 Mileage. See Standard mileage rate Military personnel, combat pay exclusion, 12 Modified adjusted gross income (MAGI), 2–3 Mortgage debt: debt, cancellation of, 8–9 insurance premiums, 165 Moving expenses, 9–10 Multiyear items, deduction for, 125 “Nanny tax,” 18–19 Net operating loss, 86 Net operating loss (NOL), 128, 129, 131 NOL. See Net operating loss (NOL) Nondeductible IRAs, 49 Office supplies, 124–125 Online planning tools: business, 173 estate tax, 174 health care/education, 172 home/family, 171 investment opportunities, 172 job, 173 miscellaneous, 173 retirement planning, 172 PAL.

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments
by Charles Goyette
Published 29 Oct 2009

Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing. Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever.

…

There is only the expectation that payment for today’s consumption can be rolled forward interminably. No one who buys a government bond today expects that it will be paid at maturity except by the issuance of another bond tomorrow. In fact, this facile dismissal—“we owe it to ourselves”—could have been made about America’s escalating mortgage debt before the house of cards collapsed. In any event, it can’t be said we owe the national debt to ourselves any longer. We are increasingly dependent on foreigners whose holdings are now more than 25 percent of our national debt, double what it was twenty years ago. On average, a family of four is paying more than $130 per month just in interest to foreign holders of American debt.

…

One need only remember the fabled Goldilocks economy of previous Federal Reserve chairman Alan Greenspan, the Maestro: “It was not too hot and not too cold, but just right!” Of course, Greenspan also admits he didn’t “get it” about the housing bubble until very late, in 2005 and 2006, despite home mortgage debt growing from $1.8 trillion to $8 trillion during his tenure. Nor did he foresee the stock market bubble before it popped in 2000. And he somehow missed the recession of the early 1990s. Greenspan’s successor, Ben Bernanke, didn’t get it either. As chairman of the President’s Council of Economic Advisers in October 2005, he told Congress that he wasn’t concerned about a housing bubble.

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Published 13 Nov 2007

So it is no coincidence that the single most important source of funds for a new business in the United States is a mortgage on the entrepreneur’s house. Correspondingly, financial institutions have become ever less inhibited about lending money to people who want to buy property. Since 1959, the total mortgage debt outstanding in the US has risen seventy-five fold. Altogether, American owner-occupiers owed a sum equivalent to 99 per cent of US gross domestic product by the end of 2006, compared with just 38 per cent fifty years before. This upsurge in borrowing helped to finance a boom in residential investment, which reached a fifty-year peak in 2005.

…

Indeed, it is not too much to say that the modern United States, with its seductively samey suburbs, was born here. From the 1930s onwards, then, the US government was effectively underwriting the mortgage market, encouraging lenders and borrowers to get together. That was what caused property ownership - and mortgage debt - to soar after the Second World War, driving up the home ownership rate from 40 per cent to 60 per cent by 1960. There was only one catch. Not everyone in American society was entitled to join the property-owning party. In 1941 a real estate developer built a six-foot high wall right across Detroit’s 8 Mile district.

…

Between 1980 and 2007 the volume of such GSE-backed mortgage-backed securities grew from $200 million to $4 trillion. With the advent of private bond insurers, firms like Salomon could also offer to securitize so-called non-conforming loans not eligible for GSE guarantees. By 2007 private pools of capital sufficed to securitize $2 trillion in residential mortgage debt.52 In 1980 only 10 per cent of the home mortgage market had been securitized; by 2007 it had risen to 56 per cent.ar It was not only human vanities that ended up on the bonfire that was 1980s Wall Street. It was also the last vestiges of the business model depicted in It’s a Wonderful Life. Once there had been meaningful social ties between mortgage lenders and borrowers.

Utopia or Bust: A Guide to the Present Crisis
by Benjamin Kunkel
Published 11 Mar 2014

So the credit system that had seemed to insure against one kind of overaccumulation (of commodity capital) by advancing money against future production now seems to have fostered another kind of overaccumulation (of fictitious capital) by promising more production than has occurred. More housing has been created than builders can sell at a profit; more mortgage debt has been issued than can be repaid, through wage income, to ensure the lenders’ profit; homeowners who took out loans against the rising value of their property find that prices are instead plummeting; and with the collapse of the housing sector more money capital now lies in the hands of its owners than they can see a way to invest profitably.

…

After listing several of the more spectacular property-market collapses of the long downturn (worldwide in 1973–75; Japanese in 1990; Thai and Indonesian in 1997), Harvey added that the most important prop to the US and British economies after the onset of general recession in all other sectors from mid-2001 onwards was the continued speculative vigor in the property and housing markets and construction. In a curious backwash effect, we find that some 20 percent of GDP growth in the United States in 2002 was attributable to consumers refinancing their mortgage debt on the inflated values of their housing and using the extra money they gained for immediate consumption (in effect, mopping up overaccumulating capital in the primary circuit). British consumers borrowed $19 billion in the third quarter of 2002 alone against the value of their mortgages to finance consumption.

Limitless: The Federal Reserve Takes on a New Age of Crisis
by Jeanna Smialek
Published 27 Feb 2023

See also digital currency money market mutual funds and rescue program, 31, 103, 147–9, 151, 157, 163, 171, 182–3, 208, 216, 238, 292–3 money printer memes and paraphernalia, 185–6 Money Trust, 56 moral hazard, 94, 120 Morgan, John Pierpont, 52–4, 53n, 54n, 56, 60–1, 66 Morgan Stanley, 155–6, 157, 169 Morse, Charles, 52 mortgage debt. See housing market and mortgage debt Mulvaney, Mick, 107, 222 municipal/state and local government bonds, 152, 167–8, 207–9, 211, 213, 237–8, 248, 258–9, 294, 350n10, 350n31 N national bank notes, 48, 53 National Reserve Bank of Washington, 58 Network for Greening the Financial System (NGFS), 266–7, 269–70, 270n New Deal, 67 news conferences.

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The Fed had relatively few tools to neatly address the growing vulnerabilities, some of which fell under the purview of other regulators, and it had been slow to use those it did have. It did not want to choke off business needlessly and it did not recognize the extent of the problem until too late. It had been quick, however, to save the system as the mortgage debt piles began to crumble, working with the elected government to roll out rescue programs for the bank Bear Stearns and the insurer American International Group. Under Ben Bernanke’s leadership, the Fed had dusted off its emergency lending powers to backstop an array of markets, and it enacted three massive bond-buying programs between 2008 and 2014.

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See also bonds/Treasury securities financial/monetary system: bank runs, 45, 50, 64–6, 103, 155, 161, 335n10; central banking on Continent and in England, 53–4; clearinghouses to move cash into rural areas, 50, 52, 336n35; fractional banking system, 44–5, 335n9; global financial system with dollar at core of, 75–6, 82, 196–8; history of central banking, 6, 45–58, 67–9, 338n81; management of cash flow in, 3, 12–13; resilience of, 104; shadow banks, 168–72, 168n; stability of and development of money market in U.S., 50–1; state banks, 47–8, 336n16; weaknesses in, 6, 9, 157 financial panic of 1873, 49, 50 Financial Stability Board, 168–9, 173–4, 265–6, 268–9, 293, 347n20 Financial Stability Oversight Council, 103, 116, 169 Fink, Laurence “Larry,” 189, 209–10 First Name Club (Jekyll Island meeting), 54–6, 54n, 60–1, 200 First Security Corporation (FSC), 64–6, 64n Florida, Main Street program in, 245–9 Floyd, George, 220–3 food pantries and soup kitchens, 288–9, 352n10 fractional banking system, 44–5, 335n9 France, 63, 266, 338n85 free-market economics/capitalism, 83, 120–1, 214–16, 264–5 Friedman, Milton, 79–80, 242, 338n85 Full Employment and Balanced Growth Act, 80, 81 G Gamble, Monroe, 229–31, 233 GameStop, 52n, 291–2 Geithner, Tim, 14–15, 91–2, 342n37 George, Esther, 285 Gill, Keith, 291 Gillespie, Sean, 24n Gini index, 348n19 Glass, Carter, 55–8, 62, 68, 159–60, 180, 337n52 Glass–Steagall Act, 159–60 gold and the gold standard: Bretton Woods system and linking dollars to gold, 75–6; fractional banking system, 44–5, 335n9; gold standard and currency backed by gold, 49–50, 57, 60, 62, 63, 63n, 75–6, 159, 236, 275; gold standard policy and the Depression, 63, 63n, 75, 159–60, 338n85; greenbacks and the gold standard, 48–50; Nixon shock and end of tying dollar’s value to gold, 78; presidential power to set price of, 75; sealed and unsealed deposits, 335n9; state banks and gold-backed money, 47 Goldman Sachs, 37, 55, 156, 157, 169, 178, 193, 342n37 Gonzalez, Henry, 85–8, 86n Gorman, James, 155–6, 156n, 157 Grant, Ulysses S., 118, 287 Great Inflation, 79, 93, 115 Great Moderation, 81 greenback currency, 48–50 Greenback Party and movement, 50, 226 Greenspan, Alan: appearance of, 85; background and expertise of, 23, 83; Bernanke as successor to, 89; chairmanship of, 23, 24, 82–9, 90–2, 96–7; congressional testimony of, 85–8; economy during chairmanship of, 23, 82–3; regulation under, 90–2; secretive Fed under, 23, 23n, 83–9, 88n; on transparency of Fed, 201 H Hamilton, Alexander, 45–6, 338n85 Hamlin, Charles Sumner, 60, 160 hedge funds, 31, 35, 103, 147, 149, 169, 171–2, 171n, 193, 194, 216, 292, 345n12 Heinze, F. Augustus, 51–2 Heinze, Otto, 51–2 Hiteshew, Kent, 208, 350n31 Holston, Kathryn, 115 Hoover, Herbert, 159, 180 housing market and mortgage debt: financial crisis of 2008 and Fed policy, 4, 24–5; home ownership and income and wealth inequality, 224, 225–6, 348n22; inflation and housing costs, 285, 288; management by Fed under Volcker, 79; overextended housing market and mortgage lending practices, 89–92, 120–1 Humphrey, Hubert, 80 Hutchins, Glenn, 129, 129n, 199 Hutchins Center on Fiscal and Monetary Policy, 129n I income inequality, 113n, 223–9, 227n, 348nn13–14, 348n19 inflation: bond buying by Fed and, 5, 72–4, 72n, 113–14, 285–7, 286n; employment, unemployment rates, and, 6, 18–19, 22, 76–82, 96–7, 97n, 100–2, 234, 236–7, 239–44; gradualism of Fed and control over, 26–7, 73, 100–2; growth of and effects on the economy, 6, 22, 22n; lowering to support economic growth, 12; management by Fed, 4, 6, 8, 12, 18–19, 21–2, 27, 61–2, 78–9; management by Fed under Powell, 105–8, 283–91, 294–5, 301; management by Fed under Truman administration, 71–4, 72n, 339n9; management by Fed under Volcker, 79–82, 86, 94, 286; modern monetary theory and, 351n1; price increases and, 77–9, 280–1, 283, 285, 287–9, 352n10; revival of after government pandemic spending, 41; shipping and supply chain issues and, 280–1, 286–7; stimulus checks and, 281–3, 281n, 351n1; too-low inflation, 97, 340n25; 2 percent inflation on average goal, 239–44, 284, 286; 2 percent inflation target, 95–8, 102, 115, 340n25; unrest and political consequences related to, 73; wages and, 22, 79, 283, 284–5, 287–9 insurance program as market backstop, 176–7, 191, 256, 345n25 interest rates: announcement of federal funds rate change, 88–9, 89n, 340n12; bond-buying program and setting, 32n, 93; cuts by Fed during pandemic, 137–8, 142–4, 148, 150, 167; discount rate, 77, 77n, 89n; employment, unemployment rates, and, 232, 237, 239–44, 349n11; federal funds rate, 77n, 83–4, 88–9, 89n, 340n12, 341n9; lowering to support economic growth, 4–5, 21–2, 108–10, 111–16, 341n9; management by Fed, 4, 12, 61–2, 279; management by Fed under Powell, 105–8, 122, 286–7, 301, 341n22; management by Fed under Truman administration, 73–4; management by Fed under Volcker, 79–82, 83–4; market reaction to cuts in, 143–4; monetary policy, economic trends, and, 111–16; neutral rate and policy, 106, 111–12, 128; nominal rate, 22n; raising to curb risky investments, 170–1; raising to slow economic growth, 12, 18–19, 239–44, 349n11; Trump’s interest in low rates, 20 International Monetary Fund (IMF), 114, 196 internet and technology companies and the dot-com bubble, 83, 228 J Jackson, Andrew, 46–8 Jackson Hole monetary policy conferences, 238–9, 240–1, 284 January 6 riots, 281n Japan: Bank of Japan, 94; economy of, 112, 114; national debt of, 293; summer Olympics in, 186 Jekyll Island Club meeting (First Name Club), 54–6, 54n, 60–1, 200 Johnson, Lyndon, 80 JP Morgan Chase, 52, 155, 156, 157 junk bonds, 31, 152, 167, 173, 177, 209–11 K Kaplan, Robert, 206n, 243, 285, 295, 349n11 Kashkari, Christine Ong, 38–9, 201 Kashkari, Neel: candidacy for California governorship of, 38; career in private sector of, 37–8, 38n; community outreach events, opinion about, 233; family and family life of, 38–9; inflation policy concerns of, 287–8; labor market and interest rate policies of, 232, 244; labor market status, awareness of, 132–3n; Minneapolis Fed presidency of, 6–7, 37, 38–9, 198–9, 230; pandemic policy response and message of, 38–40; pandemic policy response thinking of, 198–201; PPP role of, 206; pro-worker posture of, 38, 287–8; shift in thinking of, 7; statement on Floyd’s murder and police action, 221–3; suspension of bank payments, opinion about, 215; TARP role of, 37, 38, 199, 201, 214; Treasury Department position of, 7, 37 Keynes, John Maynard, 67, 75 Keynesian doctrine, 67, 77, 79, 83, 100, 101, 234 Kohn, Don, 129n Kudlow, Larry, 105 L labor market.

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America
by Matt Taibbi
Published 15 Feb 2010

Greenspan’s frantic deregulation of the financial markets in the late nineties had led directly to the housing bubble; in particular, the deregulation of the derivatives market had allowed Wall Street to create a vast infrastructure for chopping up mortgage debt, disguising bad loans as AAA-rated investments, and selling the whole mess off on a secondary market as securities. Once Wall Street perfected this mechanism, it was suddenly able to create hundreds of billions of dollars in crap mortgages and sell them off to unsuspecting pension funds, insurance companies, unions, and other suckers as grade-A investments, as I’ll detail in the next chapter. The amount of new lending was mind-boggling: between 2003 and 2005, outstanding mortgage debt in America grew by $3.7 trillion, which was roughly equal to the entire value of all American real estate in the year 1990 ($3.8 trillion).

…

Here’s how that scenario looks: You buy a $500,000 house, with no money down, which means you take out a mortgage for the full $500,000. Then instead of paying the 5 percent monthly interest payment, which would be $2,500 a month, you pay just $500 a month, and that $2,000 a month you’re not paying just gets added to your mortgage debt. Within a couple of years, you don’t owe $500,000 anymore; now you owe $548,000 plus deferred interest. “If you’re making the minimum payment, you could let your mortgage go up to 110 percent, 125 percent of the loan value,” says Andy. “Sometimes it went as high as 135 percent or 140 percent. It was crazy.”

The Big Short: Inside the Doomsday Machine
by Michael Lewis
Published 1 Nov 2009

"The thinking in subprime," says Jacobs, "was there was this social stigma to being a second mortgage borrower and there really shouldn't be. If your credit rating was a little worse, you paid a lot more--and a lot more than you really should. If we can mass market the bonds, we can drive down the cost to borrowers. They can replace high interest rate credit card debt with lower interest rate mortgage debt. And it will become a self-fulfilling prophecy." The growing interface between high finance and lower-middle-class America was assumed to be good for lower-middle-class America. This new efficiency in the capital markets would allow lower-middle-class Americans to pay lower and lower interest rates on their debts.

…

Of course, Eisman was paid to see the sense in subprime lending: Oppenheimer quickly became one of the leading bankers to the new industry, in no small part because Eisman was one of its leading proponents. "I took a lot of subprime companies public," says Eisman. "And the story they liked to tell was that 'we're helping the consumer. Because we're taking him out of his high interest rate credit card debt and putting him into lower interest rate mortgage debt.' And I believed that story." Then something changed. Vincent Daniel had grown up in Queens, without any of the perks Steve Eisman took for granted. And yet if you met them you might guess that it was Vinny who had grown up in high style on Park Avenue and Eisman who had been raised in the small duplex on Eighty-second Avenue.

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Back in July 2003, he'd written them a long essay on the causes and consequences of what he took to be a likely housing crash: "Alan Greenspan assures us that home prices are not prone to bubbles--or major deflations--on any national scale," he'd said. "This is ridiculous, of course.... In 1933, during the fourth year of the Great Depression, the United States found itself in the midst of a housing crisis that put housing starts at 10% of the level of 1925. Roughly half of all mortgage debt was in default. During the 1930s, housing prices collapsed nationwide by roughly 80%." He harped on the same theme again in January 2004, then again in January 2005: "Want to borrow $1,000,000 for just $25 a month? Quicken Loans has now introduced an interest only adjustable rate mortgage that gives borrowers six months with both zero payments and a 0.03% interest rate, no doubt in support of that wholesome slice of Americana--the home buyer with the short term cash flow problem."

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett
by Jack (edited By) Guinan
Published 27 Jul 2009

Investopedia explains Mortgage In a residential mortgage, a home buyer pledges his or her house to the bank. The bank has a claim on the house if the home buyer defaults on paying the mortgage. In the case of a foreclosure, the bank may evict the home’s tenants and sell the house, using the income from the sale to pay off the mortgage debt. Related Terms: • Debt • Fannie Mae—Federal National Mortgage Association (FNMA) • Interest • Liability • Mortgage-Backed Security The Investopedia Guide to Wall Speak 187 Mortgage Forbearance Agreement What Does Mortgage Forbearance Agreement Mean? An agreement made between a mortgage lender and a delinquent borrower by which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a specified period, bring the borrower current on his or her payments.

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For example, if a company has $45 million worth of liabilities and $65 million in assets, the company’s net worth (shareholders’ equity) is $20 million ($65 million – $45 million). Alternatively, say an individual has three assets—$100,000 of common stock, $30,000 worth of bonds, and title to a $190,000 house—and only one liability—$150,000 in mortgage debt. This individual’s net worth would be $170,000 ([$100,000 + $30,000 + $190,000] – $150,000). Related Terms: • Asset • Debt • Mortgage • Balance Sheet • Liabilities • Shareholders’ Equity The Investopedia Guide to Wall Speak 201 New York Stock Exchange (NYSE) What Does New York Stock Exchange (NYSE) Mean?

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See Coefficient of variation (CV); Convertible bond DCA. See Dollar cost averaging (DCA) DCF. See Discounted cash flow (DCF) DD. See Due diligence (DD) DDM. See Dividend discount model (DDM) Dead cat bounce, 65 Dealer. See Broker-dealer Debenture, 65-66 Debt, 66, 167-168 Debt financing, 66-67. See also Leverage; Liability; Mortgage Debt ratio, 67, 117-118 Debt/equity ratio, 67-68, 118, 168 Debt-to-capital ratio, 68-69 Default, 4, 58, 289 Default risk. See Counterparty risk Defined-benefit plan, 69-70, 153-154, 241 Defined-contribution plan, 70, 153-154, 241 Deflation, 70 Deleverage, 71 Delta, 71-72, 117 Delta hedging, 72 Demand, 73, 156 Depreciation, 73-74 Depression, 29, 120, 131-132 Derivative, 74, 319, 366.

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace
by Matthew C. Klein
Published 18 May 2020

The shrinking credit supply reinforced the decline in home values, and the spending cuts, and the job losses, and the defaults, which reinforced the tightening standards. The process that had built paper wealth and boosted consumption on the way up now threatened economic collapse on the way down.34 Despite the explosion of mortgage debt, America did not experience an economic boom. It was not Greece or Ireland or Spain. As in Germany, sharply higher inequality, anemic corporate capital spending, and relatively tight fiscal policy all dampened U.S. domestic demand. Private fixed investment spending net of depreciation and inflation remained below the 2000 peak until 2014.

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Even though crime rates plunged nationally in the past two decades, crime rates in the places most exposed to low-cost import competition slightly increased.38 Fig. 6.5 International value of the U.S. dollar (real trade-weighted index, January 1988 = 100). Sources: Federal Reserve Board; Matthew Klein’s calculations The problem was the rest of the world’s voracious demand for dollar-denominated assets. In addition to inflating the mortgage debt bubble, overabundant foreign financing also savaged America’s terms of trade as trillions of dollars of uneconomic asset purchases distorted the U.S. exchange rate. Between the start of 1997—the eve of the Asian Financial Crisis—and the beginning of 2002, the dollar appreciated by more than 20 percent against the currencies of its trading partners.

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FRED Economic Data, “Federal Debt Held by the Public,” https://fred.stlouisfed.org/series/FYGFDPUN; FRED Economic Data, “Federal Debt Held by Foreign and International Investors,” https://fred.stlouisfed.org/series/FDHBFIN; Treasury Department Fiscal Service, Monthly Bulletin; FRB, “Financial Accounts of the United States,” https://www.federalreserve.gov/releases/z1/current/default.htm; FRB, “Mortgage Debt Outstanding,” https://www.federalreserve.gov/data/mortoutstand/current.htm; SIFMA statistics, “US Mortgage-Related Issuance and Outstanding,” https://www.sifma.org/resources/research/us-mortgage-related-issuance-and-outstanding/; SIFMA statistics, “US ABS Issuance and Outstanding,” https://www.sifma.org/resources/research/us-abs-issuance-and-outstanding/. 34.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

A multiplicity of causal forces, Olson suggested, can make a false theory seem true and a true theory appear false.37 Yet most accounts of the financial crisis draw on such a multiplicity of causal forces – by claiming that the crisis arose due to the proliferation of complex debt securities, unreliable credit ratings, flawed risk models, a pass-the-parcel approach to mortgage debt, poor regulation, animal spirits, excessive global savings, and so forth. Such accounts overlook the fact that financial practices and regulations differed from one country to another. American banks may have originated dodgy mortgage debt instruments in order to distribute them, but in Spain mortgage bonds (cédulas) remained on banks’ balance sheets. The Bank of Spain even demanded that banks increase their capital reserves during the boom.

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Yet Bernanke’s analysis ignores the fact that the riskiest subprime loans were priced off short-term rates, including the option of adjustable-rate mortgages with their negative amortization feature (in which interest was rolled up with the principal). It was only after the Fed’s easy money policy was launched that credit growth picked up, financial leverage soared, housing markets bubbled, underwriting standards declined and the repackaging of subprime mortgage debt into collateralized debt obligations took off. Low interest rates fed the demand for credit, while financial innovation increased its supply. The explosive growth of the market for complex mortgage securities was driven in large part by a desperate search for yield at a time when interest rates were at multi-decade lows.

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Teeth-grinding and jaw-clenching are caused by high levels of stress. Stress is a natural response to hard times. By 2010, around one in ten American workers were unemployed.67 Nearly half of American households were on benefits.68 The poverty rate was at a multi-decade high.69 Many US homes were ‘under water’, with outstanding mortgage debt higher than their market value.70 Housing foreclosures were at a record high.71 Middle-class households, whose largest asset was their home, lost on average 44 per cent of their wealth during the property bust. Since share ownership is largely the preserve of the rich, most Americans didn’t partake in the stock market’s recovery.72 Instead, their pension pots shrank in size and the income on their cash savings evaporated.73 By 2013, median household wealth was back at its 1969 level.74 The least fortunate suffered most.

Big Data and the Welfare State: How the Information Revolution Threatens Social Solidarity
by Torben Iversen and Philipp Rehm
Published 18 May 2022

https://doi.org/10.1017/9781009151405.005 Published online by Cambridge University Press Credit Markets 109 Yet the distribution of default risk is not merely a function of individual circumstances but also a function of national-level financial and social institutions. Income losses are cushioned by the social protection system, and financial regulations can absorb some of the default risk by subsidizing debt repayments or providing lender-of-last-resort guarantees. For example, when governments step in to purchase debt, notably by buying and securitizing mortgage debt, they assume risks that would otherwise be borne by lenders, thus enabling the latter to offer loans to more people and on more equal terms. This is a key effect of major quasi-public financial institutions such as Fannie Mae and Freddie Mac in the USA. The welfare state also matters. When people become unemployed, some of their lost income is replaced by unemployment benefits, and the higher the replacement rate, the more likely an unemployed person will be able to keep servicing debt.

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Published online by Cambridge University Press Credit Markets 109 Yet the distribution of default risk is not merely a function of individual circumstances but also a function of national-level financial and social institutions. Income losses are cushioned by the social protection system, and financial regulations can absorb some of the default risk by subsidizing debt repayments or providing lender-of-last-resort guarantees. For example, when governments step in to purchase debt, notably by buying and securitizing mortgage debt, they assume risks that would otherwise be borne by lenders, thus enabling the latter to offer loans to more people and on more equal terms. This is a key effect of major quasi-public financial institutions such as Fannie Mae and Freddie Mac in the USA. The welfare state also matters. When people become unemployed, some of their lost income is replaced by unemployment benefits, and the higher the replacement rate, the more likely an unemployed person will be able to keep servicing debt.

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Published online by Cambridge University Press Credit Markets 109 Yet the distribution of default risk is not merely a function of individual circumstances but also a function of national-level financial and social institutions. Income losses are cushioned by the social protection system, and financial regulations can absorb some of the default risk by subsidizing debt repayments or providing lender-of-last-resort guarantees. For example, when governments step in to purchase debt, notably by buying and securitizing mortgage debt, they assume risks that would otherwise be borne by lenders, thus enabling the latter to offer loans to more people and on more equal terms. This is a key effect of major quasi-public financial institutions such as Fannie Mae and Freddie Mac in the USA. The welfare state also matters. When people become unemployed, some of their lost income is replaced by unemployment benefits, and the higher the replacement rate, the more likely an unemployed person will be able to keep servicing debt.

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by Guy Standing
Published 13 Jul 2016

Dating from 1853, when the UK first made interest paid by firms on loans or debts tax-deductible, today it is a feature of tax systems everywhere. In 2007, before the crash, the annual value of lost revenue due to tax breaks on debt payments was 2.4 per cent of GDP in the Eurozone (1.9 per cent for company debt; 0.5 for mortgage debt) and 3.5 per cent in the UK (all attributable to company debt, as mortgage interest payments are not tax-deductible). To put it into context, this was more than those countries spent on defence. In the USA, the lost revenue was a staggering 4.9 per cent of GDP, with company debt accounting for most of it.

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In 2014, evictions were still taking place at the rate of more than 100 a day. The number of unoccupied houses and apartments rose sharply, many repossessed by the banks after homeowners were unable to pay their mortgages. By 2015, 3.4 million homes lay vacant. In Spain, as in Ireland, people remain liable for mortgage debt, complete with penalties and interest, even after repossession. But while the British authorities continue to welcome plutocratic property speculators and create yet more incentives for under-occupation, in parts of Spain a new breed of politicians has taken action. The mayor of Barcelona, a housing activist elected in 2015, has fined banks for keeping properties empty and negotiated the temporary transfer of apartments for use as social housing.

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There was a run on the bank, the first UK bank run in 150 years, and in 2008 it was taken into state ownership. Billions of pounds of outstanding mortgages remained, many in arrears. The government held on to them until the market picked up. Then, in 2015, it sold a ‘book of loans’, the collective mortgage debt of 125,000 households, to an American private equity group, Cerberus, for £13 billion. This made it the biggest-ever sale of a loan portfolio, described effusively by the Chancellor of the Exchequer as the largest sale of financial assets by a European government.32 The deal immediately attracted controversy.

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

Today, pension funds, insurance companies, banks, and mutual funds—and not only American ones, but also many financial institutions and investors based abroad—hold mortgage-backed securities in their portfolios. Mortgage borrowers are the beneficiaries of what amounts to a global competition to lend to American home buyers.104 Indeed, by the mid 1990s household consumer and mortgage debt surpassed the total debt of nonfinancial corporations, and it also exceeded the debt of federal, state, and municipal governments combined. The global competition to lend to American workers combined with the global competition that free trade represented to integrate as well as weaken American labor.

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The roots of the subprime mortgage crisis thus lay in the way the anti-inflation commitment had since the 1970s ruled out the public expenditures that would have been required just to start addressing the crisis of inadequate housing in US cities. As we saw earlier, a key factor in the steady expansion of Americans’ consumer and mortgage debt since the 1970s had been reformers’ faith that private finance could be used by the state in the public interest—in other words, that financial institutions could be so regulated and reformed as to ensure their functioning in the interest of social groups that they had hitherto excluded. The rising demand for home-ownership at lower income levels had been encouraged by government support for meeting housing needs through financial markets backed by mortgage tax deductions.

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Of course, the desire to realize the American dream of home-ownership on the part of so many of those who had previously been excluded was one thing; actual access to residential finance markets was another. Access for such unprecedented numbers by the turn of the century was only possible because financial intermediaries were frantically creating domestic mortgage debt in order to package and resell it in the market for structured credit. Already well underway during the 1990s, this trend was given a great fillip not only by the Fed’s low interest rates but also by the Bush administration’s determination to expand the scope for “entrepreneurs” in the business of selling home mortgages, although it was mainly long-established private mortgage companies like Countrywide, and new ones that specialized in subprime loans like New Century Financial, that benefited from this.

The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World)
by Robert J. Gordon
Published 12 Jan 2016

“While only about $150 million worth had been sold before the war, total investment in real estate bonds is thought to have been approximately $10 billion by the early thirties.”39 One reason homeownership rates soared in the 1920s as part of the massive building boom of that decade was a widespread loosening of credit conditions that allowed families to take out second and third mortgages. The value of outstanding mortgages soared from about $12 billion in 1919 to $43 billion in 1930 (i.e., from 16% to 41% of nominal GDP). Figure 9–2 plots the ratio of mortgage debt to GDP against the non-structures consumer debt ratio already examined in figure 9–1. The differing left-hand and right-hand axes indicate that mortgage debt for structures during the 1920s was consistently seven times higher than for non-structures consumer debt. The longer view in figure 9–2 shows that the value of outstanding mortgages was roughly 20 percent of GDP from 1900 to 1922.40 Figure 9–2.

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The ratio of residential mortgage debt to residential wealth increased from 14.3 percent in 1916 to 27.2 percent in 1929. The sharp decrease evident in figure 9–3 between 1916 and 1920 is a result of wartime and postwar inflation, and the sharp increase between 1929 and 1932 is a result of deflation in the Great Contraction of 1929–32. The rise in prices after 1933, together with the near disappearance of residential construction during the 1930s and the years of World War II, helps account for the decline in the debt/wealth ratio between 1932 and 1948. Figure 9–3. Ratio of Nonfarm Residential Mortgage Debt to Nonfarm Residential Wealth, 1890–1952.

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Then a first mortgage would be obtained from a savings bank or mortgage dealer for 40 percent of the sales price ($1,200) at an interest rate of 5 to 6 percent, and a second mortgage for $300 was obtained from a real estate agent. Interest was paid semiannually over three to eight years, and the lump sum of principal was due at the end of the loan period. The details of mortgage contracts differed between and within cities, with some loans extending for as long as twenty years. The largest holders of mortgage debt were individuals, savings banks, and building and loan associations. The latter pioneered amortized loans, in which the monthly payment included both interest and repayment of principal, so that no lump-sum payment was due when the loan matured. Though the inclusion of principal repayment raised the size of the monthly payment, this was in many cases offset by extending the length of the repayment period.

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed
by Andrew Jackson (economist) and Ben Dyson (economist)
Published 15 Nov 2012

As Steve Keen (2011) puts it: “Population dynamics – even immigration dynamics – have nothing to do with house prices. What determines house prices is not the number of babies being born, or immigrants – illegal or otherwise – arriving, but the number of people who have taken out a mortgage, and the dollar value of those mortgages … For changes in house prices, what matters is the acceleration of mortgage debt.” In response to the suggestion that mortgage lending increases house prices some may argue that an increase in the price of an asset acts as a signal (in the housing market) to developers to build more houses: increasing house prices lead to an increase in the number of houses being built, increasing their supply and so leading to a fall in their price.

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Globally the situation is similar – Figure 4.4 shows the percentage of countries in a banking crisis between 1800 and 2007 (so excluding the most recent financial crisis) fig. 4.4 - Percentage of Countries affected by Banking Crises Source: Reinhart and Rogoff, 2008 Box 4.F - The house price bubble In the years preceding the most recent financial crisis, bank lending created a bubble in the property market in several countries. For example, Keen (2012) calculates that 78% of the change in American house prices over the past 25 years and 60% of the change in Australian house prices over the past 30 years can be explained by the acceleration in mortgage debt. Meanwhile, in the UK house prices increased threefold between 1995 and 2007 (Nationwide, 2012). Contrary to popular belief, the increase in house prices was not fuelled by there being ‘too many people and not enough houses’. As Figure 4.5 shows, between 1997 and 2007, the number of housing units actually grew by 8%, while the population only grew by 5%.

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As an example, if an individual on an average salary of £25,200 took out a 25 year mortgage on an average house in 2007, the repayments would account for 47% of their salary over that period (assuming the unlikely scenario that average interest rates on mortgages remain at the historically low level of 4.5%). In contrast, the same person buying the same house in 1995 would only spend 24% of their salary servicing their mortgage debt. Today, most young people have effectively been priced out of ever being able to own their own home because of excessive money creation by the banking sector. fig. 4.5 - UK property prices, 1997 – 2010 (Indexed, 1997 = 100) Source: Nationwide house price survey 2012, Bank of England Statistical Database The flip side of this is people that owned or purchased property in the run up to the crisis now feel much wealthier.

Broke: How to Survive the Middle Class Crisis
by David Boyle
Published 15 Jan 2014

The fact that fewer homes were built in 2009 than in any year since 1924 doesn’t help. Often prices rose because the middle classes compulsively wanted them to do so. They loved it. It made them feel rich, right up to the point where it ruined them. The Corset may have been impossible to sustain, but its demise marked the end of mortgage rationing. Mortgage debt didn’t rise at all in the Corset years of the 1970s. From 1979 to 1987 it grew at 10 per cent a year. The real problem was not so much the demise of the Corset. It was the failure to replace it with any policy that could possibly hold down house prices as the Niagara of mortgage money roared through the national economy.

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‘The securities involve a high degree of risk,’ said the front page of one junk-bond prospectus two days after the 1987 Crash, ‘and accordingly, investors may lose their entire investment.’ A quarter of a century on, the Collateralized Debt Obligations (CDOs), the complex instruments that bundled up good mortgage debt with unrepayable subprime debt, were deliberately packaged to be obscure so that the credit-rating agencies could not value them, and they could then be sold to less sophisticated investors. Michael Lewis interviewed the handful of people who had seen what was coming, and whose bets against the subprime bonds flew in the face of market momentum — just as Paul Woolley had done during the dot.com boom.

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Nor are our pensions practised at investing in the next generation of green energy infrastructure we so badly need to underpin our lives in the next generation. But something else needs to happen if the middle classes are to claw back any kind of retirement. Over a million of us in the UK are already working beyond retirement, some because we want to, but some because we still haven’t paid off our mortgages (the average mortgage debt for pensioners is now £45,300), and one in four pensioners is still borrowing money to make ends meet. The middle classes know all this. They are all too aware of the inadequacy of their pensions, without perhaps looking too closely at how inadequate. They are all too aware that the magical compound-interest machine, which protected middle-class generations in retirement, has run down.

Palace Coup: The Billionaire Brawl Over the Bankrupt Caesars Gaming Empire
by Sujeet Indap and Max Frumes
Published 16 Mar 2021

Because of the hot real estate market in 2006, the debt secured by the six casinos was far greater than what could have been borrowed from a traditional loan or bond. Apollo and TPG had been obsessed with taking advantage of that arbitrage, and so were able to originally secure a $6.5 billion commitment of mortgage debt—about a third of the total Harrah’s new financing figure of $20 billion. The commitment for the real estate-backed loan was essentially unprecedented. Real estate financing was not new, but banks had been reluctant to provide a bridge loan strictly based on property valuations, which they were now doing for the first time in the Harrah’s buyout—a sign of the excesses that had developed in financial markets.

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But he also knew the company could not sit still if it wanted to grow out from underneath $24 billion of debt. While Harrah’s had been strategically buying back its own debt at a discount, it had been carefully examining the debt of other troubled rivals. In 2009, Harrah’s began acquiring the junior mortgage debt of the Planet Hollywood hotel and casino from the likes of Goldman Sachs for fifty cents on the dollar or less. Ultimately, Harrah’s spent $70 million to acquire $300 million of debt, which it then converted into a controlling equity position by early 2010. There was a remaining $550 million senior mortgage that would be left in place at a low interest rate, making it a low-risk bet.

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Banks, insurers, and hedge funds were writing and buying CDS to the tune of trillions of dollars by the mid-2000s—activities that were largely done outside of the watch of regulators. AIG, the massive global insurer, had sold CDS on more than $500 billion of assets, including $78 billion of securitized mortgage debt called CDOs. Those underlying mortgages soured in 2008, and AIG had no way to come up with the payout it owed. It ultimately led to a $182 billion bailout and seizure by the US Treasury. Warren Buffett labeled CDS as “weapons of financial mass destruction” and their opaque, complex use and scale worried market observers.

The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below Their Means
by Jeff Yeager
Published 8 Jun 2010

Our addiction to borrowing, the mechanism through which we’re able to spend more than we earn, and our aversion to saving some of what we earn for the proverbial rainy day, are both fairly recent trends in America. Total consumer debt grew nearly eight times in size from 1980 ($355 billion) to 2008 ($2.6 trillion). During that same period, the share of disposable income each household spent servicing its consumer debt and mortgage debt increased by 35 percent. Once upon a time in America, the way we accumulated savings was by, well, spending less than we made and banking the difference. In 1982, the average household put 11 percent of its disposable income into savings; twenty-five years later that figure had dropped to less than 1 percent.

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More than 80 percent of those cheapskates polled who own homes reported that they have already paid off or plan to pay off their home mortgages sooner than required under the terms of the loan. That’s a shocker, given that roughly half of all Americans will never—during their lifetimes—be entirely free of a home mortgage debt and/or debt secured against their home. “Every minute of every day that I owe someone else money is sheer agony for me,” Alice Wilson told me. “It’s like I’m in prison, and the only thing I can think about is getting out as quickly as possible.” Alice definitely exhibits no warning signs of debtor dementia. 15.

End This Depression Now!
by Paul Krugman
Published 30 Apr 2012

By that I mean that we found ourselves in a world in which lack of sufficient demand had become the key economic problem, and in which narrow technocratic solutions, like cuts in the Federal Reserve’s interest rate target, were not adequate to that situation. To deal effectively with the crisis, we needed more activist government policies, in the form both of temporary spending to support employment and of efforts to reduce the overhang of mortgage debt. One might think that these solutions could still be considered technocratic, and separated from the broader question of income distribution. Keynes himself described his theory as “moderately conservative in its implications,” consistent with an economy run on the principles of private enterprise.

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Deflation, said Fisher, can depress the economy by raising the real value of debt. Inflation, conversely, can help by reducing that real value. Right now, markets seem to expect the U.S. price level to be around 8 percent higher in 2017 than it is today. If we could manage 4 or 5 percent inflation over that stretch, so that prices were 25 percent higher, the real value of mortgage debt would be substantially lower than it looks on current prospect—and the economy would therefore be substantially farther along the road to sustained recovery. There’s one more argument for higher inflation, which isn’t particularly important for the United States but is very important for Europe: wages are subject to “downward nominal rigidity,” which is econospeak for the fact, overwhelmingly borne out by recent experience, that workers are very unwilling to accept explicit pay cuts.

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression
by Richard A. Posner
Published 30 Apr 2009

Low interest rates, aggressive and imaginative marketing of home mortgages, auto loans, and credit cards, diminishing regulation of the banking industry, and perhaps the rise of a speculative culture —an increased appetite for risk, illustrated by a decline in the traditional equity premium (the margin by which the average return on an investment in stocks exceeds that of an investment in bonds, which are less risky than stocks)—spurred speculative lending, especially on residential real estate, which is bought mainly with debt. As in 1929, the eventual bursting of the bubble endangered the solvency of banks and other financial institutions. Residential-mortgage debt is huge ($11 trillion by the end of 2006), and many defaults were expected as a result of the bubble's collapse. The financial system had too much risk in its capital structure to take these defaults in stride. The resulting credit crisis —a drastic reduction in borrowing and lending, indeed a virtual cessation of credit transactions, for long enough to disrupt the credit economy seriously—precipitated a general economic downturn.

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In a March 2006 article in The Economists' Voice entitled "The Menace of an Unchecked Housing Bubble," another economist, Dean Baker, had written: "When the downturn in house prices occurs, many homeowners will have mortgages that exceed the value of their homes, a situation that is virtually certain to send default rates soaring. This will put lenders that hold large amounts of mortgage debt at risk, and possibly jeopardize the solvency of Fannie Mae and Freddie Mac, since they guarantee much of this debt. If these mortgage giants faced collapse, a government bailout (similar to the S&L bailout), involving hundreds of billions of dollars, would be virtually inevitable." Baker, like Roubini, had hit the bull's eye.

Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence
by Jerry Kaplan
Published 3 Aug 2015

At the end of 2011, the value of the U.S. bond market was just under $37 trillion, with U.S. stocks at $21 trillion, for a total of $58 trillion.35 But only about two-thirds of that is owned domestically, so let’s use $39 trillion. (Contrary to popular perception, China owns only about 8 percent of the national debt.)36 Adding the $25 trillion of value stored in homes and subtracting mortgage debt of $13 trillion, that works out to $51 trillion, or about $450,000 per household.37 But that doesn’t include the value of all privately held companies, or loans to companies and individuals, which probably accounts for a portion of the difference between this estimate and the $625,000 above. That’s now, but let’s talk about the future.

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“World Capital Markets—Size of Global Stock and Bond Markets,” QVM Group LLC, April 2, 2012, http://qvmgroup.com/invest/2012/04/02/world-capital-markets-size-of-global-stock-and-bond-markets/. 36. http://finance.townhall.com/columnists/politicalcalculations/2013/01/21/who-really-owns-the-us-national-debt-n1493555/page/full, last modified January 21, 2013. 37. Cory Hopkins, “Combined Value of US Homes to Top $25 Trillion in 2013,” December 19, 2013, http://www.zillow.com/blog/2013-12-19/value-us-homes-to-top-25-trillion/; and “Mortgage Debt Outstanding,” Board of Governors of the Federal Reserve System, last modified December 11, 2014, http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm. 38. “International Comparisons of GDP per Capita and per Hour, 1960–2011,” Bureau of Labor Statistics, table 1b, last modified November 7, 2012, http://www.bls.gov/ilc/intl_gdp_capita_gdp_hour.htm#table01. 39. https://www.energystar.gov, accessed December 31, 2014. 40.

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy
by Mehrsa Baradaran
Published 5 Oct 2015

The debate centered on mortgage relief, and although both administrations decided to help the people through the banks, they ended up helping the banks instead of the people. They were not always clear about their intentions, however. In 2008, Treasury secretary Henry Paulson sold the TARP to Congress and the public as an undertaking that would help relieve average Americans’ mortgage debts through modifications and other direct relief. Paulson promised Congress that he would find ways to stem the tide of impending mortgage foreclosures. But after examining direct-relief plans, including a mortgage modification protocol developed by FDIC chairman Sheila Bair, Paulson concluded that these programs would “require substantial government subsidies” and “direct spending”43 that he ultimately felt were unjustified.44 This led one congressman to call the TARP “the second largest bait and switch scheme that history has ever seen, second only to the reasons given to us to vote for the invasion of Iraq.”45 Barney Frank also angrily cut off Henry Paulson during congressional testimony, saying that “the bill couldn’t have been clearer” in being aimed at reducing foreclosures.46 When President Obama took office, his administration also promised, but failed, to achieve meaningful mortgage relief.

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As explained by one scholar, “The problem of loan-sharking was brushed aside by making [high interest rates], once typical only of organized crime, perfectly legal—and therefore, enforceable no longer by just hired goons and the sort of people who place mutilated animals on their victims’ doorsteps, but by judges, lawyers, bailiffs, and police.”34 Today, American society not only accepts credit as a way of life, we embrace it. The average American has $15,000 in credit card debt, $33,000 in student loan debt, and $156,000 in mortgage debt.35 Not only do the majority of the American public borrow their way up the income ladder, but federal mortgage and student loan markets and loose credit policies led to the creation of the American middle class. We, the people, have decided (through laws and policies enacted by our elected representatives) that as a society, we want access to affordable credit for both big wealth-building items like homes, education, and businesses and day-to-day smooth-out-the-bumps sorts of things via credit cards and car loans that would have even higher interest rates if not for government policies.

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The CRA myth allows the proponents of continued banking deregulation to flip the narrative. Instead of admitting that the banks’ high levels of debt were a central problem, they can claim that the irresponsible poor and middle-class—enabled by federal government largesse—brought down the banks with their mortgage debt. Subprime borrowers were certainly not always hapless victims, but they were also not the villains in this story.88 The debate over the CRA suggests two broader questions about providing banking for the poor: (1) whether mainstream commercial banks should be tasked with providing these services, and (2) whether they can do it in a way that benefits the poor.

Stress Test: Reflections on Financial Crises
by Timothy F. Geithner
Published 11 May 2014

I remember in August 2006, when I snuck out of the Fed’s annual economic summit in Jackson Hole, Wyoming, to go fly-fishing, my guide was a mortgage broker; his horror stories of sketchy loans to homeowners with sketchy credit were a stark real-world supplement to the academic debates at the central banking summit. Borrowing frenzies are prerequisites for financial crises, and too many Americans were using credit to finance lifestyles their salaries couldn’t support. From 2001 to 2007, the average mortgage debt per household increased 63 percent, while wages remained flat in real terms. The financial system provided this credit with enthusiasm, even to individuals with low or undisclosed incomes, then packaged the loans into securities that were also bought on credit. The financial sector now held $36 trillion worth of debt, a twelvefold increase over three decades.

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For the time being, though, IndyMac’s indelible images of fear were just more evidence that things were going from bad to worse. THE FINANCIAL system could easily absorb the $30 billion collapse of IndyMac. There was no way it could absorb the collapse of Fannie Mae and Freddie Mac. The two government-sponsored enterprises held or guaranteed more than $5 trillion in mortgage debt. They were funding about three of every four new U.S. mortgages, propping up what was left of the housing market. But they were heading for the abyss. Fannie’s stock price plunged to $10.25 the day IndyMac failed, down 90 percent from its peak. Just about everyone except their captured regulator agreed they were woefully undercapitalized.

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It was a brutally complicated problem, affecting the profligate along with the merely unfortunate, and we felt intense pressure to do something big. There had been three million foreclosure filings in 2008, and, so far, federal efforts to ease the crisis had been limited in ambition and impact. One congressionally designed program known as Hope for Homeowners, an effort to reduce the mortgage debt of families in distress, had attracted only 312 applicants nationwide. And the futures markets suggested real estate prices still had a long way to sink, which meant a lot more suffering ahead—not just for speculators who had assumed the boom would never end and conspicuous consumers who had bought bigger houses than they could afford, but for hardworking homeowners who were underwater through absolutely no fault of their own.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One
by Meghnad Desai
Published 15 Feb 2015

They were buying their houses in the hope that as the house prices rose their debts would become payable, while interest rates would remain low. Household debt, which had been steady at around 45 percent of household income between 1965 and 1985, had risen to a peak of just under 100 percent by 2007. Much of this was mortgage debt. Lenders such as Countrywide would loan out the money for mortgages and borrow in turn from short-term money markets against the collateral of these mortgages. At the other end of the globe, China had been growing at double-digit rates. Its voracious appetite for raw materials put pressure on the commodity markets, where prices began to rise.

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But after a political crisis which led to the breakup of the Labour Party and the exit of the UK from the Gold Standard in 1931, things began to bottom out. The Depression in the UK lasted for five years, from 1929 to 1934. But in the US the situation was more serious and unemployment reached the unprecedented level of 25 percent. Unable to repay their mortgage debts, many farmers lost their farms and had to migrate in large numbers from the Midwest to the West Coast or the big cities. The tumultuous and harrowing impact that the Great Depression had on the lives of the farming community was immortalized in John Steinbeck’s moving novel The Grapes of Wrath.

The Money Machine: How the City Works
by Philip Coggan
Published 1 Jul 2009

But an additional safeguard could be introduced; ensure that bonuses only be given for results achieved over the long, not the short-term. SHADOW BANKS The credit crunch has also shown that it is not just the banks that create problems. There is also a vast shadow banking system, consisting of hedge funds, private equity and structured investment vehicles or SIVs. These both invested in the mortgage debts that originated the problems and borrowed money from the banks to do so. When they collapsed, the banks were brought down with them; their disappearance also left a gap in the funding of the private sector. Should they be regulated? The answer is clearly yes, if only because of the mess that they have left.

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It seems likely that the authorities will aim to increase the amount of information they hold about such funds, so they can see whether they pose a risk to the system. In his report, Lord Turner discusses the need for ‘macroprudential regulation’, a sort of longstop to the system that worries about the risks being taken across the industry. Such a regulator would warn when mortgage debt was growing too quickly or when banks were taking too much of a risk in trading. There is also talk of a global version, based around a body called the Financial Stability Forum. The problem lies in giving such a body teeth. At the national level, this could be done, as Lord Turner suggests, by using a committee drawn from the FSA and Bank of England.

Home: Why Public Housing Is the Answer
by Eoin Ó Broin
Published 5 May 2019

The report also highlighted the growing affordability issues for both private renters and home buyers suggesting that 20 percent of renters were paying more than 35 percent (the Government’s definition of affordability under the Planning and Development Act 2000) of their post-tax income on accommodation. While the picture for recent home buyers was less clear cut, the report did emphasise the risks inherent in the growing levels of mortgage debt, particularly if interest rates were to rise or wages fall. Interestingly the report highlights three main concerns regarding the housing system, which while not shared by all members were a significant portent of things to come. In a section on the stability of the system the following observation was made: One group of observers consider that the Irish housing market displays a strong instability and irrationality, amounting to a ‘bubble’ that is likely to burst when the irrational expectations and exuberance that drives the market turn from positive to negative.

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In parallel to these measures the report urged Government to bring the Rent Supplement and Housing Assistance Payments in line with market rents.76 The Committee called for the introduction of a scheme for Councils and Approved Housing Bodies to purchase rental properties with the tenants remaining in situ (a Rent Switch programme); they voiced for an amendment to the Residential Tenancy Act to remove sale of property as grounds for issuing a Notice to Quit and to give tenants in such situations greater legal safeguards; they also called for a general improvement in the length of rental tenancies beyond the current four years.77 In June 2016 according to the Central Bank the total number of residential mortgages in arrears of more than ninety days was 52,571 while a further 14,828 buy-to-let mortgages were also in long-term distress.78 Their quarterly Mortgage Arrears and Repossession Statistics bulletin published that month recorded 1,783 residential dwellings in the bank’s possession at the end of the quarter with a total of 397 properties transferring to the lenders in those three months, 101 via court order to repossess with the remaining 296 as a result of voluntary surrender or abandonment.79 The total number of buy-to-let properties that had been transferred into the management of receivers at the end of the quarter was 5,741 with 305 properties being transferred to the banks in that quarter, 171 via court ordered repossession and 134 via voluntary surrender or abandonment.80 The Housing and Homeless Committee urged the Government to introduce a legal moratorium on home repossessions and as a matter of urgency to bring forward a new plan to tackle the growing mortgage distress problem. The report called Government to make better use of a number of schemes to keep people in the family home including Mortgage to Rent, split mortgages, debt write downs and downsizing.81 There had been a considerable volume of discussion at the Committee on the issue of financing social and affordable housing delivery, particularly in the context of recent funding constraints caused by the policies of austerity and the changes to European Union fiscal rules following the adoption of the Treaty for Stability, Coordination and Governance (known by its critics as the Austerity Treaty) in 2013.

Misbehaving: The Making of Behavioral Economics
by Richard H. Thaler
Published 10 May 2015

When the housing bubble arrived and drove up prices, homeowners were told they could lower their mortgage payment and take out a bit of extra cash too, to refinish the basement and buy a big-screen television. At this point, home equity ceased to be a “safe” mental account. This fact is illustrated by a change in the borrowing behavior of households with a head that is aged seventy-five or older. In 1989 only 5.8% of such families had any mortgage debt. By 2010, the fraction with debt rose to 21.2%. For those with mortgage debt, the median amount owed also rose over this period, from $35,000 to $82,000 (in 2010 dollars). During the housing boom in the early 2000s, homeowners spent the gains they had accrued on paper in home equity as readily as they would a lottery windfall. As documented in House of Debt, a book by economists Atif Mian and Amir Sufi, by 2000 increases in home equity had become a strong driver of consumption, especially of consumer durables.

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Home equity offers an interesting intermediate case. For decades people treated the money in their homes much like retirement savings; it was sacrosanct. In fact, in my parents’ generation, families strived to pay off their mortgages as quickly as possible, and as late as the early 1980s, people over sixty had little or no mortgage debt. In time this attitude began to shift in the United States, partly as an unintended side effect of a Reagan-era tax reform. Before this change, all interest paid, including the interest on automobile loans and credit cards, was tax deductible; after 1986 only home mortgage interest qualified for a deduction.

The Dying Citizen: How Progressive Elites, Tribalism, and Globalization Are Destroying the Idea of America
by Victor Davis Hanson
Published 15 Nov 2021

The middle class over the half century following 1970 was losing the ability to buy homes—even as, or in part because, houses became far larger and more livable. Far more rarely could the middle classes meet the family budget sacrifices needed to service growing mortgage debt. In the last fifty years of the twentieth century, for example, the ratio of collective mortgage debt to other family loan obligations rose from 20 to 73 percent. The ratio of household mortgage debt to household assets rose from 15 to 41 percent. Middle-class Americans still wanted to own their homes. But increasingly they lacked the wherewithal to buy them and turned to ever-larger mortgages—if they could get them.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

Rather than dampen speculation, the rising rates stimulated it all the more, as mortgage brokers like Mozilo and Wall Street securitizers financed riskier mortgages to make up for lower profit margins. Tens of billions of dollars of fresh capital flowed to the United States from China. Despite the rapid increase in rates by the Fed—the target federal funds rate rising from 1 percent to more than 5 percent—more subprime mortgages were written than ever before. In all, $7 trillion of mortgage debt was created between 2000 and 2007, more than the total debt of the federal government accumulated over fifty years. Some economists blamed Greenspan for cutting rates to such low levels, and keeping them there for so long. But the low rates could have been a constructive way to revitalize the economy had they been accompanied by adequate regulatory oversight.

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On the contrary, in one of the most remarkable episodes of government irresponsibility, Greenspan and other Washington regulators looked the other way. Regulatory failure was the open valve through which bad debt flowed. This regulatory failure, like Wall Street excess, was the product of the ideology that first took root in the 1970s. Ultimately, hundreds of billions of dollars of bad mortgage debt were bought by the world’s largest investment institutions. All the while, the American people seemed to trust that even when they were taking mortgages they couldn’t imagine qualifying for a decade earlier, the financial markets were working fairly and that federal overseers would see to it that Wall Street greed did no damage.

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Overall, capital investment rose in the 1990s as a proportion of GDP, but many hundreds of billions of dollars of it turned out to be wasted. The collapse of housing eight years later followed the same pattern, but the bubble in terms of actual dollars was far bigger and the collapse of greater consequence. Six to seven trillion dollars of new mortgages had been written that decade; mortgage debt was now much greater in total than federal debt. Wall Street firms learned how to raise capital for new mortgages around the world by creating attractive securities that in fact disguised the real risk of the mortgages. The major banking firms not only “securitized” these mortgages but had consumer loan subsidiaries that wrote subprime and other risky mortgages aggressively.

Crashed: How a Decade of Financial Crises Changed the World
by Adam Tooze
Published 31 Jul 2018

But to explain how this could trigger a financial crisis, with bank failures spreading panic and a credit crunch across the world, there is one crucial thing to add: Real estate is not only the largest single form of wealth, it is also the most important form of collateral for borrowing.4 It is mortgage debt that both amplifies the broader economic cycle and links the house price cycle to the financial crisis.5 Between the 1990s and the outbreak of the crisis in 2007, American housing finance was turned into a dynamic and destabilizing force by a fourfold transformation—the securitization of mortgages, their incorporation into expansive and high-risk strategies of banking growth, the mobilization of new funding sources and internationalization.

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Fannie Mae did not issue mortgages. It bought them mainly from commercial banks across the United States that specialized in issuing FHA-insured mortgages. By acting as a backstop, Fannie Mae lowered the cost of lending and set a national standard for both lenders and “prime” borrowers. It helped to unify America through mortgage debt. Fannie Mae was able to fund its purchases of these standardized mortgages cheaply because its credit rating was that of a government agency that could not fail. So-called agency debt was equivalent to that of the Treasury. By the same token, the obligations of Fannie Mae featured on the federal government’s balance sheet.

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The Rise and Fall of Subprime Lending in the United States, 1996-2008 (in $ billions) Note: Percent securitized is defined as subprime securities issued divided by originations in a given year. In 2007 securities issued exceeded originations. Source: Inside Mortgage Finance. The message that this communicated down the food chain was simple: We want more mortgage debt to process, and the worse the quality, the better. By the magic of independent probabilities, the worse the quality of the debt that entered into the tranching and pooling process, the more dramatic the effect. Substantial portions of undocumented, low-rated, high-yield debt emerged as AAA. In any boom, irresponsible, near criminal or outright fraudulent behavior is to be expected.

The Global Minotaur
by Yanis Varoufakis and Paul Mason
Published 4 Jul 2015

A little later, the RBS attempts to stave off bankruptcy by trying to raise £12 billion from its shareholders, while at the same time admitting to having lost almost £6 billion in CDOs and the like. Around this time house prices start falling in Britain, Ireland and Spain, precipitating more defaults (as homeowners in trouble can no longer even pay back their mortgages by selling their houses at a price higher than their mortgage debt). May – Swiss bank UBS is back in the news, with the announcement that it has lost $37 billion on duff mortgage-backed CDOs and that it intends to raise almost $16 billion from its shareholders. June – Barclays Bank follows the RBS and UBS in trying to raise £4.5 billion on the stock exchange.

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So, whereas prior to 2008 Wall Street created its synthetic financial products on its own (perhaps with the government turning a blind eye), following the 2008 meltdown it has done so with massive government (American and European) subsidies. In summary, as early as in February of 2009, the Obama administration filled Wall Street’s sails by engineering a new marketplace for the old derivatives (which were replete with poor people’s mortgage debts). The medium of exchange in this new marketplace was a mixture of the old (refloated) derivatives and new ones (based not on poor people’s mortgages but on the taxes of those who could not avoid paying them – often the very same poor people). Thus, many of the banks’ toxic assets were moved off their accounts, while the production of new private toxic money took another turn.

The Vanishing Middle Class: Prejudice and Power in a Dual Economy
by Peter Temin
Published 17 Mar 2017

Finance is seen in the FTE sector as a way to make large purchases or deal with emergency needs. But it is seen in the low-wage sector as a burden or a form of oppression that may lead to prison. Many workers in the low-wage sector say they cannot find funds for an emergency for which they need a few hundred dollars without selling something they would otherwise want to keep. Consider mortgages, debts that home owners secure using their houses and condos as security. The median worker did not see figure 2 as it developed in the 1980s or the developing split of the American economy that was already under way. Instead, working families had increasing trouble trying to continue the spending habits they had developed before.

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Mortgage default normally is considered a problem for each individual, but the accumulation of household debt, which doubled relative to income after 1980, was encouraged by government subsidies through tax deductions, guarantees from Fannie Mae and Freddy Mac for home mortgages, and the stagnation of working incomes. The accumulation of mortgage debt has impeded personal expenditures, depressing consumer expenditures after the crash. The result is that employment has remained low since the 2008 financial crisis due to low consumer spending.2 Mortgage relief would promote prosperity better than standard fiscal policies because it would help people most likely to increase spending.

China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle
by Dinny McMahon
Published 13 Mar 2018

It also owns eight riverboats that do scenic tours of the Three Gorges, an amusement park with performing dolphins and a bungee tower, and a traditional Chinese-medicine company that grows a type of lily used as a cough suppressant. However, the one element that this vast group of disparate companies has in common is debt. State firms might account for only a quarter of the economy, but they’ve borrowed almost 60% of all the corporate debt. China has little mortgage debt relative to the United States, and official government debt is very low, unlike in Greece; but China’s companies—and in particular its state-owned companies—have borrowed incredible amounts. According to the consulting firm McKinsey, between 2007 and mid-2014, China’s companies—both state and private companies combined—went from owing $3.4 trillion to $12.5 trillion, a faster buildup than in any other country in modern times.

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Four years later, the corporate descendant of Springs’s company closed the last of its Lancaster plants, packed up its machines, and moved them to Brazil. With the end of large-scale textile manufacturing in Lancaster, unemployment in the county soared, peaking a little below 19% in mid-2009. That year, Forbes magazine, based on a survey of poverty, education, income, and mortgage-debt levels, labeled Lancaster the most vulnerable county in the United States. By 2013, South Carolina had lost more than thirty thousand textiles jobs over the preceding decade, a decline of 63%. That was the year I met Zhu Shanqing. Zhu had started his career working for a state-owned chemical company, then went out on his own to trade polyester.

Be Your Own Financial Adviser: The Comprehensive Guide to Wealth and Financial Planning
by Jonquil Lowe
Published 14 Jul 2010

You can see that the Bank of England rate has ranged from nearly 15 per cent a year down to 0.5 per cent, so over the full term of a mortgage you could see considerable variation in your repayments. Changes that happen many years ahead are less important than changes within the earlier years of your mortgage. Your mortgage debt is a fixed or reducing sum, whereas your earnings will tend to rise at least in line with inflation as the years go by. Thus, your monthly payments will tend to take a smaller proportion of your income in the years ahead, giving you an expanding capacity to cope with any rise in the mortgage rate.

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In its final report, the Commission made the following points: Housing wealth…has major implications for appropriate pension system design. But it is not in itself a sufficient solution to problems of pension adequacy… A 55–59 year old with an income of between £17,500–£24,999 owned housing assets (net of mortgage debt) with a median value of around £150,000 in mid 2002. And while today only a very small proportion of these are used to fund retirement via equity release or trading down, with home ownership now reaching over 60% among those aged over 80, there will be an increasing flow of inheritance of housing assets, often by people who already own one house.

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Equity release and inheritance planning Some advisers suggest that equity release schemes (see Chapter 8) can be a useful way to save inheritance tax. It is certainly true that, if you take out a lifetime mortgage against your home and spend the money raised, the value of your estate will be reduced. Your home is still part of your estate but the mortgage debt is deducted. Similarly, a home reversion scheme cuts the size of your estate because your home passes out and into the ownership of the reversion company. But you should bear in mind that equity release schemes do not give you the full value of the equity you give up. This difference is likely to more than match any amount you save in inheritance tax.

Profiting Without Producing: How Finance Exploits Us All
by Costas Lapavitsas
Published 14 Aug 2013

There are several causes of this development which only partially relate to weakly increasing (or stagnant) real incomes among workers and others. Indeed, the available evidence reveals a nuanced and complex process of household financialization. Figures 38 to 41 disaggregate household indebtedness by splitting it into mortgage debt, unsecured consumer debt and other liabilities for each of the four countries. By far the largest component of indebtedness is mortgage debt, which has also grown strongly (except for Germany); unsecured consumer debt has also generally increased, but it is far from a dominant, or even a large, part of household liabilities.20 The bulk of household indebtedness in the period of financialization in mature countries has been for mortgage purposes.

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By 2006 the US housing bubble was over and the conditions were ready for the enormous crisis that followed. It is remarkable – and a true reflection of the content of financialization – that the historic crisis that commenced in 2007 was triggered by the poorest layers of the US working class defaulting on mortgage debt. Figure 4, showing bank assets relative to GDP, indicates that in the course of the bubble, banks and the financial system in general grew rapidly in the UK and significantly in Japan; there was much less rapid growth in Germany. The figures for the US are partially misleading in this respect because there has been a large increase of ‘shadow banking’ including institutions engaging in mortgage and other activities, which does not appear in the commercial bank data, as was noted in Chapter 7.

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society
by Will Hutton
Published 30 Sep 2010

The whole financial sector drowned the property market in credit, so by summer 2007 it had cumulatively issued £257 billion of residential mortgage-backed securities in the new markets for securitised assets to top up normal sources of funding. In other words, more than a fifth of the total £1.2 trillion stock of British mortgage debt was being funded through an avenue – asset-backed securities – that had not even existed a decade earlier. The competition between the lenders drove down credit-worthiness terms, as it always does. The research firm Data Monitor suggests that 7 per cent of mortgages just before the crash went to people with a poor credit history, and another 5–6 per cent required no proof of income.24 Mortgages to the buy-tolet market expanded ten times in a decade as lenders believed they were on to fail-safe lending.

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The McKinsey researchers identify five countries that experienced a huge rise in their debt in the decade up to 2007 (and where, if history is any guide, the financial crisis will lead to a period of deleveraging) – the United States, the UK, Spain, South Korea and Canada. These are not economic minnows: together, they account for more than a third of the world’s GDP. The UK is particularly vulnerable. It had the biggest jump in residential mortgage debt, to reach 101 per cent of GDP in 2007 according to the institute’s calculations, the highest in the world. Moreover, UK mortgages are particularly sensitive to changes in interest rates. The financial sector grew phenomenally too, with borrowing reaching 194 per cent of GDP, although part of that represented the City’s position as a global hub.

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The institute then looks at the level of leverage, its growth, debt service ratios and the vulnerability of borrowers to shocks either to their income or to their capacity to refinance their borrowing. The results are collated into a ‘heat map’ of where in the world deleverage pressures will be most acute. In Britain it is plain that, by these criteria, households will try to reduce their £1.2 trillion of mortgage debt, while real estate companies will try to do the same with their £350 billion commercial property debt. Banks will also attempt to deleverage. Moreover, the British will be deleveraging at the same time as the other countries in the study. The chances of growing out of trouble through export will thus be small.

When the Money Runs Out: The End of Western Affluence
by Stephen D. King
Published 17 Jun 2013

The gains in asset price and debt were extraordinary, at least relative to underlying economic performance. In the US, the Case-Shiller house price index more than doubled between 2000 and 2006. American households took on vast amounts of additional debt. As a share of (rising) household income, mortgage debt rose more than 50 per cent over the same period. The UK's experience was more or less identical. Yet, in policy-making circles, these extraordinary changes were casually brushed to one side. In 2004, Charlie Bean, at the time the Bank of England's chief economist, argued that there was nothing amiss: he regarded house price gains and the associated increase in household indebtedness as merely ‘a transfer of lifetime wealth from younger generations to their parents’.7 In his view, first-time buyers and those trading up were both willing and able to take out larger mortgages, thanks to lower interest rates and an increase in available mortgage finance.

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Pre-crisis, confidence in financial alchemy manifested itself in all sorts of ways: strange innovations within capital markets; the huge expansion of carry trades as investors could borrow cheaply in, for example, Japanese yen and invest in sterling, the New Zealand dollar or the Turkish lira, all of which offered much higher interest rates; rapacious bankers who were happy to bet the house (or, more likely, their bank) on ever more outlandish deals; and, for the man and woman on the street, a massive increase in mortgage debt as dream homes became part of a new, credit-frenzied, reality. At the height of the subprime boom, when investors were falling over themselves to purchase allegedly safe assets with returns higher than those available on low-yielding government bonds, the connection between ultimate borrower and ultimate lender became increasingly tenuous: the homebuyer in Arizona had little idea that her mortgage had, ultimately, been provided by Norwegian savers putting money aside for their future pensions.

Empire of Things: How We Became a World of Consumers, From the Fifteenth Century to the Twenty-First
by Frank Trentmann
Published 1 Dec 2015

A decade later, almost half of all mortgage funds were federally insured.24 It was a golden handshake between the banks and the state, and of historic importance for the expansion of private credit. For one, a home tends to be far more expensive than a radio or a fridge. Mortgages thus make up a much larger part of personal credit than ‘unsecured’ consumer credit. There is, secondly, a close correlation in modern credit societies between mortgage debt and other consumer credit. The greater the former, the greater tends to be the latter.25 What is decisive is mortgages rather than home ownership as such. Greece and Italy today have a higher home-ownership rate than the United States, but people there inherit homes and take out less credit.26 Mortgages, by contrast, simultaneously accustom households to taking on big debt and serve as a collateral that enables them to borrow more for other purposes.

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In Britain, for example, the gross household saving ratio fell sharply from 11 per cent in 1992 to 2 per cent in 2007, and the ‘mean’ unsecured consumer credit had risen to £10,000 when the 2009 Great Recession hit – that is, as many households owed less than £10,000 as owed more than that. Mean mortgage debt stood at £100,000. These are large figures, but they were dwarfed by mean housing and pension wealth, which was over £200,000.52 Economists, by and large, turn to two models to explain what has happened to saving: the lifecycle and the permanent-income hypotheses. Both saw the light of day in the 1950s; Franco Modigliani articulated the former, Milton Friedman the latter.53 For Keynes, the primary motive for saving had been almost irrational pride: to leave a bequest for posterity.

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Credit for goods and services made up a higher share in Britain and Germany (15–20 per cent); in Poland and Austria, it reached 40 per cent of total personal credit. Mortgages, then, make up the bulk of consumer credit, but they do so to a larger or smaller degree. It is a common misunderstanding to presume that because renting is widespread in the Netherlands and Germany, mortgage debt must be smaller, too. Land and property costs much more in Maastricht and Munich than in Missouri, which means that those Dutch and Germans who buy a home carry a disproportionately large burden of debt. The big difference between the Anglo-world and the rest in the 1990s and early 2000s was that, for the latter, unsecured credit (plastic, instalments, loans) shrunk as a share of private debt.

Rentier Capitalism: Who Owns the Economy, and Who Pays for It?
by Brett Christophers
Published 17 Nov 2020

Thus, as Gabriel Zucman has noted, house price increases in the UK have ‘tended to boost the wealth share of the middle class, since most [of] its wealth is invested in housing, while upper groups mostly own financial assets’.78 Or, as Facundo Alvaredo, Tony Atkinson and Salvatore Morelli note of the UK: ‘housing wealth has moderated a definite tendency for there to be a rise in recent years in top shares in total wealth apart from housing’.79 But that is not quite the end of our account of the headline political-economic consequences of UK rentierization. This is because, in order to sustain the aforementioned house-price increases of recent decades, it has been necessary for UK households to take on sharply increasing amounts of mortgage debt. Moreover, as income and wealth inequality have increased, households have, as a result, also taken on increasingly large quantities of unsecured debt (see Figure 0.9).80 This latter phenomenon is not only about households at the lower end of the income spectrum using debt to compensate for stagnant real wages.

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Thus were whole new asset classes conjured into existence, vastly expanding the financial rentier’s field of operation. Developments in housing finance warrant special mention in this regard, partly because they have been of particular significance socioeconomically. The colossal expansion of UK household mortgage debt in the past few decades (see Figure 0.9, p. 46) has seen the financing and ownership of housing become increasingly pivotal not only to the UK financial sector but also, on some accounts, to the UK economy more widely.23 But developments in housing finance are also noteworthy because it was this space that saw the first big policy interventions bearing on financial rentierism under neoliberalism in the UK.

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As we will see for the UK (see especially Chapter 7), and as Thomas Piketty has observed for the advanced capitalist countries more generally, it is not only financial assets that have seen substantial price inflation since the 1980s in political contexts described by Piketty as ‘more favourable to private wealth than that of the immediate postwar decades’.82 With the ratio of median residential property price to median annual earnings in England and Wales increasing from 4.62 to 9.68 on new dwellings, and from 3.44 to 7.57 on existing dwellings, between 1997 and 2017, households took on increasing sums in mortgage debt, younger generations inevitably shouldering the main burden.83 Clearly, though, not all households have been caught up in the debt spiral. Furthermore, financial rents, alongside land rents (Chapter 7) and to a much lesser extent intellectual property rents (Chapter 3), occupy a special place among the seven different types of rent and rentierism that this book examines, insofar as these rents are not exclusively corporate rents, which the other types all are.

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy
by Daniel Gross
Published 7 May 2012

In March 2008 they helped JPMorgan Chase take over an ailing Bear Stearns, with the Fed lending $30 billion to a newly created investment partnership that would acquire dodgy assets from the listing Bear. It was called Maiden Lane I, after the narrow street in lower Manhattan that runs near the Fed’s New York branch.2 In the long, hot summer of 2008 Treasury and the Fed rushed to the aid of AIG, the massive insurer whose reckless extension of credit insurance on mortgage debt threatened to sink it, its counterparties, and the global financial system. In September 2008 Treasury formally assumed responsibility for the trillions of dollars of debt issued by the housing behemoths Fannie Mae and Freddie Mac, a move intended to shore up the banking system. In the weeks and months after Lehman Brothers collapsed in September 2008, the bailout machine kicked into higher gear.

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Between 2007 and 2011 more than 4 million homes were repossessed by banks. After peaking at 69.1 percent in late 2005, the homeownership rate in the United States began to fall; it stood at 66.5 percent in mid-2011. Through a combination of default, pay-downs, and shifting to rentals, Americans have shucked nearly a trillion dollars in mortgage debt since the crisis. According to the New York Federal Reserve, by the third quarter of 2011 the outstanding totals of household mortgages and home equity lines of credit were off 9.6 percent and 10 percent, respectively, from their peaks. But housing was just the beginning. According to the credit card research firm Card Hub, the delinquency rate on credit cards rose from 3.9 percent in the second quarter of 2007 to 6.61 percent in the first quarter of 2009, leading the credit card companies to write off tens of billions of dollars in balances.

Money Moments: Simple Steps to Financial Well-Being
by Jason Butler
Published 22 Nov 2017

I eventually sold my apartment in 1994 for £44,000, which was a loss of £18,000. Thankfully my overpayments had reduced the mortgage balance to about £42,000 by then, allowing me to move on. Global interest rates are currently at an all-time low, which has pushed up property values and caused lots of people to take on very high levels of debt, including mortgages. Mortgage debt is currently cheap and property values are high by historical standards – but it may not stay that way. History tells us that booms turn to busts and bubbles eventually burst, leaving a wave of wealth-destruction in their wake. Assuming you’ve got no ‘bad debt’ (see chapter five), you have an adequate cash emergency fund (see chapter 16), and you are receiving the maximum employer contributions to any workplace pension scheme (see chapter 33) overpaying your mortgage makes a lot of sense.

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry
by Helaine Olen
Published 27 Dec 2012

See women General Mills, 43 George, Neil, Jr., 136 Ghilarducci, Teresa, 78, 85, 97–101, 234 Githler, Charles and Kim, 134, 136, 137 glide path, 89 Goldberg, Herb, 225–26, 227 governmental measures Community Reinvestment Act, 203 Dodd-Frank Wall Street Reform and Consumer Protection Act, 110, 198, 218 Employee Retirement Income Security Act (ERISA), 81 financial literacy initiatives, 197–98 Pension Protection Act, 89 Proposition 13 (California), 225 Senate Subcommittee on Deficits, Debt Management, and Long-Term Economic Growth, 76–78 Social Security, 58, 80, 81 Graziosi, Dean, 181 Grimaldi, Mark, 44–46 Hacker, Jacob, 234 Harter, Kathy, 10 Herbert, Joe, 169 Hill, Catey, 159 Hira, Tahira, 165 Holmes, Selina, 204–5 Holt, Lester, 51 home ownership. See also real estate attitudes toward mortgage debt, 174–75, 176 as automatic savings plan, 175, 176 easy access to mortgages, 176–77, 193 foreclosure, 175 G.I. Bill, 175 as leverage, 177–80, 184 as middle-class value, 174–75 rate of, 192–93 real estate crashes, 175, 180–81, 193 social issues linked to, 175–76 successful investors in, 193–95 How to Prosper During the Coming Bad Years (Ruff), 33, 140 Huddleston, Pat, 111 Hulbert, Mark, 45–46, 142 Humpage, Anthony, 189 income inequality current levels, 28 equities holdings and, 78–79 gender-based wage gap, 153–54, 158 growth in, 8, 21–22 Occupy Wall Street movement, 233 risk-taking and, 166 spending decisions and, 228–29 unconcern about, 22–23 individual investors age demographic, 135, 141–42, 148 appeal of doomsday scenarios, 139–40 classes for, 132–33 day trading, 130–32 fear of retirement shortfall, 132–34 frequent trading, 130–31, 135, 168 frustration with professional advisers, 132 gender differences, 167–68 investment errors, 129 marketing aimed at, 127–28, 133–34 options trading, 131, 133–34 overconfidence, 168–69 televised financial news for, 143–49 World MoneyShow, 127–28, 134–37 insurance.

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Randy, Jr., 200–201 Lloyd, Felix Brandon, 205–6 lobbying groups, 87–88, 99–100, 110, 200, 218 Lockyer, Bill, 100–101 Loibl, Cäzilia, 165 Lucas, Lori, 88 Lucht, Tracy, 16 Lundy, Jeff, 57 Lusardi, Annamaria, 159, 198 Mackay, Harvey, 34 Mad Money (CNBC), 143–47 Mahar, Maggie, 95 Malkiel, Burton, 33 Mamudi, Sam, 95 Mandell, Lew, 201, 207–8 Marquis, Milton, 83 marshmallow experiment, 211–12 Mathisen, Tyler, 82 McCarthy, Carolyn, 111 McGee, Micki, 33, 47 McGinn, Daniel, 179 McInturff, Bill, 75–76 McKenna, Laura, 27 medical expenses, 58, 59–60, 61 Mellan, Olivia, 227 Merrill Lynch, 162–63, 167, 213 Michelman, Kate, 59–60 Middle Class Millionaire, The (Prince and Schiff), 56 Miller, George, 100 Miller, Maurice Lim, 223 Millionaire Next Door, The (Stanley and Danko), 54 Mitchell, Olivia, 159, 198 Money Island game, 205–6 Money Makeover series, 1–2, 4 Money Navigator newsletter (Orman), 44–46 MoneyShow, 127–28, 134–37 Mooney, David, 109 Moore, Michael, 41 mortgage debt, 174–75, 176–77, 193 Mullainathan, Sendhil, 107–8, 116, 162, 166, 228 mutual funds. See stock and mutual fund markets Neasham, Glenn, 115 New York Stock Exchange, 15–16, 160–61 Nine Steps to Financial Freedom (Orman), 34–35 Nocera, Joe, 79 Noeth, Markus, 162, 166 Occupy Wall Street movement, 40, 233 Odean, Terrance, 128–29, 168 Odom, William E., 200 O’Donnell, John, 133 Online Trading Academy, 132–33 Onsite’s Healing Money Issues retreat, 226 options trading, 131, 133–34 Orman, Suze as antipoverty crusader, 41, 46 Approved Card prepaid debit card, 40–42 audience, 38 background, 29, 30–32 books, 34–35, 41 business deals and partnerships, 42–43 contradictory advice, 28, 38 Courage to Be Rich, The, 30, 35, 53 criticism of, 27–28, 35, 46 on Kiyosaki, 188 latte factor calculation, 53 Money Navigator newsletter, 44–46 New Age orientation, 31, 34 Nine Steps to Financial Freedom, 34–35 popularity, 27–30, 38–39 scolding and badgering, 36–38 spending habits, 32, 40 on variable annuities, 104 wealth and source of income, 40, 42, 47 on women’s financial incompetence, 153 You’ve Earned It, Don’t Lose It, 34 overspending by baby boomers, 141–42 celebration of, 57 Latte Factor, 48–53 wealth accumulation and, 54–55, 56–57 by women, 159–60 Palmer, Kimberly, 53 Parker, Richard, 23 Pastor, Lubos, 94–95 Pederson, Allen, 60 Pension Protection Act, 89 pension system.

Austerity: The History of a Dangerous Idea
by Mark Blyth
Published 24 Apr 2013

But there is no such insurance in the repo markets, so repo-market investors protect their cash by receiving collateral equivalent to the cash lent. If the borrower goes bust, the lender can still get the money back, so long as, and this is critical, the collateral doesn’t lose value. What counts as high-quality collateral? Back in the early 2000s, it included such things as Treasury bills, of course. But increasingly, AAA-rated mortgage-debt securities began to be used as collateral, since T-bills were in short supply, which is how mortgages ended up in the repo markets.7 A decline in house prices in 2006 hit the value of these bundled mortgage securities. If you were using mortgage securities as collateral for loans in the repo market, you needed to find more collateral (which people were increasingly less willing to hold) or higher-quality collateral (alternative assets that were in short supply), or you would have to take a “haircut” (a discount) on what you would get back, all of which affected your bottom line.

…

Add to this the fact that Spanish mortgages are recourse loans, meaning that the bank can come after the debtor for the original loan—forever—and not for just the current value of the property, and mortgagers have every incentive to sit tight and not allow the market to clear, thus making the situation worse by inches. In the United States you can walk away from a mortgage and the house is the bank’s problem. In Spain, when you walk away from the house, the mortgage debt is still your problem. Take Ireland and Spain together and you do not have a story of profligate states, feckless workers, and all the rest. Certainly, the Spanish regional governments have a few white elephant projects that have worsened the situation, airports that have no traffic, massive opera houses with no customers, and the like; but these are symptoms, not causes.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

No data existed on this “home-equity extraction,” as it later came to be known. But Greenspan estimated how much new mortgage debt might have been created as a result of the construction of new homes, and he calculated how much debt existing mortgage holders would normally repay in any given period. By taking his estimate for new mortgages and subtracting repayments on old mortgages, Greenspan arrived at the expected change in the total amount of mortgage debt in the economy. Now he was just one step away from the statistic he wanted. If the expected increase in mortgage debt was smaller than the actual change, the difference must represent additional mortgage lending to existing homeowners—home-equity extraction.

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It was said that you could walk the famous canyons near the stock exchange and hear only the rattle of backgammon dice through open windows. But by the early 1950s, financiers were active once again. The GI Bill had promised mass home ownership, turning a generation of Americans into mortgage borrowers; and once they had acquired a taste for mortgage debt, other kinds of borrowing soon followed. By the time Greenspan joined Townsend, consumer loans were becoming so ubiquitous that the bill collector emerged as “the central figure of the good society,” as one contemporary put it.17 Meanwhile, a southerner named Charles Merrill shocked the Wall Street establishment by promoting stock market investment to ordinary Americans.18 Thanks partly to Merrill’s hard-hitting advertisements, the amount of money invested in mutual funds shot up fivefold between 1950 and 1960.

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By 2001, their combined balance sheets had swelled nearly ninefold: they now held $1.2 trillion of mortgages and mortgage-backed securities. Meanwhile, they also guaranteed payments on another $1.5 trillion of mortgage securities held by other investors. All told, Fannie and Freddie shouldered the risk associated with almost half of all outstanding residential mortgage debt—a market share that had nearly doubled in the span of just over a decade. Greenspan usually saw the bright side of financial innovation and agglomeration, but the near doubling of Fannie and Freddie’s market share was an exception. The explosion of over-the-counter derivatives reflected free choices by investors, leading Greenspan to give it the benefit of the doubt; in contrast, the rise of Fannie and Freddie reflected a sinister subsidy.

The American Way of Poverty: How the Other Half Still Lives
by Sasha Abramsky
Published 15 Mar 2013

In 2000, the total level of student debt nationwide was estimated to be around $200 billion.11 A mere twelve years later, that number had increased to an astonishing $870 billion—or $24,000 for each graduate who left college having taken out loans. And, while underwater homeowners could use the bankruptcy system to clear their mortgage debts, there was no legal mechanism in place to allow student-loans to be similarly discharged. In April 2012, when Michigan Congressman Hansen Clarke proposed HR 4170, a Student Loan Forgiveness Act that would allow people to discharge their debt if they had paid at least 10 percent of their discretionary income on student loans for at least ten years, more than 1 million people signed petitions in support of the legislation.12 Yet the GOP-led House didn’t pass it.

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There’s no good reason these models shouldn’t become a key part of state and federal housing strategy in the near future, with credit unions able to access low-interest federal startup loans in return for guaranteeing to keep given numbers of people in their homes. More ambitiously, given the amount of toxic mortgage debt that the federal government was forced to buy up in the months following the 2008 collapse, there’s no reason that it shouldn’t use its status as a de facto lender of last resort to create similar profit-sharing agreements of its own with homeowners underwater on their loans or already skidding along the foreclosure route.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

In turn, the level of bank capital relative to regulatory levels can be an important determinant of a bank’s cost of financing. But banks’ capital positions also tend to be strongly pro-cyclical since assets tend to increase in value in a boom and fall in a recession. This further enhances the potential potency of the financial accelerator, observed in the large build-up of mortgage debt and high leverage of the financial sector in the run-up to the financial crisis. It also means that in the aftermath of a financial crisis, where the banking system finds itself overleveraged, burdened with non-performing loans and insufficient capital, there can be a sharp drop in the flow of credit to the economy.

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Buccleuch, Henry Scott, 3rd Duke of budget deficits and austerity Burns, Arthur Burns, Mary business cycle theory Fisher Hayek Schumpeter Callaghan, James Cambridge School see also Keynes, John Maynard; Marshall, Alfred; Robinson, Joan Cambridge University Girton College Kings College Newnham College St Johns and women Canon capital accumulation capital investment capitalism in aftermath of 2008 financial crisis and communism derivation of term and Engels and the financial crisis of 2008 free-market and Hayek inequality and capitalist economies laissez-faire see laissez-faire and Marx and the Occupy movement and Schumpeterian ‘creative destruction’ socialism vs welfare state capitalism car industry Carney, Mark Carter, Jimmy Case, Elizabeth central banks Bank of England Bank of Japan European Central Bank Fed see Federal Reserve forward guidance macroprudential policy monetary policy tools see also quantitative easing (QE) Chamberlin, Edward Chicago School see also Friedman, Milton Chile China 1949 revolution asset management companies banking system Beijing Consensus Communist Party corporate debt Cultural Revolution domestic innovation economic transformation ‘effect’/‘price’ employment system entrepreneurs exports Five Year Plan (1953) foreign direct investment (FDI) and Germany industrialization and reindustrialization inequality innovation challenge legal institutions manufacturing Maoism and Marx national debt openness ‘paradox’ poverty reduction privatization R&D investment regional free trade agreement renminbi (RMB) as second largest economy services sector shadow banking smartphones social networks trade-to GDP ratio and the USSR wage increases women Churchill, Winston class Engels’ The Condition of the Working Class in England and Marx middle see middle class and Ricardo wage earner class Classical School of economics see also Mill, John Stuart; Ricardo, David; Smith, Adam Clinton, Bill Clinton, Hillary cloth clothing Coase, Ronald Cold War Collectivist Economic Planning collectivization Collier, Paul Columbia University communism Bolshevik Party and capitalism Chinese Communist League First International Marxism see Marxism and Robinson Socialist/Second International Third International USSR see Soviet Union Vietnamese vs welfare state capitalism Communist League comparative advantage theory competition ‘competing down’ (Schumpeter) imperfect between money providers perfect and Robinson wages and competitiveness computers Conard, Ed construction consultancy firms consumerism consumption and comparative advantage theory consumer spending and marginal utility analysis convergence hypothesis corn, free trade in Corn Laws repeal and Ricardo corporate debt Cowles Commission Crafts, Nicholas crafts credit crunch credit default swaps (CDS) credit rating Crimean War crypto-currencies currency crises first-generation second-generation third-generation currency stability Cyprus death duties debt Chinese corporate debt-deflation spiral and government bonds indexation and protection from and Minsky’s financial instability hypothesis mortgage debt national see national debt private corporate as share of GDP decentralization defence deflation debt-deflation spiral Fisher and combating deflation Japan self-fulfilling deindustrialization and globalization premature reversing/reindustrialization and trade US Deng Xiaoping depression see Great Depression (1930s); Long Depression (1880s); recession/depression diminishing returns to capital distributive lag model Douglas, David, Lord Reston Douglas, Janet DuPont East Asian ‘tiger’ economies see also Hong Kong; Singapore; South Korea; Taiwan eastern Europe Eastman Kodak Econometric Society Econometrica economic development challenges and Beijing Consensus financial/currency crises and institutions and Lewis model Myanmar and North and path dependence poverty eradication/reduction South Africa Sustainable Development Goals Vietnam and Washington Consensus economic equilibrium economic freedom economic growth and austerity barriers convergence hypothesis development challenges see economic development challenges drivers of 2 see also innovation; institutions; public investment; technology endogenous growth theories inclusive growth through investment Japan’s growth and Japan’s ‘lost decades’ Lewis model mercantilist doctrine of and new technologies policy debates on raising and poverty reduction and productivity debate/challenge slow growth and the future Solow model UK government’s renewed focus on and unemployment Economic Journal economic rent Ricardo’s theory of economies ‘animal spirits’ of crises see financial crises deflation see deflation emerging see emerging economies equilibrium in GDP see gross domestic product global macroeconomic imbalances growth of see economic growth inequality and capitalist economies inflation see inflation and international trade and investment see investment; public investment national debt see national debt QE see quantitative easing rebalancing of recession see recession/depression services economy see services sector and stagnant wages state intervention Economist education higher role in reducing inequality universal Eliot, T.

Portfolio Design: A Modern Approach to Asset Allocation
by R. Marston
Published 29 Mar 2011

It’s just P1: a/b c11 P2: c/d QC: e/f JWBT412-Marston T1: g December 20, 2010 Real Assets—Real Estate 17:3 Printer: Courier Westford 223 in comparisons between the NCREIF Index and the NAREIT Index that leverage has to be taken into account. HOME OWNERSHIP For many families in the United States, their home is their largest financial asset. In many cases, home ownership is leveraged with mortgage debt with the latter typically representing the largest financial liability of the family. But even taking into account mortgage debt, home ownership represents a substantial portion of net wealth for many families. So it’s important to study returns on homes as part of a larger study of investment returns. Many families believe that home ownership provides some of the highest returns that they earn in their lifetimes.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
by Christopher Leonard
Published 11 Jan 2022

But the members of the FOMC knew otherwise, because they knew how the plan would work and what it was intended to do. The Fed had done quantitative easing once before, during the heat of the 2008 financial crisis. It was an emergency effort, an extraordinary thing for an extraordinary moment: The Fed directly bought mortgage debt to stabilize the mortgage market. Now Bernanke was suggesting that the Fed turn quantitative easing, for the first time, into a normal operating tool to manage the economy. The basic mechanics and goals of quantitative easing are actually pretty simple. It was a plan to inject trillions of newly created dollars into the banking system, at a moment when the banks had almost no incentive to save the money.

…

Wall Street investors didn’t give the frackers money because the investors were stupid or because they believed wholeheartedly in the future production promises. They invested because the Fed was incentivizing them to invest. Thousands of wells were drilled across the country. The search for yield pushed money into commercial real estate. In 2013, a bond analyst named John Flynn was preparing for a wave of mortgage-debt failure. He called this apocalyptic moment “the Wall of Maturities.” The wall he referred to was the moment when billions of dollars in commercial real estate bonds, extended during the real estate bubble of 2006, were set to mature. This would be a moment of reckoning for the commercial real estate industry, spelling doom for irresponsible developers who borrowed money to build shopping malls, office parks, and factories when they had no realistic way of repaying the loans.

The Extreme Centre: A Warning
by Tariq Ali
Published 22 Jan 2015

Because they understand growth as the growth of businessmen’s profits, not the growth of social justice, redistribution, public services, access to housing and other necessities. Because the parties in power are concerned only for their continuation in office … Because no politician has to live with what they legislate for their ‘subjects’: insecurity, mortgage debt, uncertainty. We question this democracy because it colludes with corruption, allowing politicians to hold a private post at the same time as public office, to profit from privileged information, to step into jobs as business advisors after leaving office, making it very profitable to be a politician.

The System: Who Rigged It, How We Fix It
by Robert B. Reich
Published 24 Mar 2020

Credit card solicitations flooded mailboxes; many American wallets bulged with dozens of cards, all amassing larger and larger debt loads. Auto loans were easy to come by. Students and their families went deep into debt to pay the costs of college. Far and away the largest borrowing was to buy homes. Mortgage debt exploded. As housing values continued to rise, homes doubled as ATMs. Consumers refinanced their homes with even larger mortgages and used their homes as collateral for additional loans. As long as housing prices continued to rise, it seemed a painless way to get additional money. (In 1980 the average home sold for $64,600; by 2006 it went for $246,500.)

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers
by Lawrence G. Mcdonald and Patrick Robinson
Published 21 Jul 2009

But Wall Street had outsmarted everyone, and instead of the old-fashioned regular reliable bonds, investors now stampeded for residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and structured investment vehicles (SIVs), paying around 5 to 8 percent. Securitization. What a stroke of pure genius. Turning those mortgage debts into tangible entities. Hardly anyone noticed the minor flaws that would, in time, bankrupt half the world. The year 2003 turned into 2004, and still the flame of my ambitions burned as strongly as ever. I still wanted a seat at Wall Street’s top table, right up there in the major leagues, and I thought I had what it took to make those final steps.

…

That would have been tantamount to high treason, as if the president of the United States had invited Osama bin Laden to Camp David for the weekend. Still, without one iota of reason, evidence, or fact, I wondered. Deep in the night I wondered. Sometimes I went to sleep trying to make sense of the billion-dollar mortgage debts against our breathtaking profits. And then, four days before Christmas something happened. Something that was a puzzle more than a truth, and it did not occur to anyone else. At least I don’t think it did. No one ever said anything. It occurred perhaps only to a guy like myself, a natural worrier, who had been lying awake at night, wondering.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

On this reading of history, even the apparent resolution of class conflicts in the 1980s was a conjuring trick, because the true living standards of working people fell for most of the free-market period, with their pauperization disguised by a fraudulent inflation of property values and buildup of mortgage debt. As this tower of debt collapses, the middle class and the poor will realize that they gained little or nothing from free-market reforms. And if, as the New Normal assumes, economic conditions turn out to be even worse after the crisis than they were in the precrisis period, then a fortiori, the middle class will conclude that the free-market reforms of the Thatcher-Reagan period have made them much worse off than they were in the Keynesian Golden Age.

…

After all the speculative bubbles and phony financial froth were blown away, the true wealth created from the 1980s onward turned out to be much smaller than the wealth created in the era of government-led, strictly regulated, high-tax capitalism from 1945 until the 1970s. On this reading of history, even the apparent resolution of class conflicts that was arguably the greatest achievement of the 1980s was a mirage. The living standards of working people had actually fallen and this pauperization had simply been disguised by the ultimately ruinous build-up of mortgage debt. As this illusion vanished, the middle class and the poor should have realize that they gained nothing from the reforms of the free-market period. Their prospects in an austere postcrisis New Normal would be even worse than they were in the 1980s and 1990s and, therefore, far worse than in the Keynesian Golden Age of the postwar decades.

Makers and Takers: The Rise of Finance and the Fall of American Business
by Rana Foroohar
Published 16 May 2016

And getting people to feel secure, and thus to spend more, is crucial to a sustainable recovery in an economy like America’s, where consumer spending accounts for 70 percent of GDP.9 Some economists have called on Americans to reconsider the model of home ownership as the cultural norm, arguing that it would make more economic sense for people to rent rather than own, since the former increases labor mobility and helps diversify investment risk. That may be true for some groups and in certain parts of the country—one thing we learned from the 2008 crisis was that heavy mortgage debts aren’t for everyone. But the American Dream of home ownership is deeply entrenched. Like it or not, a home, not stocks or savings, remains the chief financial asset for most Americans. And that’s likely to continue to be the case over the next several years, since returns from stocks are unlikely to match those of the recent past, for reasons covered in the previous chapters.

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The perverse cycle continues, as out-of-work people with even less spending power are buried under mounds of debt (no federally subsidized bailouts for them). Indeed, House of Debt paints a fascinating picture of how similar the periods leading up to the Great Depression and the Great Recession were in this regard. From 1920 to 1929 there was “an explosion in both mortgage debt and installment debt for purchasing automobiles and furniture,” a consumer spending spree based on easy credit that mirrors the doubling of consumer debt in America between 2000 and 2007 in the run-up to the housing crisis.23 Monetary policy of the sort we’ve had for the last several years—meaning superlow interest rates and big asset purchases by central bankers—can’t do much to help, since the people benefiting from it are those who actually own assets, not debt.

Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

Here is a typical pro-inflation argument by Dean Baker of the Center for Economic and Policy Research: If it is politically impossible to increase the deficit, then monetary policy provides a second potential tool for boosting demand. The Federal Reserve Board can go beyond its quantitative easing program to a policy of explicitly targeting a moderate rate of inflation (e.g., 3–4 percent) thereby making the real rate of interest negative. This would also have the benefit of reducing the huge burden of mortgage debt facing tens of millions of homeowners as a result of the collapse of the housing bubble.22 The problem is, in a deflationary environment when banks aren’t lending, how can the Fed create inflation? This is the biggest problem with the inflation solution in a situation of overleveraging and overcapacity.

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No longer will greed, scarcity, the quantification and commoditization of all things, the “time preference” for immediate consumption, the discounting of the future for the sake of the present, the fundamental opposition between financial interest and the common good, or the equation of security with accumulation be axiomatic. THE DEBT CRISIS: OPPORTUNITY FOR TRANSITION A golden opportunity to transition to negative-interest money may be nigh in the form of the “debt bomb” that nearly brought down the global economy in 2008. Consisting of high levels of sovereign debt, mortgage debt, credit card debt, student loans, and other debts that can never be repaid, the debt bomb was never defused but just delayed. New loans were issued to enable borrowers to repay old ones, but of course unless the borrowers increase their income, which will only happen with economic growth, this only pushes the problem into the future and makes it worse.

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone
by David Carey
Published 7 Feb 2012

Many industry insiders predicted that, collectively, private equity funds raised in the mid-2000s would not break even, performing even worse than funds raised at the end of the 1990s that were invested during the last market high. The push by some firms like Apollo, KKR, and Carlyle to diversify away from LBOs into other asset classes by launching business development companies and publicly traded debt funds also proved calamitous. A $900 million mortgage debt fund that Carlyle raised on the Amsterdam exchange, shortly after KKR launched its $5 billion equity fund, was leveraged with more than $22 billion of debt and capsized in 2008 when its lenders issued margin calls and seized all its assets. It was a complete wipeout. KKR Financial, a leveraged mortgage and corporate debt vehicle in the United States, had to be propped up by KKR and barely survived.

…

Lee Partners: Vyvyan Tenorio, “It Could Have Been Worse,” Deal, Jan. 7, 2010; Vyvyan Tenorio, “The Fallen,” Deal, Feb. 19, 2009. 16 Forstmann Little: Tiffany Kary and Don Jeffrey, “Citadel Broadcasting Can Use Cash During Bankruptcy,” Bloomberg News, Dec. 21, 2009. 17 In Britain, Terra Firma Capital Partners: Devin Leonard, “Battle of the Bands: Citigroup Is up Next,” NYT, Feb. 6, 2010. 18 The deals done: David Carey, “Buyouts and Banks,” Deal, Nov. 30, 2008. 19 The rescue of Washington Mutual: Geraldine Fabrikant, “WaMu Tarnishes Star Equity Firm,” NYT, Sept. 27, 2008. 20 Executives at two other: Background interviews. 21 One of Blackstone’s coinvestors: SVG Capital plc Interim Report 2009, 13. 22 TXU, the record-breaking buyout: David Carey, “Future Shock,” Deal, Nov. 24, 2009; Jenny Anderson and Julie Creswell, “For Buyout Kingpins, the TXU Utility Deal Gets Tricky,” NYT, Feb. 27, 2010. 23 A $900 million mortgage debt fund: Peter Lattman, Randall Smith, and Jenny Strasburg, “Carlyle Fund in Free Fall as Its Banks Get Nervous,” WSJ, Mar. 14, 2008; Henny Sender, “Leverage Levels a Fatal Flaw in Carlyle Fund,” Financial Times, Nov. 30, 2009; home page of Carlyle Capital, www.carlylecapitalcorp.com. 24 KKR Financial: KKR Financial Holdings LLC press releases, Sept. 24, 2007, and Mar. 31, 2008. 25 Apollo Investment Corporation: Apollo Investment Corporation Annual Report 2009, 24. 26 The steady profits: Craig Karmin and Susan Pulliam, “Big Investors Face Deeper Losses,” WSJ, Mar. 5, 2009. 27 “By December [2007]”: Background interview with an adviser to limited partners. 28 CalSTRS, was so cash-strapped: Karmin and Pulliam, “Big Investors”; background interviews with an adviser to limited partners and an executive at a private equity firm. 29 More than $800 billion: “The Leveraged Finance Maturity Cycle,” Credit Sights, Apr. 29, 2009; “Refinancing the Buyout Boom,” Fitch Ratings special report, Oct. 29, 2009; Mike Spector, “Moody’s Warns on Deluge of Debt,” WSJ, Feb. 1, 2010. 30 Peterson felt so badly: Confirmed in e-mail from Peter Peterson, Feb. 25, 2010, in response to a query. 31 That month the firm announced: Blackstone annual report for 2008, Mar. 3, 2009, 158. 32 Motorola’s cell phones were eclipsed: Freescale and Motorola annual reports. 33 “In every fund”: Stephen Schwarzman interview. 34 In early 2008: Freescale press release, Feb. 8, 2008; background interviews with two sources familiar with the change. 35 Chip sales … nose-dived: Freescale financial reports. 36 “The game on a deal”: Schwarzman interview. 37 Harry Macklowe: Jennifer S.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

But these moves failed to halt the prospect of debt deflation, and so in March 2009, in a bit of quantitative easing of its own, the Bank of England pledged to buy some £150 billion worth of government debt and corporate bonds. The European Central Bank followed suit two months later, pledging €60 billion to purchase “covered bonds,” a form of mortgage debt. All these interventions constituted a dramatic shift in the role of central banks. In previous crises, central banks restricted their efforts to acting as lenders of last resort. This time, however, in a series of incremental steps, central banks around the world adopted a new role: as investor of last resort.

…

debt agency of China contingent convertible bonds corporate credit card currency depreciation and defaults on deflation and deregulation and in emerging Europe of emerging-market economies of financial sector Fisher’s views on Great Moderation and household in Japan Latin American crisis in (1980s) long-term of Mexico Minsky’s views on rating agencies and, see rating agencies; specific ratings recovery and restructuring of short-term unsecured bonded U.S., purchase of see also collateralized debt obligations; leverage; loans; mortgages debt-deflation theory of great depressions debt inflation decoupling deficits budget, see budget, deficits current account, see current account deficit fiscal, see fiscal deficits monetizing of deficit spending deflation debt Great Depression and Keynes’s views on recovery and demand aggregate, see aggregate demand fiscal policy and interest-rate cuts and for investments Keynes’s views on demand side, reforms and Denmark deposit currency deposit insurance bank runs and for credit unions money market funds and raising of limits on regulation and depression fiscal policy and gold prices and monetary policy and see also Great Depression deregulation derivatives Bear Stearns and industry guide to reforms and Deutsche Bank Dexia discount window discredit (revulsion) dollar, U.S.

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

That applied to international debtors—in South America and Central Europe, with Germany being by far the largest debtor. But it also applied domestically. In the United States, the weakness was most apparent in the agricultural states, where owners of 45 percent of all U.S. farms, amounting to 52 percent of the value of farm mortgage debt, were delinquent in payments.46 The total volume of personal debt was reduced dramatically: from $27 billion before the Depression to less than $9 billion in 1934.47 As prices fell, producers had to sell more in order to service the debt, and their efforts drove prices down even further, in a vicious spiral.

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What prevented the adoption of such a measure was the fear that it would spark market contagion, that other categories of debt and other countries would be affected, and that a debt restructuring would bring down a precariously balanced house of cards. There was an analogous argument in the case of American household debt, where it became clear that the problem lay not only in subprime mortgage debt, but much more widely, in the upper price segments of housing. The default rates had risen in areas where house prices had increased disproportionately as a result of high-income and high-credit-score purchases.18 In the middle of a crisis, the ramifications of debt write-off looked much too complex.

The Tyranny of Nostalgia: Half a Century of British Economic Decline
by Russell Jones
Published 15 Jan 2023

House prices rose to unprecedented levels relative to current incomes, with the rise particularly marked in London and the South East. The boom was underpinned by easy access to finance. Building societies began to offer 100% mortgages, while the major banks provided them with stiff competition for housing loans for the first time. The accumulation of mortgage debt for house purchases did not itself reduce personal savings, but the additional funds made available were channelled into higher spending. The housing boom soured and turned to bust after 1988, as higher rates of interest squeezed incomes and house prices began to turn downwards, especially where the boom had been most intense.

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Adding to the sense of impending doom was a sharp deterioration in the finances of the Federal National Mortgage Association, which was known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac. These two government-sponsored entities were the anchors of the US mortgage system. They guaranteed more than $5 trillion of mortgage debt, and by the second quarter of 2008 they were effectively the last major source of mortgage funding. Trillions of dollars of Fannie and Freddie’s securities were dispersed around the global financial system, not least in the investment portfolios of central banks and sovereign wealth funds, which regarded them to all intents and purposes as being guaranteed by the US government.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

Strictly speaking, pass-throughs are not a money market instrument, since their average life, a variable number at best, exceeds by far that of true money market instruments. However, pass-throughs are traded so actively and in such volume that it is hard to write about the money market without mentioning them here and there. The Securities Total residential mortgage debt outstanding stood at $8.6 trillion in December 2005, well above the $4.2 trillion of Treasuries outstanding. About half of residential mortgage debt has been securitized and thus used to back various types of negotiable securities, which in turn have been sold to investors. The securitization of mortgages increases the amount of capital available for the financing of residential mortgages.

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As Table 2.1 shows, households in 2005 had gross savings of $1.186 trillion yet made capital expenditures of $1.712 trillion, leaving the sector with a funds deficit of $526 billion. This funds deficit has been a persistent phenomenon in the early 2000s. Every year consumers as a group have been saving less than they have been investing in housing and other capital goods. Consumers have been financing their investments mostly through home mortgages; household mortgage debt doubled between 2000 and the first quarter of 2006, increasing from $4.4 trillion to $8.9 trillion. With consumers running large funding deficits, it could be said that the business sector has been lucky that it hasn’t had to depend upon the household sector to finance its capital expenditures.

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Growth Prospects for Agency Securities The market for agency securities is likely to grow in the years ahead, even if housing demand slows and the government legislates a slowing in the growth of retained mortgage portfolios at the GSEs. One reason relates to the sheer size of the mortgage market. At over $9 trillion, residential mortgage debt was the biggest debt that households had at the end of 2006 (households had about $13 trillion in debts at the end of 2006). Importantly, only about half of all mortgage loans have been securitized. In other words, companies such as Fannie Mae have repackaged only about half of all mortgages into securities.

Planning Your Perfect Home Renovation: Save Time and Money With This Essential Guide to Fuss-Free Home Improvements
by Alex May
Published 8 Jan 2005

‘I hate having to go to the back of the house to use the loo,’ Camille says. She’d like to think about rebuilding the back section of the house, but thinks that they can’t afford it. The couple is stretched financially, and because both of them are contractors, they do not have stable enough incomes to take on more mortgage debt. Camille and Roy have saved $7500 but don’t want to spend all of it on the renovations. Their small budget and modest desire to make some cosmetic improvements means that it is easier to work backwards with their budgeting, starting with the total amount and working out how much they can spend per square metre: $7500 divided by 81.92 sq m = $91.55 per square metre.

Democracy at Work: A Cure for Capitalism
by Richard D. Wolff
Published 1 Oct 2012

Threatened with the prospect of slowing consumption, advertisers intensified their association of personal worth and success with the extent of one’s consumption of commodities. Without rising real wages, and unable to earn enough with extra hours of labor, US households turned en masse to the only remaining way to achieve the American Dream: borrowing. Mortgage debt soared, partly enabled by rising home prices and partly contributing to those rising home prices. More borrowing to buy homes increased demand for them and, thus, their prices. As prices rose, homeowners could refinance and borrow more against the increased collateral their rising home values represented.

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

Some analysts estimated that 3 percent to 5 percent of the increase in housing wealth showed up annually in the demand for all manner of goods and services, from cars and refrigerators to vacations and entertainment. And, of course, people poured money into home modernization and expansion, further fueling the boom. This pickup in outlays was virtually all funded through increases in home mortgage debt, which financial institutions made particularly easy to tap.* The net effect was characterized neatly by economics columnist Robert Samuelson, who wrote in Newsweek on December 30, 2002: "The housing boom saved the economy.... Fed up with the stock market, Americans went on a real-estate orgy.

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E I G H T E E N CURRENT ACCOUNTS AND DEBT C onsumer short-term d e b t . . . is approaching a historical turning p o i n t . . . . It must soon adjust itself to the nation's capacity for going in hock ; which is not limitless/' declared Fortune in March 1956. A month later the magazine added, "The same general observations apply to mortgage debt—but with double force." Chief economist Sandy Parker and coauthor Gil Burck arrived at those dour conclusions after poring over detailed data on the money owed by U.S. households. (The data had been assembled by me, working as a Fortune consultant.) Their concern was hardly unique—many economists and policymakers were worried that the ratio of household debt to household income had risen to a point where the American family was in danger of delinquency and default.

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Breyer, Stephen. "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and C o m p u t e r Programs." Harvard Law Review 84, no. 2 (December 1970): 2 8 1 - 3 5 5 . Burck, Gilbert, and Sanford Parker. "The Coming Turn in C o n s u m e r Credit." Fortune, March 1956. . "The Danger in Mortgage Debt." Fortune, April 1956. Burns, Arthur F., and Wesley C. Mitchell. Measuring Business Cycles. N e w York: National Bureau of Economic Research, 1946. C a n n o n , Lou. Reagan. N e w York: G. P. Putnam's Sons, 1982. Cardoso, Fernando Henrique, w i t h Brian Winter. The Accidental President of Brazil: A Memoir.

MONEY Master the Game: 7 Simple Steps to Financial Freedom
by Tony Robbins
Published 18 Nov 2014

After 54.25% has been lopped off for the tax man, you can also say good-bye to another 17.25% of each dollar you earn in interest and fees. Got a car, a house, any credit card or student loan debt? In April 2014 the average US household had credit card debt of over $15,000; student loan debt of over $33,000; and mortgage debt of over $150,000. As a nation, we are up to our eyeballs in debt. The fact is, on average, approximately one-third of the income you have left after taxes will be spent on paying down interest! That leaves you with (drumroll, please) a whopping 28.5% of your hard-earned income left over to pay for everything else in life: food, clothing, shelter, education, health care, travel, entertainment, and anything else you happen to stumble upon at the mall or on Amazon!

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Interest rates were even lower in 2009, and they couldn’t give houses away. People were buying during the boom because prices were inflating rapidly. Home prices were rising every single month, and they didn’t want to miss out. Billionaire investing icon George Soros pointed out that “Americans have added more household mortgage debt in the last six years [by 2007] than in the prior life of the mortgage market.” That’s right, more loans were issued in six years than in the entire history of home loans. In Miami and many parts of South Florida, you could put down a deposit, and because of inflationary prices, before the condo was even finished being built, you could sell it for a sizeable profit.

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Soros cited some staggering numbers: “Martin Feldstein, a former chairman of the Council of Economic Advisers, estimated that from 1997 through 2006, consumers drew more than $9 trillion in cash out of their home equity.” To put this in perspective, in just six years (from 2001 to 2007), Americans added more household mortgage debt (about $5.5 trillion) than in the prior life of the mortgage market, which is more than a century old. Of course, this national behavior is not a sustainable way to live. When home prices dropped like a rock, so did spending and the economy. In summary, which season or environment can powerfully drive home prices?

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right
by Philippe Legrain
Published 22 Apr 2014

But being tied to a particular property prevents people from moving to take advantage of better job opportunities, while their unpayable debt burden depresses their spending. It would be better to write down debts across the board, in a way that allows families to remain in their homes and provides banks with an upside if house prices recover. One way is to create economy-wide mechanisms that allow banks to swap their bad mortgage debts for an equity stake, with mortgage-holders paying rent on the proportion of the property owned by the bank. Likewise, the IMF has advocated creating economy-wide mechanisms for writing down unpayable corporate debts while giving viable companies the scope to remain in business. While the failure to tackle the overhangs of household and corporate debt is impeding the recovery in many countries, so too is the failure to deal decisively with Greece’s unsustainable government debt, as subsequent chapters will explain.

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She set up Irish Homeowners Unite, a campaigning group for distressed borrowers that advises households on their options. While the Irish government introduced new insolvency laws in 2013 that aim to make it easier for distressed homeowners to negotiate “sustainable” deals on their mortgages with lenders, that is not enough. Mortgage debts ought to be reduced through economy-wide debt-equity swaps. Where necessary, personal bankruptcy terms ought to be eased and the process streamlined. Corporate debt has continued to soar in Ireland and Portugal and remains high in Spain.327 The IMF reckons that up to 20 per cent of southern European companies’ debts may end up in default: some 30 per cent in Italy, 41 per cent in Spain and 47 per cent in Portugal.328 The Fund therefore proposes a move towards insolvency procedures along the lines of America’s Chapter 11, which allows companies to continue trading while restructuring their debts, as well as economy-wide write-downs.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

The balance sheet of the UK banking system grew from about 50 per cent of GDP for the century prior to 1970, to a little over 200 per cent in the late 1980s and over 500 per cent of GDP immediately before the crisis of 2007.26 This partly reflected the increased debt within the UK economy, particularly household mortgage debt. But between the late 1990s and 2008, the consolidated foreign claims of UK headquartered banks also rose from less than $500bn to $4tn, or about 150 per cent of GDP.27 Part of this was because of increased trading activity and part of it was because of mergers, particularly the 2007 takeover of the Dutch banking group ABN AMRO by the Royal Bank of Scotland.

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In addition to these changes, as Andrew Smithers has argued, there is a powerful case for attacking the bonus culture, which leads management to under-invest in capital goods and over-invest in share buybacks.17 The fourth area is changes in financial contracts. The idea would be to create debt contracts that automatically adjust to circumstances. Index-linked debt is an example: the nominal value depends on the rate of inflation. Similarly, the nominal value of mortgage debt could be indexed to house prices: if house prices rose above a certain amount, lenders would share in the gain and similarly, if house prices fell, lenders would share in the losses. Such contracts might be an attractive way for investors to gain from rising house prices without having to put together portfolios of houses.

Investment: A History
by Norton Reamer and Jesse Downing
Published 19 Feb 2016

Economic agents knew 224 Investment: A History enough not to view the equity of technology firms as low risk, and therefore agents generally did not assemble their balance sheets in such a way so as to have their financial obligations depend fundamentally on the value of those stocks. For the rational agent, then, the shock produced by the precipitous decline in the stock of tech companies did not induce severe distress. This was quite different than the highly rated tranches of mortgage debt (often having AA and AAA ratings), where agents believed in the soundness of the asset and often constructed their liabilities to depend fundamentally on their valuation not declining substantially. Agents thought, in short, that these mortgage assets involved their low-risk capital and as such could build more liabilities against them, and when that turned out not to be true, disaster struck.

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Huang of Jinhua, 30 Livermore, Jesse Lauriston, 204 Lives of the Twelve Caesars (Suetonius), 59 Lo, Andrew, 183 loan-to-value ratios, 30 loca (shares), 65 lock-ups, initial investment, 271–72 Lodge, Henry Cabot, 199 Lombard Street (Bagehot), 216 London: banks of, 73, 82; public markets and, 86–87, 97 London Company, 65–66, 69 London Stock Exchange, 95 London Stock Exchange Group, 95 Index 427 long-life bank (Changshengku), 29 Long-Term Capital Management, 5–6, 213, 246 loss aversion, 252–53 lottery problems, 252 luoghe (claim on debt), 83 Madoff, Andrew, 148–49 Madoff, Bernie, 1, 68, 147, 148–53 Madoff, Mark, 148–49 Magazine, 66 magister (manager), 51 Maimonides, 52 malfeasance: examples of, 9, 146; prevention of, 133, 141 management fee, 261, 270, 273, 304–5 manager (magister), 51 manager in provinces (pro magistro), 51 mandate fragmentation, 330–31 maritime insurance, 65 maritime loans, 26–27 market economy, 42 market efficiency and indexing, 301–3 market inefficiencies, 330–31 market manipulation, 9, 174–83; by Duer, W., 175–77; Erie War and, 177–79; Guinness sharetrading fraud, 181–82; LIBOR scandal, 182–83; by Tellier, 179–80 Markopolos, Harry, 151–53 Markowitz, Harry, 240–43 Marschak, Jacob, 240 Mary I (queen of England and Ireland), 65 Massachusetts Investors Trust, 141 mass production, 200 match markets, 162 mathematical finance, 230 maturation, 332 Mauboussin, Michael, 311–12 McAndrews, James, 94 mean-variance optimization, 10, 243 Medici, Cosimo de’, 35 Medici bank, 6, 43–44, 60, 291 Mediterranean Sea: investment partnerships in, 51–52; trade and, 41–42 Mehra, Rajnish, 252 Mendels, Emanuel S., 89 merchant banks, 81–82; of Italian city-states, 6, 42–44, 54, 291 merchants, 42 merger arbitrage, 185, 265, 288, 314; spread, 331 mergers: acquisition or, 265; banks, 136; NYSE, 95 Merrill, Charles, 92 Merrill Lynch, 188–89 Merton, Robert, 235, 236 Mesopotamia: land and, 15–17, 291; trade in, 41; usury in, 33 middle class: creation of, 8; investment by, 120 Middle East: investment partnerships in, 51–52; SWFs, 130 Milken, Michael, 185–86 Millar, John, 79 Miller, Merton, 121, 233, 235 Miller, William, 158–59 mineral rights, 282 Minsky, Hyman P., 214 Mises, Ludwig von, 205 Mitchell, Charles, 164 Mit Ghamr Savings Bank, 38 Modigliani, Franco, 121–22, 233 Moley, Raymond, 211 momentum investing strategies, 314 monetarist school, 206–7, 212 428 Investment: A History Monetary History of the United States, 1867–1960, A (Friedman and Schwartz), 206 money: Aristotle on, 33, 59; expanding supply of, 176; sterility of, 23; time value of, 32 moneylenders (doso), 31 money market mutual funds, 143 Monte, 83 moral hazard, 219 Mores, Edward Rowe, 132 Morgan Stanley, 294 Morgenthau, Henry, 209–10 mortality risk, 132, 145 mortgages, 321–23; insurance, 321; mortgage-backed securities, 217, 266, 323; mortgage debt, highly rated tranches of, 224; subprime-mortgage lending, 223 mudaraba contract, 35, 53, 55 mufawada contract, 55 Muhammad, 37 Murlyn Corporation, 190 Murphy, Thomas, 7 Muscovy Company, 65–66 musharaka contract, 53 Muth, Richard, 207 mutual funds, 139–44; closedend, 140, 141; 401(k) and, 144; Great Depression and open-ended, 141–42; industry today, 144; money market, 143; opportunities with, 92; during postwar period, 142–44; precursors to, 140; in retirement accounts, 295; shares through, 93 mutual life insurance companies, 133–34 mutual savings banks, 134–37 Napoleon, 74 Napoleonic Wars, 87 naruqqum investment partnerships, 52 Nasser Social Bank, 38 National Conference of Commissioners on Uniform State Laws, 124 National Housing Act of 1934, 321–22 national or international exchange, 94 National School Lunch Program, 167 National Venture Capital Association (NVCA), 278 Natomas Company, 186 natural catastrophe, 332; raising funds by selling, 162; “safe,” 1; selling and purchasing, 165; Treasury, 252 natural resources, commodities and, 281–82 NBC Reports, 111 Needham & Co., 187 negotiable bills of exchange, 83–84 nemulum (net profit), 52 net present value (NPV), 231–32 net profit (nemulum), 52 new asset classes, 331–32 New Deal, 92, 108, 109 new elite, 10, 291, 304–5, 315, 318 New World, 65, 69 New York Curb Market Agency, 89, 97 New York Life, 102 New York Stock Exchange (NYSE), 88, 191; closure of, 203; mergers and transformations, 95; “Own Your Share of American Business” campaign, 92; stock ticker network, 95; trading Index 429 volume, 89, 90; Whitney, R., and, 164–67 New York Stock Exchange Gratuity Fund, 165 New York Yacht Club, 165 Nicostratus, 24 no-arbitrage condition, 235–36 Nomos Nautikos, 52 nonnegotiable bills of exchange, 83 Norman, Montagu, 202 Nourse, Edwin, 207 NPV.

Capitalism in America: A History
by Adrian Wooldridge and Alan Greenspan
Published 15 Oct 2018

The rise of Silicon towns such as Palo Alto and Seattle coincided with the decline of Rust Belt towns such as Youngstown, Ohio. The “great unraveling” was already under way. As we note in chapter 12, the crowding out of savings by the surge in entitlements required a rapid rise in consumer debt. Between 1981 and 2007, consumer debt as a proportion of disposable income grew by 8 percentage points and home-mortgage debt grew by 57 percentage points. So did America’s level of anxiety. Information technology had already started to do for some white-collar jobs—particularly secretarial and clerical jobs—what machines had done for blue-collar jobs, creating a nagging fear of technological obsolescence. In 1991, at the bottom of the business cycle, a survey of workers in large corporations showed that 25 percent were afraid of being laid off.

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Their skill at packaging mortgage loans into mortgage-backed securities and selling them on to investors, all with the implicit backing of the U.S. government, encouraged foreign savings to pour into the American housing market. Fannie and Freddie had doubled their share of the American mortgage market from 1990 to 2000 and were responsible for about half of America’s mortgage debt, despite extraordinarily thin buffers of equity capital. But in a rare display of political unity in those partisan times, both George Bush and the congressional left wanted them to expand still further and provide poorer Americans, including those with “nontraditional financial profiles,” a chance to live “the American dream of home ownership.”

How Money Became Dangerous
by Christopher Varelas
Published 15 Oct 2019

The student loan market has facilitated schools’ raising the cost of education astronomically, which in turn has made it even less viable for those unable to access loans and scholarships. Our national education bubble has swelled to $1.6 trillion in debt outstanding—that’s larger than both credit card and auto loan debts, a consumer debt market smaller only than mortgage debt. Two million people in our country owe more than $100,000 in student loans. After being told their whole lives about the importance of a college education, then working hard to get into the best school they could, they graduated into a Kafkaesque existence, shackled to debts they have limited ability to repay while working jobs that leave them living at subsistence levels.

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” * * * During the early 2000s, when Northern California was beginning to recover from the dotcom bust, the housing market began its rise to historic levels. All across Stockton, residential construction exploded in hopes of attracting Bay Area commuters. In most local economies, residential housing is a small percentage of overall growth and value creation, but in Stockton, an extremely large percentage of expansion was funded by mortgage debt, since the city had basically shifted its central industry to home construction. Eager to cash in on its proximity to the center of tech and culture, Stockton was soon rolling in property tax revenue. Median home prices quadrupled in just six years. Leading up to this moment, Stockton also overcommitted on future pensions, offering retirement at age fifty to the city’s underpaid police- and firemen, while boosting their pensions and benefits, including medical coverage for life.

The More of Less: Finding the Life You Want Under Everything You Own
by Joshua Becker
Published 2 May 2016

In America, we consume twice as many material goods as we did fifty years ago.2 Over the same period, the size of the average American home has nearly tripled, and today that average home contains about three hundred thousand items.3 On average, our homes contain more televisions than people.4 And the US Department of Energy reports that, due to clutter, 25 percent of people with two-car garages don’t have room to park cars inside and another 32 percent have room for only one vehicle.5 Home organization, the service that’s trying to find places for all our clutter, is now an $8 billion industry, growing at a rate of 10 percent each year.6 And still one out of every ten American households rents off-site storage — the fastest-growing segment of the commercial real-estate industry over the past four decades.7 No wonder we have a personal-debt problem. The average household’s credit-card debt stands at over $15,000, while the average mortgage debt is over $150,000.8 I’ll stop there with the statistics dump, because I don’t want to depress you. Besides, you don’t need statistics and surveys to help you recognize that you very likely own too much stuff. You see it as you walk through your house every day. Your living space has become filled with possessions of every kind.

Sabotage: The Financial System's Nasty Business
by Anastasia Nesvetailova and Ronen Palan
Published 28 Jan 2020

We are the only ones coming out smiling.’23 After the takeover was complete, Botín, Santander’s victorious CEO, refused to take phone calls from Goodwin.24 A three-decade-long partnership had ended. Unlike RBS, Santander survived the global financial crisis relatively well – mainly due to its focus on retail banking and little exposure to US subprime mortgage debt.25 Indeed, from January 2009 the Spanish bank had lobbied the European Commission to launch an investigation into ‘state aid’ given to the nationalized Lloyds Bank and its old ally, RBS. Santander’s aim in lobbying the European Commission was to achieve ‘a break up of both RBS and Lloyds so he could cherry-pick the best bits at fire-sale prices’.26 The strategy worked: in 2009 Santander was allowed by the authorities in London and Brussels to bid for RBS business branches called Williams & Glyn.27 In pursuit of cheap deals, Santander pulled out of the bidding competition several times but stated that it ‘may return to the negotiating table if the Edinburgh-based lender is prepared to lower its asking price’.28 If the ABN takeover was the ‘nail in the coffin’ for RBS, then Santander was key in manoeuvring RBS into this deadly corner.

Why Liberalism Failed
by Patrick J. Deneen
Published 9 Jan 2018

They are rooted in economically deprived regions or survive on the outskirts of concentrations of elites, where they will struggle with inflated real estate prices either by overpopulating subpar urban housing or by living at a great commuting distance from work and entertainment. They generally own extraordinary and growing levels of debt, mainly college loans and mortgage debt, though the insistent demand that they participate fully in the broader economy as consumers doubtless leads them to accumulate other excessive debts as well. While there is always the chance that one of their children might move up the economic ladder—particularly via an elite college—in the main, fairly static differentiation now persists between the classes.

Meet the Frugalwoods: Achieving Financial Independence Through Simple Living
by Elizabeth Willard Thames
Published 6 Mar 2018

You probably won’t make all of your money back, but since the initial, colossal depreciation already took place, your resale price will be much closer to the price you paid. This as opposed to the remarkable discrepancy between the price of a new car and its resale potential. Paying cash for cars is also a perfect illustration of the fact that frugality is a compounding game. By never having car payments or any other non-mortgage debt, and the often-exorbitant interest rates that go along with such debt, Nate and I have always been able to save at a high rate, which means we’re able to avoid having car payments, which means we’re able to save at a higher rate . . . it’s a virtuous cycle of low spending and high saving that’s self-perpetuating.

Retire Before Mom and Dad
by Rob Berger
Published 10 Aug 2019

Imagine spending no more than about 30 minutes a year—yes, a year—to maintain your investment portfolio. Lie #5: Debt is a Fact of Life Finally, the world tells us to accept debt as a fact of life. Everybody has debt.1 Some will even tell you it’s part of growing up and being a responsible adult. From school loans to car loans, credit card debt to a mortgage, debt is the way the world works. Lie #5 makes us feel better about going into debt. Perhaps we tell ourselves that it’s “good” debt, whatever that means. Combine this lie with the belief that happiness is expensive and we start to fund our lifestyle with credit cards. We decide if we can afford something according to whether we can make the monthly payment.

All the Devils Are Here
by Bethany McLean
Published 19 Oct 2010

And as he has been saying for years, the number of people borrowing to buy an actual home is dwarfed by the number of people borrowing to refinance. The refis, in turn, are made possible by rising home values—which may not even be real, given all the inflated appraisals. (In fact, Alan Greenspan himself noted in a study he co-authored in 2007 that about four-fifths of the rise in mortgage debt from 1990 to 2006 was due to the “discretionary extraction of home equity.”) Like Ranieri, Rosner has become worried about the CDO market. Around the same time as Ranieri’s speech, Rosner approaches a finance professor at Drexel University, Joseph Mason, to co-author a paper with him. They deliver it in February 2007 at the Hudson Institute.

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But they had never focused on credit risk—the risk that the mortgages Fannie and Freddie guaranteed or held would default. Maybe it was because they had been so blind over the years to all the credit risk in the system, from subprime originators to AIG, that they never saw it coming with Fannie and Freddie, either. Thus it was that in 2007 Fannie and Freddie would add $600 billion in net new mortgage debt to their books, debt that would wind up being highly destructive. They would continue to buy and guarantee mortgages well into 2008. And thus it was that the GSEs would lumber, slowly but inevitably, toward a cliff they didn’t see. The financial crisis came on in fits and starts, and all the while Fannie Mae and Freddie Mac were accumulating the very mortgage risk that would cause the long-dormant volcano to finally erupt.

Who Stole the American Dream?
by Hedrick Smith
Published 10 Sep 2012

“It would have conflicted with the president’s own policies.” The Warnings Those were comments made in hindsight. But there were warnings ahead of time from outside economists. In 2003, Dean Baker and Mark Weisbrot of the Center for Economic and Policy Research in Washington cautioned that rising mortgage debt had reached dangerous levels and this was “especially scary” because housing prices “may be inflated by as much as 20 to 30 percent.” Other warnings that the housing market was dangerously overheated came from economists Stephen Roach of Morgan Stanley and Paul Krugman of Princeton. In 2004, Robert Shiller, whose book Irrational Exuberance had foretold a stock market bust in 2000, reported ominous housing bubbles in key regional markets, warning that speculative fever could bring widespread mortgage defaults.

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The Wall Street Journal, June 9, 2007. 38 “Like a city with a murder law” Gramlich, “Booms and Busts.” 39 “What we forgot” Johnson and Kwak, 13 Bankers, 142–44. 40 No Bush official wanted Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, “White House Philosophy Stoked Mortgage Bonfire,” The New York Times, December 21, 2008. 41 Mortgage debt had reached dangerous levels David Cay Johnston, “Business; In Debate Over Housing Bubble, a Winner Also Loses,” The New York Times, April 11, 2004. 42 Shiller’s warning was more stark Robert J. Shiller, “Household Reactions to Changes in Housing Wealth,” Discussion Paper 1459 (New Haven, CT: Cowles Foundation, Yale University, April 2004), http://​cowles.​econ.​yale.​edu. 43 “May be the biggest bubble in U.S. history” Robert J.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

The result: Americans in 2005 had $41,000 in household debt for every man, woman, and child in the country, up from $6,400 in 1980. If debt levels had grown only as fast as the overall economy, consumers would have owed less than half as much. The details were different in other countries where home prices rose, but the basic trend wasn’t: In Spain, for example, mortgage debt rose at an average rate of 20 percent a year from 2000 to 2004, a period in which home prices rose 16 percent a year. It’s almost impossible for real estate prices to go through that kind of rapid price increase without borrowed money making it possible, which raises a question: Just who was doing all that lending—and why?

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He had documented how problems in the financial sector tend not to stay in the financial sector, but to spread to other areas of the economy, slowing down overall growth. This, he argued, was a major cause of the deep downturn of the 1930s, a large part of what made the Great Depression great. When banks and other lenders suffer major losses, as they did with mortgage debt in 2007, they pare back lending of all kinds. That weakens the economy, which causes banks’ losses to mount further, setting up a vicious cycle—the “financial accelerator,” as Bernanke and frequent coauthor Mark Gertler called it. From the earliest days of the crisis, the Fed chief was concerned that the problems in the U.S. housing market could spiral into something very dangerous indeed.

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

The more than compensatory sweetener was that mortgage interest would remain deductible, now for up to $1 million in indebtedness, and another $100,000 in “unrelated interest”—and thus, the home equity line of credit was born.* A little paperwork, and the Boomers once again had their personal interest deduction, and indeed, “much of the [new, mortgage] debt finance[ed] vacations, cars, boats, and other consumer purchases.”16 Of course, this was the part of the Boomers’ life cycle in which they were snapping up real estate at tremendous volume, and while the numerical bulk of the deduction went to the richest (as is the case with most deductions), the most populous beneficiary group was the most-indebted (i.e., youngest) homeowners, whose ranks were swelling with Boomer voters.

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Still, a nuclear option isn’t unthinkable, given that Boomer debt insanity was on full display in 2016 when Trump went so far as to suggest the government issue debt with intent of subsequently renegotiating its terms—i.e., premeditated default.41 Because that’s what many Boomers have done with their personal borrowing, Trump wasn’t so much bloviating as reflecting a reality practiced at home. Private Liabilities As to that, just as government borrows to maintain its lifestyle, so do citizens. On a personal basis, American debt totaled $14.2 trillion in 2015, of which about $9.5 trillion is mortgage debt, $1.3 trillion educational debt, plus an assorted remainder.42 Some of these debts, like student loans to pay tuition at elite schools, are really in the nature of debt-financed investments.* Others are offset in whole or part by assets like houses, though as the underwater mortgages in Florida, Arizona, and Nevada show, not as much as one would hope.

Inequality and the 1%
by Danny Dorling
Published 6 Oct 2014

One night in a fake shanty-town shack costs the same as an average month’s wage in South Africa. But why do rich American tourists fly all the way to Africa to experience extreme poverty? They could just as easily find it at home. On average, the few homes that the poorest 40 per cent of Americans own are worth less than nothing, due to their mortgage debt. In the UK, wealth inequality is, as yet, nowhere near this level, and fear of kidnap is much less; but as UK wealth inequality rapidly increases, we need to look to the US to see where we are heading. By 2012 almost 50 per cent of the UK population were no longer satisfied with their personal financial situation, and less than a fifth expressed high satisfaction (Figure 4.6).

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street
by Robert Scheer
Published 14 Apr 2010

“This current financial crisis had many causes . . . in the widespread use of poorly understood financial instruments, in shortsightedness and excessive leverage at financial institutions. But it was also the product of basic failures in financial supervision and regulation.” What irony that Summers, who as Clinton’s Treasury secretary pushed through legislation guaranteeing “Legal Certainty for Swap Agreements” and banning the regulation of securitized mortgage debt, should now admit that “securitization led to an erosion of lending standards, resulting in market failure that fed the housing boom and deepened the housing bust.” According to Summers and Geithner, the Obama plan promised that all derivatives dealers would be “subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.”

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity
by Charles L. Marohn, Jr.
Published 24 Sep 2019

When we build a neighborhood all at once to a finished state, we have – at best – a moment of perfection, a period of time when everything works as envisioned. But even in the most perfect development, an unavoidable, yet entirely predictable, stress looms. The homes were all built at the same time; they will all reach the end of their life cycle at the same time. Within the lifetime of the mortgage debt for the home, the homes in the neighborhood will simultaneously start to fail. An asphalt-shingled roof will last for 25 to 30 years, and then it will need to be replaced. Because they were all built at the same time, every home in the neighborhood will need a new roof within a few years of each other.

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality
by Brink Lindsey
Published 12 Oct 2017

Dot-com stocks were held mostly by comparatively rich people, so the losses fell on those best able to bear them; by contrast, falling home prices inflicted pain much more broadly. Furthermore, and crucial for our purposes, there was a difference in how the two bubbles were funded. The dot-com bubble was inflated with infusions of equity financing; the subprime bubble, on the other hand, was inflated with debt, not only mortgage debt held by home buyers but also short-term debt that provided the vast bulk of financing for banks and shadow banks alike. The evidence shows that debt-financed bubbles are much more damaging than those financed with equity, as the recessions that follow are much steeper and the ensuing recoveries are much slower.17 First, debt financing by home buyers channels losses through the financial system rather than directly to households (as is the case with equity bubbles); second, heavy levels of debt by financial firms render them highly vulnerable to insolvency crises in the event of declines in the value of their assets.

Retirementology: Rethinking the American Dream in a New Economy
by Gregory Brandon Salsbury
Published 15 Mar 2010

As comedian Jackie Mason said, “Right now I have enough money to last me the rest of my life, unless I buy something.”25 • Four in ten Americans now feel buyer’s remorse—wishing they had spent less money during good times and put more away over several years.26 • Average American household credit card debt equals $8,565, up almost 15% in 2008 since 2000.27 • Americans have $10.5 trillion in just mortgage debt since the end of 2007, more than double the $4.8 trillion in 2002.28 • The big buzz kill. – According to a survey by Lightspeed Research, 60% of Americans have scaled back on fancy or expensive coffee in the past six months; 43% of those completing the survey indicated that they frequented Starbucks the most.29 – For the first time, annual sales of flat panel TVs looked to decline from $24.4 billion in 2008 to $21.8 billion in 2009.30 • Hummers not humming

The Minimalist Home: A Room-By-Room Guide to a Decluttered, Refocused Life
by Joshua Becker
Published 18 Dec 2018

It opens up so many new possibilities! Downsizing for the Decades The advantages of downsizing when you’re younger So many young couples buy the biggest house they can afford as soon as a loan officer says they can be approved for it. And thus they start out a lifetime of carrying heavy mortgage debt. What they don’t think about is the flexibility and freedom they’re giving up in exchange for square footage. If yours is a younger family, buy only as much house as you need and don’t strain your borrowing capacity more than you have to. Lay the groundwork of a lifetime where you—not lenders—are in control of your financial well-being and lifestyle.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

Between 1997 and 2006 the higher overall demand caused average house prices to double. By late 2006, the average U.S. home cost four times the average family income, an increase from the historical two or three times. As house prices rose, Americans saved less and borrowed more. American home mortgage debt increased to 73 percent of American GDP in 2008, up from below 50 percent in the 1990s. High house prices put home ownership beyond the means of the people that the policy was meant to assist. Borrowers were forced to enter into expensive creative mortgages to purchase houses. Eventually a surplus of unsold homes and unsustainable levels of borrowings caused housing prices to decline from mid-2006, leaving homeowners with unsustainable levels of debt.

…

Historical studies going back to 1986 showed that the notes typically trade at 67 percent of 1-month LIBOR. If the relationship did not change (known as basis risk), Jefferson County saved between 0.75 and 1.25 percent per annum. In January 2008, when monoline insurers were downgraded by rating agencies because of exposure to subprime mortgage debt, the ARSs guaranteed by them also got downgraded. Investors exited the ARS market and auctions failed. Where there is an auction failure, the rate increases to a pre-agreed maximum level, as high as 20 percent, to compensate investors unable to sell their investments. In February 2008, Jefferson County’s interest rate rose to 10 percent from 3 percent.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay
by John Lanchester
Published 14 Dec 2009

Add this together, and you get an entirely different culture of money, borrowing, and debt, one which means that the French have dramatically lower levels of household debt than the Anglo-Saxon economies. In Britain, going into the credit crunch, the typical household owed more than 160 percent of its average income—an alarmingly high figure and one which reflects our high levels of mortgage debt, and general willingness to borrow, borrow, borrow in order to spend, spend, spend. In France the equivalent figure was 60 percent. Individually and collectively, French households are much less stretched and much less at risk from a downturn. Economists attribute this to the fact that Germany and France were the first countries to emerge officially from the current recession.

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
by Mohamed A. El-Erian
Published 26 Jan 2016

Indeed, as detailed by Atif Mian and Amir Sufi in their recent book, House of Debt, the phenomenon was a much broader one, with households (and, I would add, companies) also falling victim to it.6 Having access to new “exotic” lending vehicles that dismantled traditional barriers to expensive and, for some, hard-to-get credit—such exotic instruments as home mortgage loans and refinancing that required no income verification, involved no up-front fees or down payments, and whose repayment conditions could be structured in a very back-loaded manner—too many households embarked on financial activities that they could ill afford, taking risks that they really did not understand. In the process, they did more than mortgage future income that they would have difficulty generating. To capture a piece of what appeared as a housing market that could only go up in value, too many took on mortgage debt that they could not afford, fueling an unusual combination of subsequent foreclosures, bankruptcies, and poverty. Governments were not immune to this societal phenomenon. Many, including the least creditworthy ones that could ill afford commercial borrowing terms, were tempted by the easy availability of debt financing as creditors rushed to provide financing at ever more lenient terms.

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

The Agony of the Household Sector Up to 2008, with no significant financial wealth, debts in excess of their income—which was in any case stagnant—and diminished employment security, the great American “middle class” continued to drive the economy. Up until 2008, personal consumption accounted for 70 percent of US GDP. The largest positive item on the US household balance sheet was the value of residential property, and the largest negative item was mortgage debt. As long as house prices rose faster than consumer debt, household spending would continue to grow. But that depended on the great Wall Street leverage machine continuing to turn consumer credit into investments. When it became clear that it had gone too far and the machine seized up, so did demand for houses, and therefore their prices fell, especially in the most overheated and overbuilt real estate markets, such as California, Nevada, and Florida.

The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number (Bloomberg)
by Liam Vaughan and Gavin Finch
Published 22 Nov 2016

And we don’t want to be coerced into anything “by outside sources such as the media”.14 The banks on the committee had a sound reason to resist significant changes to the way Libor was set.By 2008,the benchmark was embedded in an estimated $350 trillion of derivatives contracts and $10 trillion of loans around the world.15 To put that into perspective, the total amount of U.S. mortgage debt outstanding at the start of 2015 was $13 trillion. Any substantial alterations could have invalidated those contracts, some of which, in the case of interest-rate swaps, lasted decades.16 On top of that, acknowledging serious flaws in Libor would have left the banks facing a barrage of litigation and legal wrangling.

The Long Good Buy: Analysing Cycles in Markets
by Peter Oppenheimer
Published 3 May 2020

As Carlota Perez (2009) put it, ‘the term “masters of the universe”, often quoted to refer to the financial geniuses that were supposed to have engineered the unending prosperity of the mid-2000s, expresses the way in which they were seen as powerful innovators, spreading risk and somehow magically evaporating it in the vast complexity of the financial galaxy’. During the boom years of the 1990s, banks securitised huge volumes of high-risk mortgage debt in the form of mortgage-backed securities (MBS) and collateralised debt obligations (CDO), which could be sold on to financial markets. This innovation enabled investing institutions to receive the income from mortgage payments, while also exposing them to the underlying credit risk. The problem was that when the housing market began to fall a vicious cycle developed.

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations
by David Pilling
Published 30 Jan 2018

This was the practice of dicing and slicing different revenue streams and smushing them together into a tradable asset, a practice that severed the traditional link between lender and borrower. After a while people were happily trading bits of paper—all triple-A rated, naturally—blissfully unaware of what the underlying assets actually contained. As we now know, much of it was mortgage debt taken out on homes by people who could not afford to make their payments. Yet the banking crisis was linked to national accounting in two important ways. The first is as much psychological as anything else. This is what you might call the danger of the circular argument, one that goes like this: “We all know growth is good.

5 Day Weekend: Freedom to Make Your Life and Work Rich With Purpose
by Nik Halik and Garrett B. Gunderson
Published 5 Mar 2018

Keohohou, Nicki Kets de Vries, Manfred keystone habits Kiyosaki, Robert Komisar, Randy Kroc, Ray L labor markets, technology’s transformation of Lavie, Peretz Lemony Snicket Lending Club leverage, and Cash Flow Insurance and content and creating greater returns and credit scores and current assets and entrepreneurship and real estate investments liabilities, and insurance vs. debt liberated entrepreneurs life boards, creating life insurance, combining with long-term care insurance as protective expense whole life insurance lifestyle, and cash flow cutting expenses of and freedom and Growth investment strategies and loan debt Linchpin (Godin) LinkedIn liquidity, and Cash Flow Insurance of checking and savings accounts and economic cycles and failure of conventional investments of Growth investments and real estate investments and reducing debt and tax lien certificates Litecoin “Live Like You Were Dying” (song) Living Wealthy Accounts LLCs loads, on mutual funds loans, and Cash Flow Index and credit scores and economic cycles for real estate investments restructuring from retirement plans against whole life insurance policies See also debt location, and real estate investments and storage unit construction Loehr, Jim long-term care insurance Loopnet Lyft, as entrepreneurial opportunity Lynch, Peter M Mackay, Harvey “mailbox money” myth maintenance, and storage units Mandela, Nelson Marcus Aurelius market conditions, and business startup investments and real estate investments market cycles See also economic cycles market demand, and entrepreneurial opportunities Mastermind Principle materialism, and the American dream and simplicity Maxwell, John McCain, John McCoy, Dan meals, as tax deduction meaning, and generosity medical insurance, as protective expense Melish, Stephanie mental capital mental energy mentors, and building your inner circle microcredit Mill, John Stuart mindfulness mindset, of abundance changing components of a strong and control and debt and hiring employees and limitations and Living Wealthy Accounts and quitting your job and real estate investments and resourcefulness strengthening mineral rights mobile apps, as entrepreneurial opportunity Moffat, Kyle Momentum investments, and active vs. passive income streams business startups cryptocurrencies description of gold and silver speculation and Growth investment strategies investing in people and Passive Income Ratio private equity investments purchasing distressed businesses understanding financial reports Monero monetary policies, and economic cycles moneylenders money managers fees money mastery Moody, D. L. Morley, Christopher morning routines mortgage debt, and cash flow and debts vs. liabilities and real estate investments restructuring mountain climbing multi-family units, advantages in purchasing multilevel marketing (MLM). See network marketing multi-policy insurance discounts Multiple Listing Service (MLS) Munger, Charlie Musicians Institute N Napoleon Bonaparte National Center on Addiction and Substance Abuse Netflix, network marketing, as entrepreneurial opportunity Newton, Isaac nutrition, and energy amplification O Olivier, Laurence online calculators, for ROI on real estate investments online entrepreneurial opportunities opportunity cost, and lifestyle (consumptive) expenses options trading.

Work Optional: Retire Early the Non-Penny-Pinching Way
by Tanja Hester
Published 12 Feb 2019

By saving up enough to make the down payment on a low-cost property, often a modest multifamily apartment building or basic single-family home, and then using the cash flow from the rent he collected to save for the next property, he quickly built up a portfolio of dozens of units by his early 30s that now provide enough income to cover all the expenses for him, his wife, and their two children. They live a modest lifestyle and don’t need much to cover their expenses. And they’re comfortable with the mortgage debt because they saved cash reserves and only bought properties that had a significant cushion between the rental income and the mortgage and maintenance costs, so they can weather extended vacancies without concern. Chad and his family recently spent a year in Ecuador and plan to continue traveling with their newfound financial freedom.

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't
by Nate Silver
Published 31 Aug 2012

How the Ratings Agencies Got It Wrong We have to dig a bit deeper to find the source of the problem. The answer requires a little bit of detail about how financial instruments like CDOs are structured, and a little bit about the distinction between uncertainty and risk. CDOs are collections of mortgage debt that are broken into different pools, or “tranches,” some of which are supposed to be quite risky and others of which are rated as almost completely safe. My friend Anil Kashyap, who teaches a course on the financial crisis to students at the University of Chicago, has come up with a simplified example of a CDO, and I’ll use a version of this example here.

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Barnett-Hart, “The Story of the CDO Market Meltdown: An Empirical Analysis.” 40. The 20 percent chance of default refers to the rate over a five-year period. 41. And it can get worse than that. These securities can also be combined into derivatives of one another, which are even more highly leveraged. For instance, five Alpha Pools of mortgage debt could be combined into a Super Alpha Pool, which would pay you out unless all five of the underlying Alpha Pools defaulted. The odds of this happening are just one in 336 nonillion (a one followed by thirty zeroes) if the mortgages are perfectly uncorrelated with one another—but 1 in 20 if they are perfectly correlated, meaning that it is leveraged by a multiple of 16,777,215,999,999,900,000,000,000,000,000. 42.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

In 1994, fewer than 5 percent of mortgage originations were in the subprime market, but by 2005 about 20 percent of new mortgage loans were subprime. Indeed, the expansion of subprime lending has contributed importantly to the substantial increase in the overall use of mortgage credit. From 1995 to 2004, the share of households with mortgage debt increased 17 percent, and in the lowest income quintile, the share of households with mortgage debt rose 53 percent. —Ben Bernanke, speech at the Opportunity Finance Network's Annual Conference, Washington, DC, November 1, 2006 A wide range of topics is examined, including the GSEs' automated underwriting technology used throughout the industry, their many affordable lending partnerships and underwriting initiatives aimed at extending credit to underserved borrowers, their development of new targeted low down payment products, their entry into new markets such as the subprime market, and their attempts to reduce predatory lending.

When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A)
by Scott McCleskey
Published 10 Mar 2011

Similarly, if interest rates rise, as virtually all economists expect, homebuyers with adjustable rate mortgages will find themselves paying much more on their monthly mortgages. Many homeowners will be unable to make these higher payments. If there is a large increase in the rate of mortgage defaults, then the mortgage holders will experience big losses. While many banks and financial institutions still hold large amounts of mortgage debt, most mortgages become the basis for mortgage-backed securities, a market that now exceeds $6 trillion. This market will be put in danger by a large wave of defaults following the collapse of the housing 2 Mark Zandi, Chief Economist at Moody’s Economy.com, interviewed on National Public Radio’s Weekend Edition, November 27, 2005. 3 Ellen Simpson, ‘‘Housing Bubble’s Burst Could Cost 1 Million Jobs and Cause a Recession, Experts Say,’’ Associated Press, November 13, 2005. 

The Locavore's Dilemma
by Pierre Desrochers and Hiroko Shimizu
Published 29 May 2012

Trained as economic policy analysts, we brought up statistics, contemporary case studies, historical parallels, discussions of standard research protocols, and some personal anecdotes. Especially frustrating was how quickly many activists resorted to challenging our motives rather than our arguments. We were told that we were in the remunerated service of agribusiness, Big Oil, the logistics industry, and even the New Zealand government. (Strangely, though, our mortgage debt is still significant.) Based on the volume of hateful correspondence sent our way, we sometimes felt that questioning the existence of God at a revival meeting would have elicited more measured and polite responses. While we were pleased with our original policy paper, we felt the need to spell out our case in more detail in order to counter the broader intellectual underpinnings of locavorism; hence, this book.

Shortchanged: Life and Debt in the Fringe Economy
by Howard Karger
Published 9 Sep 2005

Despite the rapid rise of housing prices during the 1990s, home equity has actually declined. From 1989 to 1999, the average home equity per homeowner declined (in 1999 inflation-adjusted dollars) from $91,000 to $89,500.30 One reason for this is increased equity borrowing. According to the Federal Reserve Board, about 40% of the growth in outstanding mortgage debt in the late 1990s was linked to home equity loans and cash-out refinancing. A Freddie Mac study found that from 1995 to 2000, about 20% of homeowners had borrowed on their home equity, with loans averaging $36,000. Twenty-five percent of the borrowers said they were concerned about repaying the new loan.31 The rapid growth of refinancing has provided a prime opportunity for fringe economy operators to earn fast money.

The New Economics: A Bigger Picture
by David Boyle and Andrew Simms
Published 14 Jun 2009

While the banks, which are at fault, have been bailed out to a previously unimaginable degree APPENDICES 167 by the taxpayer, thousands of hard-working homeowners face the daily insecurity of potential eviction as the recession makes it harder to meet repayments. This is deeply unjust, destabilizing and imposes a huge burden on society. Evictions could be stopped and in their place could be put long-term plans for restructuring householders’ mortgage debts. (b) Use this chance to rebuild the UK’s stock of social housing Following on from the above, in the event of homeowners defaulting to one of the newly nationalized banks and mortgage providers, another option is open to government. Houses facing repossession could be taken into the stock of public housing.

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All
by Martin Sandbu
Published 15 Jun 2020

Moving is costly, so this is a change that can put opportunity out of reach for those with the fewest resources. Obstacles to relocating can take many forms. Some of those who might like to move may face external constraints: where the financial crisis caused house prices to collapse, for example, mortgage debt trapped people in their homes. That is one possible reason why the once famously mobile Americans are moving less between states than they used to.15 Another constraint can be the lack of a social safety net, which can trap some who would otherwise leave in caring obligations. But it is not just a matter of financial cost.

Green Economics: An Introduction to Theory, Policy and Practice
by Molly Scott Cato
Published 16 Dec 2008

However, capitalism has successfully overcome dissent to its extermination of all but money values by devaluing local and home production of the basic necessities of all aspects of life.5 This narrow method of valuation pressurizes activities not included in the market economy, primarily caring activities, but it also eliminates the possibility of preserving all aspects of life which cannot be monetized, especially the value of the planet itself. Rowbotham’s work also focuses on debt, especially mortgage debt which is the ‘grip of death’ in the title of his 1998 book. From his perspective this debt is the cause of the most pressing ills of modern society, from the failure of public services and forced economic growth to the ever-increasing emphasis on competition and the poor quality of consumer goods.

Listen, Liberal: Or, What Ever Happened to the Party of the People?
by Thomas Frank
Published 15 Mar 2016

Things didn’t go down this way because helping average citizens during hard times is a utopian dream, but rather because those citizens’ interests conflicted with the interests of the upper strata. A choice between the two had to be made, and Obama made it. The most notorious example was a Democratic proposal that would have allowed judges to modify homeowners’ mortgage debt when they filed for bankruptcy—a process called “cramdown” that would have been extremely helpful to millions of homeowners but would also have had unpleasant consequences for whoever it was who owned the mortgages. In 2008, Obama had announced he was in favor of cramdown, but when it came up in the Senate in April of 2009, the president and his team, in the concise description of Obama biographer Jonathan Alter, “wouldn’t lift a finger to help.”12 With the banks lobbying energetically against it, the measure naturally failed.

Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required
by Kristy Shen and Bryce Leung
Published 8 Jul 2019

For example, if you’re a highly paid doctor with a whopping balance, and you can put $50,000 toward your loan this year, then go ahead: refinancing can help you save interest for the year while not sacrificing PSLF eligibility for your entire loan. MORTGAGE Last, but definitely not least, is mortgage debt. Mortgages are generally the heftiest and most common debt people carry in their lives, and while housing is way too big a topic to discuss here (we’ll deal with it in chapter 9), here are a few quick notes. Because mortgages are secured against your home, the interest rates tend to be low.

Big Business: A Love Letter to an American Anti-Hero
by Tyler Cowen
Published 8 Apr 2019

Willen. 2017. “Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis.” NBER Working Paper No. 18082. National Bureau of Economic Research, Washington, DC. Foote, Christopher L., Lara Loewenstein, and Paul S. Willen. 2016. “Cross-Sectional Patterns of Mortgage Debt During the Housing Boom: Evidence and Implications.” NBER Working Paper No. 22985. National Bureau of Economic Research, Washington, DC. Foster, Tom. 2017. “The Shelf Life of John Mackey.” Texas Monthly, June 2017. Francis, Theo, and Joann S. Lublin. 2016. “CEO Pay Shrank Most Since Financial Crisis.”

Less Is More: How Degrowth Will Save the World
by Jason Hickel
Published 12 Aug 2020

There are dozens of proposals for how we might do this in today’s economy. The US presidential candidate Bernie Sanders laid out a clear plan for cancelling student debts, which in 2020 stood at a staggering $1.6 trillion. Academics at King’s College London have published a plan for how governments could write off not just student debts but also other unjust debts: mortgage debts created by housing speculation and quantitative easing, old debts whose lenders have been bailed out by governments, and unpayable debts that are devalued on secondary markets.47 We know it’s possible. In the wake of the coronavirus disaster in 2020, governments in a number of countries suddenly found the ability to make debts disappear.

Americana: A 400-Year History of American Capitalism
by Bhu Srinivasan
Published 25 Sep 2017

The harvested acreage and bushel quantity of oats, barley, corn, and wheat stayed flat, as did the yield of pears, grapes, and oranges. This flew in the face of economic logic with its fancy supply and demand curves: Dramatic drops in prices should have altered production. But they didn’t. Country logic seemed a better fit. What else was a farmer going to do but farm? Likely the $9 billion of farm mortgage debt owed collectively by American farmers left them with little choice—it had barely dropped from the 1929 level of $9.7 billion. Though 1932 farm revenues had been cut in half from 1929, farmers carried virtually the same level of debt as before. Just as this had once served as the basis of William Jennings Bryan’s candidacy in 1896, the American farmer once again stared at the consequences of deflation and the gold standard.

…

yield of pears: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series E 231–243 (Fruits and Vegetables—Apples, Peaches, Pears, Grapes, Oranges, and Grapefruit: 1889 to 1945), 110. debt owed collectively: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series E 244–255 (Farm Credit—Farm-Mortgage Debt, Loans, Interest: 1910 to 1945), 111. “I’m not complaining”: “Capone Moralizes on Eve of Sentence,” New York Times, July 30, 1931. unemployment headed to: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series D 62–76 (Labor Force—Industrial Distribution of Employed (NICB): 1900 to 1945), 65.

Americana
by Bhu Srinivasan

The harvested acreage and bushel quantity of oats, barley, corn, and wheat stayed flat, as did the yield of pears, grapes, and oranges. This flew in the face of economic logic with its fancy supply and demand curves: Dramatic drops in prices should have altered production. But they didn’t. Country logic seemed a better fit. What else was a farmer going to do but farm? Likely the $9 billion of farm mortgage debt owed collectively by American farmers left them with little choice—it had barely dropped from the 1929 level of $9.7 billion. Though 1932 farm revenues had been cut in half from 1929, farmers carried virtually the same level of debt as before. Just as this had once served as the basis of William Jennings Bryan’s candidacy in 1896, the American farmer once again stared at the consequences of deflation and the gold standard.

…

yield of pears: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series E 231–243 (Fruits and Vegetables—Apples, Peaches, Pears, Grapes, Oranges, and Grapefruit: 1889 to 1945), 110. debt owed collectively: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series E 244–255 (Farm Credit—Farm-Mortgage Debt, Loans, Interest: 1910 to 1945), 111. “I’m not complaining”: “Capone Moralizes on Eve of Sentence,” New York Times, July 30, 1931. unemployment headed to: Bureau of the Census, “Historical Statistics of the United States, 1789–1945,” Washington DC, 1949, series D 62–76 (Labor Force—Industrial Distribution of Employed (NICB): 1900 to 1945), 65.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

In the 10 years to the start of the most recent crisis in 2007, bank balance sheets in the United States more than doubled, from $4.7 trillion to $10.2 trillion.3 The Fed’s M2 measure of total money supply rose over the same period from less than $4 trillion to more than $7 trillion.4 From 1996 to 2006, total mortgage debt outstanding in the United States almost tripled, from $4.8 trillion to $13.5 trillion,5 as house prices appreciated, in inflation-adjusted terms, three times faster as over the preceding 100 years.6 Why I Wrote This Book It seems undeniable that elastic money has not brought greater stability.

I Will Teach You To Be Rich
by Sethi, Ramit
Published 22 Mar 2009

Rung 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it (this time above and beyond your employer match). The current limit is $15,500. Rung 5: If you still have money left to invest, open a regular nonretirement account and put as much as possible there. For more about this, see the next page. Also, pay extra on any mortgage debt you have, and consider investing in yourself: Whether it’s starting a company or getting an additional degree, there’s often no better investment than your own career. Remember, this ladder of personal finance only shows you where to invest your money. In Chapter 7, I’ll show you what to invest in.

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America
by Jamie Bronstein
Published 29 Oct 2016

Before the crash, the wealthiest Americans needed places to invest vast sums, and this demand called into being a supply of risky financial instruments. Middle- and low-income Americans had stagnant real wages but could maintain or improve their quality of life with easy access to credit, including subprime mortgages. Debt as a share of income increased from 68.4 percent in 1983 to 118.7 percent in 2007 (see Figure 8.2). The net worth of minorities was much lower than that of whites.13 When the economy collapsed, the media narrative emphasized the irresponsibility of home-buyers in contracting such large levels of debt to begin with.

The Lost Decade: 2010–2020, and What Lies Ahead for Britain
by Polly Toynbee and David Walker
Published 3 Mar 2020

In a consumer society, the signals kept saying, ‘Spend, keep up, acquire,’ and it was perhaps not surprising that to keep going, many households had to borrow. Here was a paradox. Osborne and his successor, Philip Hammond, made a great fuss about the state’s indebtedness. Under them consumer debt expanded, so that by 2019 each UK household owed on average £15,385 to credit-card firms, banks and other lenders, not including mortgage debts. Debt as a share of household income was now 30 per cent higher than it had ever been. Rob Kent-Smith of the ONS noted that by early 2019, unprecedentedly, households had spent more than their income for nine quarters in a row. An optimist might note that some households were buying new homes, acquiring assets with future value; a pessimist would cite those high rates of indebtedness.

EcoVillage at Ithaca Pioneering a Sustainable Culture (2005)
by Liz Walker
Published 20 May 2005

INDEX A accessibility, 214–215 accomplishments reviewed, 209 action oriented people, 154 affordability of houses, 28–29, 210–212 affordable housing, 56–57 agricultural models, 28 agriculture, 215 Alison (expectant mother), 104, 104–106 Allegra (Walking Iris story), 53–54 Allen, Tim, 13, 171 Allen-Gil, Susan, 174, 179–180 Alternative Community School (ACS), 144–145 “Alternative Transportation” group, 175–176, 177 American Demographics, 203 Anderson, Barbara, 183 Anderson, Lynn, 198 animal husbandry, 215 Annual Meetings, 19, 35–36, 154, 192 Arcosanti, 10 Ashley (dog), 110 Ayoung, Todd, 147 B Baldwin, Tad, 36 Bardaglio, Peter, 180, 181 Bates, Albert, 206 Beach Party story, 65–66 Beck, Laura, 113, 114–116, 158 belly casts, 106 Bennett, Phillip, 12 Berke, Deena, 37–38 Berman, Monty, 28, 36, 116–118, 208 biking, 144–146 bio-fuels, 217–218 birthday celebration, 116–118 births, 106–108 Blais, Steve, 24 “Blessing Way,” 104–106 Board of Directors Annual Meetings, 19, 35–36, 154, 192 election of, 15, 19 establishing EVI, 56–57 land contamination, 18 leadership, 153 mission statement, 7 mortgage repayment, 29–30 bofoellesskaber, 55–56 Bokaer, Joan beginnings of EVI, 11–12 as Co-Director, 13 Eco–City Conference, 194 “EcoVillage vision” speech, 11 Envisioning Plan, 29, 188 land purchase financing, 17–19 land subdivision, 37 Land Use Planning Forum, 26 leadership style, 155–157 leaving EVI, 119 process versus action, 156 “The Ecological Imperative” article, 13 “The Global Walk for a Livable World,” 7–8 Bokaer-Smith, John and Jen, 27, 37, 39–42, 40, 40–45 Bosjolie, Jim, 54 Boyce Thompson Institute, 25 Boyd, Marcie, 58 bridge ceremony, 147–148 Brown, Nancy, 73 bus shelter design, “green,” 175–176 bylaws, 15 C CAD. see computer-assisted drafting (CAD) Canadian Mortgage and Housing Corporation (CMHC), 201–202 229 230 E C O V I L L A G E AT I T H A C A Carpenter, Mike, 94, 140 carpooling, 126–127 cars, hybrid, 217–218 car sharing, 145 Carson, Pamela, 108–112, 111 car use reduction, 126–127, 144–146, 195, 217 cats, 163–164 Cayuga Lake, 22 The Celestine Prophecy, 58 Center for Religion, Ethics, and Social Policy (CRESP), 13, 30, 167 Champion, Rod, 140, 147 charette 2005, 216 “Check-ins,” 122 chicken feeding, 143 childbirth, 106–108 child-rearing, 83 Chittewere, Tendai, 178, 178–179 chores, 143, 165–166, 200, 205, 213 Christian, Diana Leafe, 5 Cisela (“SOUL” Partnership), 32 CNN TV, 205 co-counseling, 12, 17, 97 cohousing communication and, 77–83 envisioning, 12 growing pains, 56–57 model, 55–56 “ratcheting,” 79–80 social aspects, 4 Cohousing: A Contemporary Approach to Housing Ourselves, 10, 56 Cohousing magazine, 203, 205 committees, planning, 28–29 Common House, 55–56, 60–65, 74, 149, 166, 204 “Common House Sharing Agreement,” 149–150 communication, 77–83 Communities Magazine, 205 community conflicts, 87–102 connections, global, 189–190 education, 162–167 (see also education) intentional, 10 Community Land Trusts (CLT), 34 “Community Plunge” program, 171 Community Supported Agriculture (CSA), 39–40, 41, 43, 46–49, 48, 50–51 composting, 141–142 composting toilets, 130, 139, 198 computer-assisted drafting (CAD) maps, 25 conflict, 83–102 author’s personal, 84–87 community, 87–102 between families, 88–92 geese, 164 leadership and, 89–90 moving beyond, 149–150 reduction, 79 resolution, 90–91 SONG landscaping, 154–156 “talking stick” circles, 9 water tank, 92–102 Connelly, Christine, 202 consensus based decision making, 88–92 conservation, land, 128–129 conservation easement, 31 construction materials, 136–138 Conta, Bart, 12 contamination of land scare, 18 cooking, 61–65, 166 Cornell, Ezra, 22 The Cornell Magazine, 204 Cornell University, 22, 23, 34, 170 cost overruns, 30, 34–36, 151–152 Creating a Life Together, 5 Creeger, Katie, 159 CRESP. see Center for Religion, Ethics, and Social Policy (CRESP) “Crux of the Matter” party, 150–152 cycling, 144–146 Cynthia (menopause story), 116 D Dakar, city of, 193–194 Dancing Rabbit Ecovillage, 206 Darling, Mark, 176 deaths, 108–112 “Debt-Free in 2003” Campaign, 35–38, 158 “Deepening Relationships” group, 121–123 deer fence, 47 de Munn, Mike, 174 development, future, 216 DiChristina, Mariette, 204 Diene, Serigne Mbaye, 192, 194, 200 diversity, 214 divorce and marriage, 10, 14, 114–116 dog (Ashley), 110 Index 231 dogs, 163–164 Durrett, Charles, 10, 56 E Earth Island Journal, 204 Eco-Block™, 134 Eco-City Conference, Third International, 190, 193–200 ecological construction materials, 136–138 ecological features energy savings, 126–127, 136–137 future, 213, 216–217 “green” bus shelter design, 175–176 location, 125–134 solar design, passive, 136–137 solar energy, 136 solar generated electricity, 217 ecological footprint, 174 ecological innovations, 216–217 economic development, future, 218–220 economy, internal, 128 ecosystems, global, 2–3 EcoUrbanismo/EcoUrbanism: Sustainable Human Settlements: 60 Case Studies, 201 EcoVillage at Ithaca (community). see also EcoVillage at Ithaca (nonprofit) aerial view, 35 description of, 3–4 Envisioning Plan, iii future of, 220 mission statement, 7 Newsletter, 13 timeline, 225–229 EcoVillage at Ithaca (nonprofit). see also Board of Directors accomplishments, 208 affordability, 210 cost overruns, 30, 36–37 “Debt-Free in 2003” Campaign, 35–38, 158 financial struggles, 211 and FROG, 30 infrastructure sharing, 35, 93, 149, 166 leadership of, 153 mortgage lenders, 151–152 non-profit status received, 19 and SONG, 33, 36–37 Village Association, forming of, 150 ecovillage design education, 185–188 EcoVillage Education and Research Center (EVER), 181, 219 Ecovillage Living: Restoring the Earth and her People, 1, 185 EcoVillage Newsletter, 190–191 “EcoVillage vision” speech, 11 Eco-Yoff, 198 Edmondson, Brad, 203 Educate the Children (ETC), 109, 190 education community, 162–167 ecovillage design, 185–188 EcoVillage Education and Research Center (EVER), 181, 219 envisioning sessions, 168–169 outreach, 167–168 partnerships, 167–168, 179–185 Permaculture Certification course, 198 potential, 218–219 Shapiro, Elan, 168–174 sustainability courses, 170, 172–174, 184 Elgin, Duane, xi–xv Elliott, Jack, 170 Ellis, Don, 24 El Mundo, 201 email communication, 80–81 “embedded energy,” 137 employment, on-site, 127–128 energy, “embedded energy,” 137 “Energy Efficiency and Sustainable Energy” course, 173 energy savings, 126–127, 136–137 “Environmental Futures” course, 174 environmental illnesses, 214–215 environmental sustainability movement, 3 Envisioning Plan, 29, iii envisioning sessions, 168–169 The Envisioning Retreat, 12–14 Equity Trust Fund, 34 “Exploring our Differences, Deepening our Connections,” 149–150 F family conflict, 88–92 Famous Fried Tofu recipe, 63 Famous Fried Tofu story, 61–65 farming, 40–45, 131. see also gardening Findhorn, Scotland, 186–187 The Findhorn Conference, 185–188 Finger Lakes region, 21–23 Finlay, Marcie, 94 fire, 60–61, 204 232 E C O V I L L A G E AT I T H A C A fire protection, 92–93 First Resident Group (FROG) accessibility, 214–215 aerial view, 35 affordability of houses, 28–29, 210–212 conflict between families, 88–92 cost overruns, 30, 151 energy savings, 136 house design, 138–141 infrastructure sharing, 35, 93, 149, 166 meetings, 213 moving in, 59–60 neighborhood center, 55 relationships, deepening, 121–123 with SONG, 148 “flip tax,” 211 food, “green,” 131 footprint, ecological, 174 footprint, transportation, 126–127 Forte, Marcia, 12 framing materials, 137 Freer, Lori, 67 Freer, Zoe, 67 Fresneda, Carlos, 201 friends and neighbors, influencing, 143–146 Friendship Donations Network (FDN), 49 FROG. see First Resident Group (FROG) fundraising, 35–38 G Gaarder, Steve, 151 garbage, 142 gardening, 130–133. see also farming gasoline use, 126–127. see also car use reduction Gasser, Marcia, 148 Gasser, Sarah, 73 Gasser family, 203 geese conflict, 164 George (family friction), 88–92 global ecosystems, 2–3 The Global EcoVillage Network (GEN), 207–208 The Global Ecovillage Network (GEN), 185–187 glossary of acronyms, 221–223 Godin, Arthur, 144–146 Goethe, Johann von, 36 Goodman, Bill, 96, 159 graduate students, 178–179 grant, National Science Foundation (NSF), 169 green building, 134–138 “green” bus shelter design, 175–176 “green” community features, 125–134 “green” food, 131 “green living,” 143–146 Greenstar, 40 Greg, (SONG finance committee), 151–152 greywater treatment system, 217 group learning, 165–166 “Guidelines for Development,” 28–29, 160 Guys Baking Pies, 68, 68–70 H Habitat II, 195 habitat restoration, 129–130, 215 haiku poems, 117 Harrod, Jon, 173 Harry (mortgage lender), 31–32 Harvest Tuesday, 50–51 Hawkes, Janet, 170 Hayes, Dennis, 7 head shaving tradition, 109–110, 111 heating systems, 137, 217 heat recovery ventilators (HRVs), 137 Henry (family friction), 88–92 Hepburn family, 36 Herrick, David, 98 Her World, 202 Highland, Sarah, 134–135 Hollick, Malcolm, 202 hospitality, 195–196 house design, 79, 138–141 hybrid cars, 217–218 I Ifugao, 27 In Context magazine, 204 India, Poona, 27 infrastructure sharing, 35, 93, 149, 166 Inglese, Tulio, 12 insulated concrete form (ICF), 134 insulation, 137 intentional communities, 10 Interhelp, 168 International Ecological Rebuilding Program, 194, 195 interns, 171–172 Index 233 Iroquois, 22 irrigation system, 47 “ISLAND Agreement,” 34–36, 151–152 Ithaca, New York, 21–23 water tank construction, 92–102 Ithaca College education partnership with EVI, 167–168, 179–185 and Ithaca, New York, 22 location of, 23 student projects, 175–178 sustainability courses, 170, 172–174, 184 Ithaca Farmer’s Market, 40, 44 “Ithaca Hours,” 200, 205 J Jacke, Dave, 132–133, 150 Jackson, Hildur, 1, 132, 185–188 Jacobson, Jay, 25, 87, 100, 118, 155, 164–165, 170, 207–208 Japanese culture, 201 Japanese visitors, 200–202 Johnson, Tom, 28 Jones, Jared, 18–19, 58–59, 68–69, 69, 70–72, 113, 128, 144–145 journal entries September 1991, 15 September 1992, 26 Winter 1996, 196–197 Spring 1999, 34 Fall 2001, 134 Spring 2002, 140 Summer 2002, 134–135 September 2002, 169 Winter 2002, 135 July 2003, 107–108 September 2003, 147–148 Winter 2003, 31 May 2004, 186–187 June 2004, 218–219 Summer 2004, 66 Julia (medical crisis), 112–113 June, Pam, 27–28, 164 K Katz, Daniel (author’s son), 1, 57–58, 144–145 Katz, Jason (author’s son), 9, 57–58, 144–145, 197 Katz, Jon, 10, 12, 14, 195 Keiko (student), 200–201 Kid’s Council, 83 Kraus, Mary, 139 L Labor Day, 72–74, 147–148 Lake Ontario, 21–22 Lakeside Development Corporation, 129 Lambert, Rod, 33, 59, 93, 120, 139–140 land contamination scare, 18 financing, 14, 17–19 “Guidelines for Development,” 28–29 trust, 211 West Hill site, 15–17 landscaping, 65–66, 129–130, 154–156, 156 land stewardship, 215 land use, 128–129 development, future, 216 “ISLAND Agreement,” 35 Land Use Planning Forum (LUPF), 24–28 planning process, 23–29 subdividing, 36–37 “The Crux,” 150–152 Land Use Planning Forum (LUPF), 24–28 L’Association pour la Promotion Économique, Culturelle, et Sociale de Yoff (APECSY), 193–200 La Vida Simple, 201 leadership, 13, 89–90, 119–120, 152–159, 212 learning and teaching, 161–188 Licht, Rob, 175 listservs, 81 “Livable World” fairs, 8 “living machine,” 217 “Living the Questions” process, 159–160 Liz’s Famous Fried Tofu story, 61–65 Lo, Alice, 177 location, energy savings and, 126–127 Long, Libby, 96 Los Angeles Ecovillage, 206 LUPF. see Land Use Planning Forum (LUPF) M Man Ndiare, 196 maps, computer-assisted drafting (CAD), 25 marriage, divorce and, 10, 14, 114–116 234 E C O V I L L A G E AT I T H A C A Mathei, Chuck, 34 Matthew (husband of Poppy), 106–108 Matt (husband of Tendai Chittewere), 178 May Day, 163 McCamant, Kathryn, 10, 56 meals, 61–65, 166 media, 168, 195, 200, 202–206, 209 medical crises, 112–114 meetings, group, 81–82 Memo, 200 menopause story, 116 milkweed story, 46 Mohler, Chuck, 26, 28 Mom’s Whole Wheat Bread recipe, 71 monetary gifts, 30–31 Morgan, 78 Morgan, Julia, 59 mortgage “Debt-Free in 2003” Campaign, 35–38, 158 financing, 17–19 foreclosure, 31–32 lenders, 31–32 repayment, 29–30 Mother Earth News, 206 Mouth or Bucket? poem, 69 moving in party, 59–60 mulching, sheet, 132–133 multiple chemical sensitivity (MCS), 214–215 N National Public Radio, 203, 204, 205 National Science Foundation (NSF), 167, 169, 172–174 grant, 179–180 native plants, 129–130. see also landscaping necklaces, “Blessing Way,” 105 neighborhood siting, 26 neighbors, 84–87, 143–146 The New York Times, 191–192, 205 Nicholson, Gay, 182 Nickelodeon, 205 Nilsen-Hodges, Tina and Jim, 159 Niruja (wife of Ram Saran Thapa), 65–66, 112 Nolan, Joe and Michelle, 121 non-profit status received, 19 Northeast Organic Farming Association (NOFA), 39, 41 No Sola Musica, 201 O Oafs Baking Loafs, 70–72 organic farming/growing, 131 organic foods, 131 Organic Style Magazine, 22 Orion, 78 Orr, David, 184 P parenting, 83 Parenting Magazine, 205 parenting/work balance, 43–45, 57–58 participation in building, 140 passive solar design, 136–137 pedestrian friendly villages, 13, 195 Peeks, Brady, 198, 199–200 permaculture, 132–133 Permaculture Certification course, 198 Permaculture Magazine, 132 personal conflict (author’s), 84–87 personal limits, setting, 82 personal transformations, 118 pet death, 110 pets, 163–164 Phebe (“Living the Questions”), 159–160, 208 photovoltaic panels, 136 Pines, Sara, 36, 49, 72 Pitts, Greg, 93–94, 101–102, 114–116, 159 Planning Council, 23–29, 28 planning process, land use, 23–29 poems, haiku, 117 pond, 16, 26–27, 65–66, 164 Poppy (expectant mother), 104, 104–106, 106–108 Popular Science magazine, 204 pregnancy, 104–106 press coverage, 168, 195, 200, 202–203, 209 process oriented people, 154 process versus action orientation, 154, 156 professional transformations, 119–120 Progressive Architecture magazine, 203 projects, future, 215–220 Proposed Principles and Statement of Purpose, 15 public transportation, 127 Q Quevedo, Ed, 182, 183 Index 235 R racial diversity, 214 rainforest ecosystem analogy, 77–78 rainwater collection, 130–131 raising money for land purchase, 17–19 Ramanujan, Karryn, 117 Ramsey, Greg, 216 Rana, Mira, 189, 190 “ratcheting,” 79–80 recipes, 63, 71 recycling, 141–143 Register, Richard, 193, 194, 198, 199–200 relationships. see also conflict cohousing social aspects, 4 communication, 77–83 dealing with differences, 82–83 deepening, 121–123 people connections, 190–192 Residential Architect, 206 retrofitting, 137–138 reuse room, 142 rites of passage, 116 “rotating fishbowl,” 27 Roth, Dan, 183 S Salk, Jim, 32 Sarah (Walking Iris story), 53–54 Save Our Unlimited Land (“SOUL” Partnership), 31–33 Schade, Linda, 25 Schloss, Bob, 15 Schroeder, John, 100–101, 102 “Science of Sustainability,” 167 Second Resident Group (SONG) accessibility, 214–215 aerial view, 35 affordability of houses, 210–212 author’s leadership of, 119–120 beginnings, 33–34 birthday celebration, 54 building, 126, 134–135 cost overruns, 30, 151 energy savings, 136 finances, 36–37, 151–152 with FROG, 148 house design, 138–141 infrastructure sharing, 35, 93, 149, 166 landscaping, 154–156, 172 location of, 133 media coverage, 205 time pressures, 213 tree planting, 156 verse 1, 134–135 verse 2, 135 seedlings, 41–42 Senegal, Yoff, 192–200 setting personal limits, 82 Shahan, Zach, 95, 172 Shapiro, Elan, 73, 113, 122, 168–174, 173, 180, 183, 205 Shapiro, Rachel, 73, 159, 168, 205 sheet mulching, 132-133 Shevory, Tom, 180 Shidara, Kiyokazu, 133, 174, 201, 202 Shire, Doug, 73 Shortall, Janet, 218 sister village, 192–200 site plan, 133–134 Slack Hollow Farm, 41 Snyder, Phil, 26–27, 29 social aspects, 4 social sustainaibility movement, 3 solar design, passive, 136–137 solar energy, 136 solar generated electricity, 217 Soleri, Paolo, 10 SONG. see Second Resident Group (SONG) “SOUL” Partnership, 31–33 The Sound of Music, 71 Spain, 201 Spayde, Jon, 205 Stettinius, Martha, 47, 158 straw bale building, 135 structurally insulated panels (SIPs), 137 students, 171–172, 173, 175–179. see also education subsidized homes, 211 Sue (neighbor), 84–87 support groups, 120, 121–123, 162 “Sustainability Assessment,” 207–208 sustainability courses, 170, 172–174, 173, 184 sustainability culture, 4 sustainability message, 180–183, 183–185 Sustainable Communities: Lessons from Aspiring Ecovillages, 202 “Sustainable Tompkins County,” 181–183 Svensson, Karen, 1, 185 T talent show, 72 “talking stick” circle, 97–100 teamwork, 156–158. see also leadership Terenga, 195–196 236 E C O V I L L A G E AT I T H A C A Thapa, Ram Saran, 65–66, 109, 112 “the Crux,” 133 “The Global Walk for a Livable World,” 7–11, 8 Thiaw, Adji Arame, 190, 190–191, 199 Thich Nhat Hanh, 103 Third International Eco-City Conference, 190, 193–200, 204 Thomas, Garry, 170, 174, 180 Thomas, Greg, 126 Thunderwolf, Mark, 219 timeline, 225–229 time pressures, 212–213 toad mating story, 163 Tofu, Famous Fried story, 61–65 toilets, 130 Tom (family friction), 88–92 Tompkins Trust Company, 138 traditional villages, 3, 185, 187, 190–191, 192–196, 195, 199–200, xiv transportation, 126–127, 144–146, 217. see also car use reduction tree planting, 156 Tremain State Park, 23 The Tune Café, 74–75 Tyler, Patrick E., 191–192 U unemployment, 210 United Nations Conference on Human Settlements, 195 United Natural Foods, 131 U.S.

Heartland: A Memoir of Working Hard and Being Broke in the Richest Country on Earth
by Sarah Smarsh
Published 17 Sep 2018

Dad and I moved boxes from our vehicles while Chris buzzed around inside with her cigarettes and tried to remember where she had set something. About a year later, the housing bubble finally burst. Big banks, it turned out, had been fleecing homeowners. While a sketchy, shadowy finance system profited from historic national levels of mortgage debt, millions of buyers lost their houses and—when the broader economy tanked—they lost their savings and incomes, too. In 2006, there were about 717,000 foreclosures throughout the country; in 2008, that number was 2,330,000. The foreclosure count peaked in 2010 at almost 2.9 million and wouldn’t return to pre-crisis levels until almost a decade after the bubble burst.

Servant Economy: Where America's Elite Is Sending the Middle Class
by Jeff Faux
Published 16 May 2012

According to his own memoirs, published in 2002, while he was telling Congress not to worry, he was also telling his own Federal Reserve Open Market Committee that there was “eye-catching” evidence of an uncommon inflation in housing prices: “It’s hard to escape the conclusion that . . . our extraordinary housing boom and the carryover into very large extractions of equity, financed by very large increases in mortgage debt, cannot continue indefinitely into the future.”24 Still, his public denial of a real estate boom that would inevitably lead to a bust continued. In a February 2004 speech to the Credit Union National Association, he actually chided American families for “losing tens of thousands of dollars” by not taking advantage of variable rate mortgages.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
by George A. Akerlof and Robert J. Shiller
Published 1 Jan 2009

These could then be sold off, and different people would own different parts of the payments from the different mortgages. Gillian Tett, author of the 2009 book Fool’s Gold, describes how initially this was an innocuous innovation designed as an end run around the Basel capital requirements. Since taking on such mortgage debts seemed all but totally safe, the capital requirement for holding them was very small. There was only one question: who was going to hold the super-senior tranche, the remaining fraction? This tranche, it was thought, would always pay at par, so it would not have to pay much added interest. Indeed, this is the same question that faces businesspeople in all walks of life.

The Theft of a Decade: How the Baby Boomers Stole the Millennials' Economic Future
by Joseph C. Sternberg
Published 13 May 2019

The “Same Old, Same Old” and the New Young The thing about the global financial crisis that hit in 2007–2008 and the Great Recession that followed is that they were bad but not necessarily uniquely bad. Modern economic crises invariably arise when an economy has become too reliant on debt and suddenly can’t borrow anymore. The United States had definitely become reliant on debt, with mortgage debt alone reaching 73 percent of annual output in 2007.28 And suddenly it couldn’t borrow anymore. Households started struggling to repay their mortgages, which sparked concerns about who else might not be able to repay. Banks started writing down the value of the loans they held as assets on their balance sheets, which raised even more concerns about who else might struggle to repay debts.

How to Own the World: A Plain English Guide to Thinking Globally and Investing Wisely
by Andrew Craig
Published 6 Sep 2015

I would suggest that if you feel safe in your job you might consider one or two months sufficient. In other words, I am suggesting that you do not begin to invest money into the financial assets we are looking at in this chapter (such as investment funds or precious metals) until you have first cleared any expensive (non-mortgage) debt and have saved at least a month’s salary to keep as cash, and possibly more. Once you have done this, however, you can start allocating some of your monthly savings to investment. Given the percentages I suggested above, here is a table detailing how you might split your money between the three categories of the keeping it simple approach – owning the world, owning inflation, and cash – depending on how much you are able to save.

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy
by David Sawyer
Published 17 Aug 2018

What cover you go for depends on a host of factors including how will your partner cope if you die tomorrow, how good is your partner at managing investments, how flexible is your partner, how healthy is your partner, how are your partner’s genes (life expectancy). RESET favours decreasing term life insurance based on your mortgage value at time of purchasing. This way, if you die, your partner has no mortgage debt to worry about and their (and your kids’) home is secure. Lump sum life insurance (where the payout is usually more than even the highest payout under decreasing term) gives more comfort, but costs more a month, and is insuring for something you may not need. Last, make sure you place your life insurance in a trust: many companies such as Beagle Street offer this service for nothing.

Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork
by Reeves Wiedeman
Published 19 Oct 2020

The company was becoming so large, he argued, that landlords would have to play ball if money got tight—the “too big to fail” argument. “If I say ‘pencils down’ to my people, the value of buildings will plunge,” Adam reportedly said in one meeting. He was at least partly right. In mid-April, S&P Global Ratings declared that there was more than $3 billion in commercial mortgage debt securities at risk of default if the company collapsed. The uncertainty made late April a complicated moment for Adam to go surfing halfway around the world. He remained in constant contact with executives back in New York, who were getting on calls with Adam in the middle of the night. But the nine-hour time difference between the Maldives and New York made things difficult.

Ghost Road: Beyond the Driverless Car
by Anthony M. Townsend
Published 15 Jun 2020

And that was after the financial crisis blew up a big part of their paper profits. The rapid expansion of moneyhandlers’ size and influence, a process that critics call financialization, has ensnared critical sectors of the material economy that for much of the twentieth century were sheltered by custom or regulation from full market pressure. Residential mortgage debt, largely unknown in America before World War II, ballooned from 15 percent of GDP in 1948 to more than 80 percent in 2018. As much as half the price of a barrel of oil is attributable to speculative trading. And in 2008, farmers produced enough food to feed the world’s population twice over, yet more people starved to death that year than ever before—victims of a systematic effort by commodities traders to manipulate markets for staples like wheat, corn, and rice.

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them
by Nouriel Roubini
Published 17 Oct 2022

Collective responses are much harder than individual ones. It can be hard even to get a decision made when policy makers disagree and squabble with one another, nationally or at the international level. As an economist, I observe risk and its consequences. In 2006 I saw stratospheric prices for houses, dangerous levels of mortgage debt, and overbuilding. New houses went begging for buyers. I warned that a historic bubble would soon burst and precipitate a global recession and financial crisis. Saying so in public venues won me no friends. Mocking critics called me Dr. Doom. They dismissed my urgent calls for caution. When events unraveled as I foresaw, culminating in the Global Financial Crisis, housing prices crashed across the United States (and other countries with housing bubbles), with worldwide reverberations for financial institutions and economies.

The End of Growth: Adapting to Our New Economic Reality
by Richard Heinberg
Published 1 Jun 2011

But demand for MBSs continued, and this helped drive down lending standards — to the point that some adjustable-rate mortgage (ARM) loans were being offered at no initial interest, or with no down payment, or to borrowers with no evidence of ability to pay, or all of the above. Bundled into MBSs, sold to pension funds and investment banks, and hedged with derivatives contracts, mortgage debt became the very fabric of the US financial system, and, increasingly, the economies of many other nations as well. By 2005 mortgage-related activities were making up 62 percent of commercial banks’ earnings, up from 33 percent in 1987. As a result, what would have been a $300 billion sub-prime mortgage crisis when the bubble inevitably burst, turned into a multi-trillion dollar catastrophe engulfing the financial systems of the US and many other countries as well.

The Irrational Economist: Making Decisions in a Dangerous World
by Erwann Michel-Kerjan and Paul Slovic
Published 5 Jan 2010

It holds that excessive consumer demand fueled by lax borrowing standards, principally in the United States, drove asset prices to high levels generally, and real estate in particular, to levels not previously seen. These bubbles then popped. And, before they popped, upward price movements first stalled in mid-2007. The timing was driven by concerns that newly incurred and poorly qualified subprime and alt-A mortgage debt would be unserviceable by borrowers without continued price appreciation or interest rate decline. As borrowers began to feel pinched and housing values began to decline, consumption naturally fell. Households needed to pay their debts, without the benefits of continuing home-price appreciation.

Good Times, Bad Times: The Welfare Myth of Them and Us
by John Hills
Published 6 Nov 2014

Overall wealth inequalities8 The inequalities in income described in Chapter 2 are put in the shade by inequalities in wealth – the level of a household’s assets (or debts).9 Wealth can be measured in different ways, depending on what is included. Sometimes the figures only allow for people’s financial assets and liabilities – their savings or debts. Or they can include physical wealth – their personal possessions such as furniture, cars, and even car number plates.10 They can include property – the value of houses and flats less any mortgage debts on them. The total of all these gives the ‘non-pension wealth’, shown in Figure 6.1 for the period from July 2010 to June 2012. It shows how much wealth households had at each percentile of the distribution – from the first percentile (below which 1 per cent of households come), up to the 99th percentile (above which comes the top 1 per cent).

The Clash of the Cultures
by John C. Bogle
Published 30 Jun 2012

Alas, as I report in this chapter, our “Gatekeepers”—the courts, the Congress, the regulatory agencies, the public accountants, the rating agencies, the security analysts, the money managers, the corporate directors, even the shareholders—largely failed in honoring their responsibilities to call out what was going on right before their eyes. The wild and risky “innovative” securities of the era, financial shenanigans by some of our largest corporations, and Congressional sanctioning of excessive mortgage debt by ill-qualified homebuyers are but a few of the myriad examples. In Chapter 3, “The Silence of the Funds,” I describe the failure of our institutional money managers—mutual fund managers and their affiliated pension fund managers, which together manage the lion’s share of our nation’s pension fund assets—to step up to the plate and exercise the rights and responsibilities of corporate governance in the interests of the fund shareholders and plan beneficiaries whom they are duty-bound to serve.

In FED We Trust: Ben Bernanke's War on the Great Panic
by David Wessel
Published 3 Aug 2009

A 2004 Fed working paper by staff economist Joshua Gallin, for instance, said that housing prices had risen 70 percent over the previous ten years while rents had risen only half as much. The strong suggestion: house prices couldn’t keep rising. Greenspan himself liked to point to a closed-door November 2002 Fed meeting in which he said the “extraordinary housing boom” and “very large increases in mortgage debt cannot continue indefinitely into the future.” (Of course, no one outside the room knew he had said that until transcripts were released five years later.) But Greenspan thought and said publicly that a nationwide bubble in housing prices was nearly impossible because housing markets — unlike, say, the market for copper — were local markets.

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

In November 2008 China had already begun printing money in the more direct form of ‘soft’ bank loans from the state-owned banks to businesses (i.e. loans that nobody expected to be repaid). Now the Fed would print $4 trillion over the next four years – buying up the stressed debts of state-backed mortgage lenders, then government bonds, then mortgage debt, to the tune of $80 billion a month. The combined impact was to flush money into the economy, via rising share prices and revived house prices, which meant that it was first flushed into the pockets of those who were already rich. Japan had pioneered the money-printing solution after its own housing bubble collapsed in 1990.

The Map That Changed the World
by Simon Winchester
Published 1 Jan 2001

The Trim Bridge offices were now gone, rented to another tenant. All that remained that he could call his own was his mortgaged home at Tucking Mill. But try as he might, it wouldn’t sell; and the owner of the mortgage, Charles Conolly of Midford Castle, was making it abundantly clear to Smith that he would not release him from the mortgage debt or buy back the house himself. It was at about this time in Smith’s life that he made what appears to have been another woefully bad decision—and that was to get married. A sensible and ordered marriage might of course have been a good thing; but from all the available evidence—and there is very little; much seems to have been destroyed, and perhaps deliberately—it seems that his union was anything but sensible and ordered.

Money: The Unauthorized Biography
by Felix Martin
Published 5 Jun 2013

It should be noted that in the ECB’s case, acceptance of such assets is as collateral under repo agreements, so that the credit risk that the central bank bears is not strictly speaking that of the financial security in question but of the bank that is taking liquidity support. Likewise, the U.S. Federal Reserve is in principle indemnified against credit losses on its holdings of mortgage debt by the U.S. Treasury. In both cases, in other words, there is in theory no credit support being granted. 26. It would be the world that James Tobin realised that the models of academic finance implied at their logical limit, in which “[t]here would be no room for discrepancies between market and natural rates of return on capital, between market valuation and reproduction cost.

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money
by Frederik Obermaier
Published 17 Jun 2016

‘I came across all the Kaupthing people in your documents as well, but they’re already locked up in prison.’ An unscrupulous elite had ruined one of the richest countries in the world in the space of just a few years – that is how most people here see it. And while ordinary Icelanders suffered as the cost of living went up, wages went down and mortgage debt soared, many of those who had brought about the crisis had long since moved their money out of the country. ‘Financial Vikings’ is the name the Icelanders still use for those risk-takers who, in their greed for ever more money, both miscalculated and enriched themselves at the same time. The Vikings were aided in this by the government at the time, which is still in power today, consisting of the Independence Party and the Progressive Party.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

Loans must be repaid out of future income, and there are good reasons why the private sector might be reluctant to increase its indebtedness at various stages of the business cycle. Remember, households and businesses are currency users, not currency issuers, so they do need to worry about how they’re going to make their payments. In the wake of the Great Recession, which was itself precipitated by a massive buildup in private (subprime mortgage) debt, it became clear that the Fed was struggling to fix the economy on its own. It had already cut the interest rate to zero, and it had embarked on a new strategy known as quantitative easing.18 It was doing everything in its power to hold things together. So, it was a frustrating moment for Fed chairman Ben Bernanke when he appeared before Congress and was grilled about why the Fed’s extreme measures didn’t seem to be doing much to help the economy recover.

The Bond King: How One Man Made a Market, Built an Empire, and Lost It All
by Mary Childs
Published 15 Mar 2022

On Closing Bell with Maria Bartiromo, they unpacked what they thought the Fed needed to do with regard to a huge and growing problem: the “government-sponsored enterprises,” or GSEs. Fannie Mae and Freddie Mac bought mortgages from the firms that lent directly to consumers. In the fall of 2008, they owned or backed more than $5 trillion worth of mortgage debt, much of it crap. They funded this by issuing debt, which the market had treated as if it were as safe as Treasuries, U.S. government debt. But the U.S. government had never made clear just how “government-sponsored” Fannie and Freddie were, and now that question was urgent. Gross and Pimco figured that if things worsened or stayed bad for Fannie and Freddie, the government would have their back.

Security Analysis
by Benjamin Graham and David Dodd
Published 1 Jan 1962

But an extensive business has also been transacted by mortgage companies (e.g., Lawyers Mortgage Company, Title Guarantee and Trust Company) in guaranteed mortgages and mortgage-participation certificates, secured on such dwellings.6 Where investments of this kind are made, the lender should be certain: (a) that the amount of the loan is not over 66% of the value of the property, as shown either by actual recent cost or by the amount which an experienced real estate man would consider a fair price to pay for the property; and (b) that this cost or fair price does not reflect recent speculative inflation and does not greatly exceed the price levels existing for a long period previously. If so, a proper reduction must be made in the maximum relation of the amount of mortgage debt to the current value. The more usual real estate mortgage bond represents a participation in a first mortgage on a new apartment house or office building. In considering such offerings the investor should ignore the conventional “appraised values” submitted and demand that the actual cost, fairly presented, should exceed the amount of the bond issue by at least 50%.

…

The result was the establishment of a price of 101 for the notes in August 1933 against a coincident price of 21 for the common stock; and a price of 15 for the stock on November 1, 1933, when the notes were taken care of at par. The impending maturity of a bond issue is of importance to the holders of all the company’s securities, including mortgage debt ranking ahead of the maturing issue. For even the prior bonds will in all likelihood be seriously affected if the company is unable to take care of the junior issue. This point is illustrated in striking fashion by the Fisk Rubber Company First Mortgage 8s, due 1941. Although they were deemed to be superior in their position to the 5½% unsecured notes, their holders suffered grievously from the receivership occasioned by the maturity of the 5½s.

The Four Pillars of Investing: Lessons for Building a Winning Portfolio
by William J. Bernstein
Published 26 Apr 2002

Because the attorney “must” drive a nicer car, live in a nicer part of town, buy more expensive clothes, and take more exotic vacations than the plumber. The message is obvious. The easiest way to get rich is to spend as little as possible. Other Goals This book is not intended as a financial planning guide; topics such as mortgages, debt management, insurance, and estate planning are well beyond its brief. But there are a few financial planning topics pertaining to basic portfolio mechanics and financial theory that are worth mentioning: Emergencies. This falls under the mantra of the financial planner: “five years, five years, five years.”

Hard Times: The Divisive Toll of the Economic Slump
by Tom Clark and Anthony Heath
Published 23 Jun 2014

In the appraisal of Nobel Laureate Joseph Stiglitz, American banks engaged not merely in reckless lending, but in ‘predatory lending, taking advantage of the least-educated and financially unsophisticated … by selling them costly mortgages and hiding details of the fees in the fine print’.43 The results of the same sort of practices are now evident in Britain as well, where, Sir John Hills’ thorough new review of the evidence asserts: ‘All the sources agree that a quarter or more of households have no, or negative, net financial assets.’ His own analysis suggests that by 2005, the poorest tenth had non-mortgage debt exceeding £6,000, tripling (in real terms) the figure of £1,900 that had applied just a decade before.44 We will return to the long post-bust shadow cast by boom-time lending in Chapter 7. But even during the so-called ‘good times’, the burden of simply maintaining such substantial debt eats into the notionally ‘disposable’ income of many a poor family, such as the disabled and unwaged couple we spoke to in Luton, ‘Stephanie’ and ‘Martin’.

The Global Money Markets
by Frank J. Fabozzi , Steven V. Mann and Moorad Choudhry
Published 14 Jul 2002

However, some policies are written so that the dollar amount of coverage declines as the pool seasons as long as two conditions are met: (1) the credit performance is better than expected and (2) the rating agencies that rated the issue approve. Since only defaults and foreclosures are covered, additional insurance must be obtained to cover losses resulting from bankruptcy (i.e., court mandated modification of mortgage debt—“cramdown”), fraud arising in the origination process, and special hazards (i.e., losses resulting from events not covered by a standard homeowner’s insurance policy). Bond insurance provides the same function as in municipal bond structures. The major insurers are AMBAC, MBIA, FSA, and FGIC. A nonagency CMO with external credit support is subject to the credit risk of the third-party guarantor.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

This relationship between debt and the real estate industry is particularly important, for when we analyse any developed or developing nation, we always see a pattern of economic disasters being preceded by large increases in household debt (Sufi & Mian, 2016). This phenomenon occurs because of the underlying inequality between borrowers and savers. Most savers have financial assets and little mortgage debt while most borrowers have a low net worth which is why they need to borrow to invest in housing. This is why the vast majority of lending for the purchase of real estate is highly skewed towards the acquisition of already existing assets instead of funding new commercial or housing real estate (Dorling, 2014).

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
by Sheelah Kolhatkar
Published 7 Feb 2017

Horvath had been at SAC for only a few months when, in early 2007, there were stirrings of trouble in the economy. Real estate values across the country had started to decline and mortgage delinquencies were spiking, imperiling the banks and other investors that had bought up large amounts of mortgage debt on the assumption that housing prices could only go up. Most investors chose to ignore the signs of impending disaster, however. Rather, they were acknowledged only by those who were open to the possibility that their rapid accumulations of wealth hadn’t made them infallibly brilliant. In May, two hedge funds owned by Bear Stearns that were heavily invested in subprime mortgage bonds started to plummet in value.

Prosperity Without Growth: Foundations for the Economy of Tomorrow
by Tim Jackson
Published 8 Dec 2016

In 1999, less than a decade before the crisis, the Gramm-Leach-Bliley Act overturned this separation. Realising that this put deposits at risk, governments began to introduce deposit guarantees. But this simply led to ‘moral hazard’ – the separation of risk from reward – and encouraged even more speculative behaviour. Securitisation of mortgage debts – another key element in the invisibility of subprime mortgage risk – compounded these risks. And securitisation was championed at the highest level, spearheaded by Alan Greenspan, former chairman of the Federal Reserve. In The Age of Turbulence, Greenspan defends the practice explicitly, arguing that ‘transferring risk away from… highly leveraged loan originators can be critical for economic stability, especially in a global environment.’28 In testimony to US Congress, Greenspan admitted to being ‘shocked’ that markets hadn’t worked as expected.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

In turn, the level of bank capital relative to regulatory levels can be an important determinant of a bank’s cost of financing. But banks’ capital positions also tend to be strongly pro-cyclical since assets tend to increase in value in a boom and fall in a recession. This further enhances the potential potency of the financial accelerator, observed in the large build-up of mortgage debt and high leverage of the financial sector in the run-up to the financial crisis. It also means that in the aftermath of a financial crisis, where the banking system finds itself overleveraged, burdened with non-performing loans and insufficient capital, there can be a sharp drop in the flow of credit to the economy.

Luxury Fever: Why Money Fails to Satisfy in an Era of Excess
by Robert H. Frank
Published 15 Jan 1999

Fewer than 5 percent of families earning more than $50,000 are burdened to that extent by credit-card debt.3 Overall, credit-card debt as a percentage of household disposable income is up 60 percent since 1989.4 Total household debt grew from 56 percent of disposable personal income in 1983 to 81 percent by the beginning of 1995, at which point home mortgage debt stood at $3.15 trillion and consumer installment credit was more than $900 billion.5 At prevailing credit-card interest rates, that translates into more than $100 billion a year in credit-card interest alone. Much of this increased consumer debt has been facilitated by a proliferation of bank credit offerings.

Everyday Utopia: What 2,000 Years of Wild Experiments Can Teach Us About the Good Life
by Kristen R. Ghodsee
Published 16 May 2023

The initiation fees and the interest payments were the price of borrowing the money I needed to buy the house, and the bank held partial ownership in that house as collateral. But within less than a month, my bank had sold my mortgage to another bank. That bank then sold my mortgage to a third bank. For the first time, I understood that my mortgage debt was a valuable commodity. As long as I made my payments, the bank that owned it would earn a lot of money from me. Here’s how it works. Let’s say a single-family house costs $300,000. A rich person can pay $300,000 in cash, but (as discussed above) a poorer person will need to borrow money from a bank.

The Wrecking Crew: How Conservatives Rule
by Thomas Frank
Published 5 Aug 2008

Such was his dedication to deregulation that he once posed for photographers with a group of banking industry lobbyists holding a chain saw to a pile of rule books and red tape.5 Like so many other Bush-era agencies, the OTS referred to the industry it oversaw as its “customers,” and it treated them with the sort of leniency one associates with such an attitude. One example, from many: In mid-2008, OTS permitted IndyMac Bank, which would soon be dragged under by bad mortgage debt, to alter its records to avoid the appearance of crisis. Thanks to the diffuse nature of bank regulating—there are several over-lapping federal agencies from which a financial institution was permitted to choose—decisions like this made OTS a hot item, a big winner in the resulting “competition in laxity,” as banks rushed to sign up for OTS supervision.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

The USA and Europe have markedly different savings cultures, the result of differences in history and in the structure of intermediating institutions. In Britain, France and Germany investment in housing (net of mortgages) accounts for about 40 per cent of household wealth. The US figure is lower, reflecting in part the lower level of house prices and the tax deductibility of interest but also a higher level of mortgage debt relative to property values, a legacy of the indiscriminate lending that preceded the global financial crisis. The USA is the only country in which direct holdings of securities by individuals form a large proportion of household assets; in the other three countries, most long-term savings are channelled through intermediaries.

The Great Divide: Unequal Societies and What We Can Do About Them
by Joseph E. Stiglitz
Published 15 Mar 2015

While the Obama administration’s housing policies have fallen short, Mitt Romney hasn’t offered any meaningful new proposals to aid distressed or underwater homeowners. Late last month, the top regulator overseeing Fannie Mae and Freddie Mac blocked a plan backed by the Obama administration to let the companies forgive some of the mortgage debt owed by stressed homeowners. While half a million homeowners could be helped with a principal writedown, the regulator, Edward J. DeMarco, argued (we believe incorrectly) that helping some homeowners might cause others who are paying on their loans to stop so that they also could get their mortgages reduced.

Financial Freedom: A Proven Path to All the Money You Will Ever Need
by Grant Sabatier
Published 5 Feb 2019

Just like buying and holding stock for the long term, buying and holding real estate is a more effective strategy than flipping to help you reach financial independence faster, since you can build up a portfolio that generates consistent monthly cash flow through rental income that can cover your mortgage debt and monthly expenses, as well as have a portfolio of assets that will also appreciate over time. You can’t get that with stocks. You can also deduct most of the interest and many of the expenses of owning rental properties, making things like upgrades, repairs, and management expenses tax deductible.

Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier
by Edward L. Glaeser
Published 1 Jan 2011

An antiurban bias is even more obvious in housing and transportation policy, which seems almost intentionally designed to hurt the cities that enrich their countries and the entire world. The centerpiece of federal housing policy is the home mortgage interest deduction, which allows home owners to deduct from their taxes the interest on up to a million dollars of mortgage debt. Because more than 60 percent of Americans are home owners, this policy has become politically inviolate, but it is deeply flawed. The home mortgage interest deduction is a sacred cow in need of a good stockyard. It encourages Americans to leverage themselves to the hilt to bet on housing, which looks particularly foolish in the wake of the great housing bust of 2006-2008.

No Slack: The Financial Lives of Low-Income Americans
by Michael S. Barr
Published 20 Mar 2012

There are some differences between filers and nonfilers in the distribution and average amounts of their debts. Overall, filers are more likely to have some form of debt and have more sources of debt. Filers are 9 percentage points more likely to hold credit-card debt, 4 percentage points more likely to have mortgage debt, and over 10 percentage points more likely to have outstanding student loans. Medical bills are 7 percentage points more prevalent among filers than nonfilers. Among filers, the median level of indebtedness is $11,500, while for nonfilers, it is far lower, at $3,000. We make no causal claims about these findings on indebtedness.

Selfie: How We Became So Self-Obsessed and What It's Doing to Us
by Will Storr
Published 14 Jun 2017

This wave of deregulation brought into being the highly unstable derivatives market that was made up, in the words of superstar investor Warren Buffett, of ‘financial weapons of mass destruction’. From a starting position of almost nothing, those weapons of mass destruction quickly became a $531tn industry. Whilst all this was happening, the low interest rates that were another of Greenspan’s preoccupations enabled millions of cash-strapped people to take on irresponsible levels of mortgage debt. In 2004 he was hailing the ‘resilience’ of the financial system; in April 2005, he voiced his approval of the new and thriving ‘subprime mortgage market’. ‘Where once more-marginal applicants would simply have been denied credit,’ he said, ‘lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately.’

Keynes Hayek: The Clash That Defined Modern Economics
by Nicholas Wapshott
Published 10 Oct 2011

Bush’s stimulus package was accompanied by a basket of actions by Ben Bernanke, who succeeded Greenspan as chairman of the Fed, to encourage banks to resume lending. Interest rates were halved between September 2007 and April 2008, huge short-term loans were made to banks, and the Fed bought bad mortgage debt. In March 2008, Bear Stearns, a leader in subprime mortgage lending, was sold in a fire sale to JPMorgan Chase. The following September, Lehman Brothers went bankrupt. Neither collapse was popular, not even among those who professed to believe the market should take its course. On the contrary, the most common criticism was that the administration had “allowed” Lehman to stop trading.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

The $13.5 trillion increase in debt amounted to about $43,000 for every person in the country, including children and senior citizens, or about $128,000 for each household. By 2006, the country’s total indebtedness amounted to 350 percent of GDP—see Figure 17.1. Most accounts of the credit crunch have focused on the rapid growth in mortgage debt, especially subprime loans, but the rise in mortgage lending was just part of a much larger credit boom. Of the overall rise in indebtedness between 2002 and 2006, households were responsible for about a third—some $4.4 trillion—and that figure includes all types of household debt, not just mortgages and home equity loans.

The Euro: How a Common Currency Threatens the Future of Europe
by Joseph E. Stiglitz and Alex Hyde-White
Published 24 Oct 2016

A super–Chapter 11 might enable firms with excessive debts issued in foreign denomination under foreign jurisdiction to have a quick and fresh start. This might be facilitated by laws allowing easy asset restructurings—for example, a family with a foreign-denominated mortgage on its home issued in a foreign jurisdiction could treat its home as if it were a separate incorporated subsidiary, converting the mortgage debt into equity in the home but without forcing the individual into full bankruptcy. Similarly, this could be done for corporations. Given the increasing litigious nature of Western society, all of this is likely to be messy, but it is still less onerous than the current depression. 30 In any debt restructuring/bankruptcy, there is a provision called “lending in arrears,” which allows those who lend to the entity after the restructuring process begins to get paid back in full, before other claimants are paid back in part.

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined
by Lasse Heje Pedersen
Published 12 Apr 2015

We brought in Blackstone as a partner and wound up buying the company out of bankruptcy by paying off all the creditors for $3.9 billion in cash, down more than 50% from what their company traded for two years before. As part of this structure, we put up $500 million, Centerbridge put up $500 million, and Blackstone put in $500 million. Together we put in $1.5 billion of equity and then raised $2.4 billion of first mortgage debt. So we had the $3.9 billion, and we bought Extended Stay, a 50% discount to the price paid three years before. We did some management changes, some restructuring, but basically, as the economy recovered, the earnings went up. Now Extended Stay is back to the level of profitability it was before, making roughly $600 million in profits.

Financial Independence
by John J. Vento
Published 31 Mar 2013

See also Bad debt; Credit card debt; Good debt; Good debt vs. bad debt Debt forgiveness, 95, 97 Debt management action plan for, 98 bankruptcy case study, 67–71 basic principles, 71–73 case study, 67–71 credit, 87–89 credit card debt control, 79–80 credit problems, 87–88 credit report and credit score, 89–93 debt analysis, 94–97 financial responsibilities, 71–72 good debt vs. bad debt, 73–74 house ownership, 83–84 identity theft, 93–94 learn to say no, 72–73 living within one’s means, 72 mortgage debt, 84–85 mortgage refinancing, 85–86 pay yourself first (practice), 72 professional conduct, 85–86 retail therapy, 5 tax facts and strategies for, 96–97 wants vs. needs, 72 Debt management, by loans auto loans, 80–81 borrow against 401K, 78 borrow against life insurance, 78 borrow from family and friends, 78 business and investment loans, 86–87 home equity loan, 77–78 home mortgage loans, 82–83 student loans, 81–82 Debt payments completion, 59 monthly, 83 Decreasing term insurance, 125 Deductible levels, 138 Deductible period, 117 Deferred annuity, 210 Dining out, 55 Disability, 118, 120 26/02/13 2:49 PM Index 345 Disability insurance health insurance, 118–122 long term, 121–122 Social Security disability benefits, 119–121 Disability insurance policy, 131–132 Diversification, 191, 202 Dividends on life insurance policies, 130 Down payments, 84 Drug industry fee, 109 property ownership and transferal, 262–265 tax facts and strategies for, 281–283 tax planning and life insurance, 278–281 trust creation, 265–277 trusts, 260–261 wills, 258–260 Expected entitlements, 2 Expected family contribution, 175 Experian, 89–91 Earned income credit, 64 Education of children, 60.

The Meat Racket: The Secret Takeover of America's Food Business
by Christopher Leonard
Published 18 Feb 2014

By 1998, the business was dominated by operations like Wirtz’s. Smaller hog farms were replaced by expensive, confinement operations holding several thousand pigs. The infrastructure was expensive, the costs were fixed, and producers didn’t have the choice just to back out of the market when prices were low. They had big mortgage debts and utility bills to pay. Modern hog barns had to be filled, almost regardless of the price hogs commanded on the market. The scale of the industry demanded it. So when prices started to fall in 1998, the supply stayed rigidly high. The industrial machine couldn’t slow down. By the end of 1998, the price of hogs fell to 10 cents a pound, lower than they had been during the Depression.

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants
by Maurice E. Stucke and Ariel Ezrachi
Published 14 May 2020

As the Financial Crisis Inquiry Commission, which was created in 2009 to examine the causes of the economic crisis, reported, Greenspan and the other regulators “ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.”19 Among the red flags they failed to see were “risky subprime lending and securitization, an unsustainable rise in housing prices, widespread reports of egregious and predatory lending practices, dramatic increases in household mortgage debt, and exponential growth in financial firms’ trading activities, unregulated derivatives, and short-term ‘repo’ lending markets.” In paraphrasing Shakespeare, the Commission noted that “the fault lies not in the stars, but in us”—namely our policy makers. When it all came crashing down, the former Fed Chair Greenspan admitted making a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions.20 “A critical pillar to market competition and free markets did break down,” Greenspan said.

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies
by Jeremy Siegel
Published 7 Jan 2014

Deflation worsens a business cycle, since a fall in wages and prices increases the burden of debt, which increases in real value as prices decline. Consumers were already burdened by record debt levels in 2007 before the financial crisis. Had wages and prices fallen as they did in the Great Depression, the burden of consumer and mortgage debt would have been more than one-third larger in real terms, greatly increasing the number of insolvencies.4 That is the reason that stabilization of the price level was a priority for the Federal Reserve and is a major reason why consumer and business spending did not decline as much in the 2007-2009 recession compared with what happened in the 1930s.5 The Federal Reserve was able to avoid deflation by stabilizing the money supply.

The Streets Were Paved With Gold
by Ken Auletta
Published 14 Jul 1980

“As a consequence,” UDC Chairman Richard Ravitch wrote Governor Carey, in a confidential January, 1977, report, “the successive Housing and Development Administrators were free, as a practical matter, to impose rent increases in amounts they decided should be imposed regardless of the fact that mortgage debt service defaults had to inevitably result from the low increases.… The result in the overall has been that without legislative authorization, the City’s program has been transformed into a partial direct subsidy program, although the continuing and increasing shift of costs of the program from the City Mitchell-Lama tenants to City taxpayers has not been publicly acknowledged as deliberate City social policy and is only dimly perceived by the public.”

The Future Is Asian
by Parag Khanna
Published 5 Feb 2019

For decades, most Asian nations (with the notable exception of Japan) lacked sufficiently mature financial markets to absorb the region’s enormous savings, which were instead recycled into London and New York. But the financial crisis laid bare how much US banks rely on financial engineering rather than underlying fundamentals to generate growth. For their part, Europeans feel burned by their purchases of US subprime mortgage debt and are less inclined to borrow short-term US dollars only to recycle them back into US consumer debt, plus they still need to worry about their own banking sector’s solvency. Asian economies have managed to ride out the past decade of Western financial volatility and rising US interest rates.

When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm
by Walt Bogdanich and Michael Forsythe
Published 3 Oct 2022

Trillions of those dollars would soon disappear. Weeks after Schumer and Bloomberg spoke at city hall, the unraveling became very public with the bankruptcy of New Century Financial, a subprime lender, followed in July 2007 by the collapse of two Bear Stearns hedge funds that invested in securitized mortgage debt. By the following March, Bear Stearns, America’s fifth-biggest investment bank, was absorbed by J. P. Morgan in a government-brokered fire sale. But the dam really broke in September when Lehman Brothers and Washington Mutual declared bankruptcy. The federal government had to bail out AIG—swamped with billions of dollars of claims for the “credit enhancements” that it couldn’t pay—to the tune of $182 billion.

Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least
by Antti Ilmanen
Published 24 Feb 2022

With strict definitions of what is investable, the US may be half of the market, but with looser definitions “only” 39%.14 Fixed income markets are larger in nominal size than equity markets (though the higher volatility makes equities the more dominant drivers of most portfolios' risk and return). They are even larger if money markets, municipal debt, mortgage debt, and bank loans are included in the definition. Instead of $120 trn, the market size might be over $200 trn. However, some argue that debt does not count as net wealth at all but is a zero-sum side deal between a borrower and a lender. The US share of bond markets may be near 40%, or less if Chinese debt is counted at almost the same size, again depending on definitions.

No Such Thing as Society
by Andy McSmith
Published 19 Nov 2010

Up to the mid-1980s, no one could increase their mortgage unless they demonstrated that they were using the extra borrowed money to increase the value of their home. A building society would lend to someone who wanted a new kitchen, but someone who wanted a new car had to take a short-term loan from a finance company, at a higher rate of interest. Suddenly, that discipline evaporated, and people happily added to their mortgage debt to pay for consumer spending. And why not? In 1988 alone, according to the Nationwide House Price Index, the price of the average property went up by a third. So if you bought a £60,000 house in January 1988, by the following January, you were in a property worth £80,000. Why leave that £20,000 of extra equity doing nothing when it could be improving your standard of living?

Wealth and Poverty: A New Edition for the Twenty-First Century
by George Gilder
Published 30 Apr 1981

The National Mortgage Association and the Federal Home Loan Bank—agencies not even on the federal budget—were channeling close to $30 billion into shelters by the end of the decade, selling mortgage-backed securities to private investors, using the proceeds to finance new mortgages, either directly or through savings and loan associations, and then later purchasing the new mortgages to finance the issue of yet new securities to back a further expansion of mortgage debt, all in a spiral that relies finally on the authority of Treasury guarantees. New credit laws that require counting thirty years of income not only from the husband but also from the wife further stimulated the expansion. It was not chiefly an expression of demand or population growth. The intensification of government support for housing in the seventies came after two decades when the United States was already spending eight times more of its capital on housing than countries in Western Europe and three times more than Japan, which had undergone far faster population growth.

Why We Can't Afford the Rich
by Andrew Sayer
Published 6 Nov 2014

Their smug self-congratulation might occasionally be tinged with embarrassment, in faint recognition that this was a matter of luck, but then, as successful people, they felt they deserved it anyway. An inflated sense of entitlement is a common vice of the better-off. Increasingly, homeowners are encouraged to see their houses not merely as homes but as ‘investments’, indeed they may even think of their mortgage debt as an investment! Some may see it as a step towards becoming rentiers in their own right. But why should anyone expect the price of a house to rise even when nothing has been done to it? When you buy a second-hand car or bike you expect to pay less than the original price. Why doesn’t the same apply to housing?

The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders
by Connie Bruck
Published 1 Jun 1989

Moreover, the gaming industry was essentially without investment-banking services because no other firm wanted the taint and gaming was not considered a growth industry at the time; if Drexel could overcome its queasiness, it could probably have the whole industry. And besides—Milken wanted it. Over the next two years, Drexel raised not $125 million but $160 million for Wynn’s idea. The capital came largely from mortgage debt, with some subordinated debt and small equity offerings—so Wynn’s ownership stake, roughly 20 percent, was barely diluted. And six years later Wynn’s $2 million stake would be worth about $75 million and he would sell the Atlantic City casino for $440 million. It would turn out to be, as one corporate-finance professional who worked on the deal says, a “grand-slam home run.”

The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History
by Kirsten Grind
Published 11 Jun 2012

Tuesday, September 16 NET CHANGE IN WAMU’S DEPOSIT BALANCE: -$2.4 BILLION From the local news: “I’m in front of WaMu’s headquarters in Seattle… Lehman Brothers filed for bankruptcy yesterday, causing a huge slide for the Dow. What company will be next? Will that list include WaMu? WaMu has the same problem Lehman Brothers had—billions of dollars in bad mortgage debt.” At the FDIC’s headquarters in Washington, Fishman and John Robinson, WaMu’s head of regulatory relations, sat across a conference table from Bair and one of her deputies. This was the first time Fishman had met Bair, and he had scheduled this time with her as a meet-and-greet. He was, after all, the new chief executive of WaMu.

If Mayors Ruled the World: Dysfunctional Nations, Rising Cities
by Benjamin R. Barber
Published 5 Nov 2013

What should be common city assets become zero-sum games in which one (rich) man’s redevelopment plan spells another (poor) man’s loss of center-city housing; in which a wealthy woman’s riverside playground is housed in former manufacturing warehouses from which poor women’s sewing jobs have fled. Too often, city corruption is defined in ways that exempt white-collar criminality (bank redlining to enforce segregation, for example, or bundling and reselling mortgage debt to distant investors insulated from responsibility to borrowers), even as it highlights activities of the poor that, while illegal, might ease their plight, if only temporarily (like the numbers game). Inequality comes in many forms, and—appropriately in this era of interdependence—these forms are intimately linked.

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era
by Gary Gerstle
Published 14 Oct 2022

Between 2007 and 2009, US households lost somewhere between $11 and $20 trillion in net worth, an aggregate figure encompassing declines in the value of household real estate, stocks, and pensions.74 By 2011, more than 25 percent of the nation’s 45 million mortgages in America were under water—meaning that mortgage debt was greater than a home’s market value. The median household lost half of its wealth between 2007 and 2010. The loss of wealth spread unevenly through the population. The poor suffered more than the rich, the young more than the old, and people of color more than whites. While median white household net worth declined 16 percent between 2005 and 2009, median black household net worth fell by more than half (53 percent), and median Latino household net worth by nearly two-thirds.

Bill Marriott: Success Is Never Final--His Life and the Decisions That Built a Hotel Empire
by Dale van Atta
Published 14 Aug 2019

Since Marriott was considered the gold standard, the company was able to continue selling restructured limited partnerships (LPs) until 1990. Without the tax benefit, Marriott had to guarantee investors a cash return. New hotels take several years to turn a good profit, so Marriott offered to forego some of its management fees and even to loan investors (as a second mortgage) enough to service mortgage debt if the hotel profits lagged. With the new LP structuring, Marriott sold a phenomenal $1.4 billion of its hotel properties in the first eighteen months after the tax law changed. Around the same time, new light emerged from the Land of the Rising Sun. Japan was in the middle of a financial boom that had its bankers looking for American real estate and companies to buy.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

It does not come as news that the working class has been lumbered with all manner of debt in the last three decades as one effective way to divert attention from flat personal income receipts, not to mention to otherwise soften the blow of a steadily worsening distribution of income in the United States, Britain, and the peripheral EU states. The standard sales pitch that promoted this trend was the stereotypic neoliberal exhortation to joyfully embrace risk through assumption of loans in order to transform the self in a more market-friendly direction, be it through student loans, credit card debt, mortgage debt, or more exotic arrangements. But while all the little entrepreneurs were assiduously busy striving to morph into Galateas exquisitely engineered to succeed without really trying, special panopticons had to be erected to maintain actuarial notions of class membership and fixed identity. Credit proliferation required concerted management; liabilities had to be recurrently affixed to a vigorous continuous human identity; and an augmented scale of loan activity required further standardization of the entities that would be granted this credit.

Owning the Earth: The Transforming History of Land Ownership
by Andro Linklater
Published 12 Nov 2013

Instead of being choked off by a rise in the cost of borrowing, mortgage lending remained buoyant, house values continued to climb, the consumer economy kept on expanding, and derivatives were still created, albeit with an ever-increasing proportion—it grew from 4 to 15 percent—of risky, or subprime, loans. In 2007, the accompanying exponential growth in derivative dealings, mortgage debt, foreign exchange, and insurance topped out at almost six hundred trillion dollars, and the sheer size of the financial colossus obscured the fact that most of it ultimately depended upon property. Only when the subprime mortgage market began to disintegrate in the summer of 2007 did the narrow basis of the boom become starkly apparent.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

By 2006, more than a fifth of all new mortgages – some $600 million worth – were sub-prime. And a third of these sub-prime loans were for 100 per cent or more of the home value, and six times the annual earnings of the borrower. In the UK, a large housing bubble was also inflating. By the end of 2007, mortgage debt reached 132 per cent of disposable income, with overall household debt reaching 177 per cent. 304 di s t r i bu t ion a s a m ac roe c onom ic p robl e m In February 2008, just before the US economy collapsed, Palley wrote that ‘the US economy relies upon asset price inflation and rising indebtedness to fuel growth.

Slouching Towards Utopia: An Economic History of the Twentieth Century
by J. Bradford Delong
Published 6 Apr 2020

And that is why the Great Recession of 2007–2009 came as such a surprise. In March 2008 I myself had reasoned that the problem was manageable.22 Perhaps five million houses had been built in the desert between Los Angeles and Albuquerque that should never have been built. On average, each carried $100,000 in mortgage debt that would never be paid and that somebody would have to eat. So, I figured, there was a $500 billion financial loss from the housing crash that holders of financial securities would have to bear, one way or another. But, the dot-com crash involved an even greater financial loss—and the dot-com crash only pushed unemployment up by about 1.5 percent.

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles
by Michael Gross
Published 1 Nov 2011

But he was also obsessed with keeping up appearances, and that meant keeping his Holy Grail, Grayhall, though it became a dead weight dragging him down even faster. In February 1986, Cornfeld’s Grayhall Inc., which owned the estate, borrowed $206,000 from a friend, Howard Mann, a New York City precious metals dealer, secured by the house, to help Cornfeld pay his mortgage debt and forestall a foreclosure from the bank. For the next sixteen months, Bernie and his lawyers maneuvered frantically to keep him in the house. That fall, Grayhall Inc. filed for voluntary bankruptcy and made a deal to repay the mortgage bank. Cornfeld, Mann, and Powers agreed to pay down the debt together and in exchange, Cornfeld signed a document he would later claim was coerced, promising Powers an additional $100,000 on the sale of the house—it was finally on the market for $9 million—in exchange for his $30,000 contribution to the debt service.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

In the United Kingdom, the cost to the taxpayer of various measures to support banks has been estimated at £124 billion,51 although the government’s total exposure to the banking system has sometimes reached a figure ten times higher. Those costs include the purchase of preference shares, making the U.K. taxpayer a major shareholder in a number of these banks. In the United States, loans were advanced to banks worth $45 billion, a bridge loan to AIG worth $44 billion, asset purchases valued at $39 billion, mortgage debt purchases totaling $930 billion, loan programs worth $450 billion, and a liquidity guarantee program worth around $300 billion. Some of this outlay will be recouped as loans are repaid, shares gain in value, and assets are sold. Although the remaining, and arguably greater, indirect costs of the crisis are ongoing and difficult to estimate, it seems likely that the monetary system, primarily through its connections with debt, will play a central role in their unraveling.

740 Park: The Story of the World's Richest Apartment Building
by Michael Gross
Published 18 Dec 2007

In 1932, defaults began and soon there was a flood of foreclosures, with valuable properties going for a fraction of their previous worth.” David Milton, the husband of John D. Rockefeller’s sister Abby, known as “Babs,” acquired Rosario Candela’s 778 Park with a partner in April 1931 after its mortgage bank seized it in mid-construction and it stood unfinished for nine months. After bidding $2,000 more than the mortgage debt of $2.1 million to get it, Milton (who’d previously built 1 Beekman Place on land owned by Bayard Hoppin, with a mortgage issued by Milton’s brother-in-law Junior) negotiated a reduction of 778’s mortgage and reduced the asking prices of apartments there. It was one of three big Park co-ops that had suffered a sales slump that year.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

Meanwhile, the S&P 500 index rose by 189 percent, and technology giants soared. Apple was up 928 percent. Sequoia and other venture boutiques were the winners from this shake-up. During the first decade of the twentieth-first century, investors had responded to low interest rates by reaching for yield the Wall Street way: they had loaded up on subprime mortgage debt, which paid a few percentage points above the normal interest rate. When this strategy ended in disaster in 2007–2008, investors reached for yield the Valley way: they bet on private tech companies. As with the subprime wagers, the idea was to take extra risk for extra reward. But unlike the subprime wagers, tech bets had a chance of generating durable profits.

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
by William D. Cohan
Published 15 Nov 2009

“It will temporarily allow these banks to use crappy [mortgage-backed securities] as temporary collateral, but eventually these will have to be written down. I think this is just an attempt to cause markets to go down gradually, versus a huge crash.” And then “Clear Skys Ahead” wrote with an acid pen, “Now that the Fed is lending to primary dealers and accepting unimpeachable items, such as mortgage debt, as collateral things can get back to normal. Now what exactly do we do when the collateral turns out to be worth less than the loan? Thank goodness everyone woke up and realized that unless the taxpayers were the ones ultimately stuck with the bill, Wall Street couldn't rally! Let the party resume at least until sanity takes hold.”

The Half Has Never Been Told: Slavery and the Making of American Capitalism
by Edward E. Baptist
Published 24 Oct 2016

But he soon discovered that he had no choice but to try to collect himself the immense quantities of debt that individual Mississippians owed to their Planters’ Bank, which in turn it owed to the B.U.S.P.51 “The condition of the people in their pecuniary concerns,” Roberts soon learned, was impossibly tangled: “Even mortgage[-secured] debts are quite uncertain, the slaves which make mortgaged debts most safe, are frequently removed and disposed of beyond our reach.” The mortgage for a piece of land was recorded at the Woodville courthouse, he was told. Or maybe it was recorded in Natchez. Or was it Yazoo City? “‘Tis all design!” Roberts exploded, exasperated at run-arounds that circled other run-arounds.

Capital in the Twenty-First Century
by Thomas Piketty
Published 10 Mar 2014

It would make sense to tax net wealth below 200,000 euros at 0.1 percent and net wealth between 200,000 and 1 million euros at 0.5 percent. This would replace the property tax, which in most countries is tantamount to a wealth tax on the propertied middle class. The new system would be both more just and more efficient, because it targets all assets (not only real estate) and relies on transparent data and market values net of mortgage debt.28 To a large extent a tax of this sort could be readily implemented by individual countries acting alone. Note that there is no reason why the tax rate on fortunes above 5 million euros should be limited to 2 percent. Since the real returns on the largest fortunes in Europe and around the world are 6 to 7 percent or more, it would not be excessive to tax fortunes above 100 million or 1 billion euros at rates well above 2 percent.

Money and Power: How Goldman Sachs Came to Rule the World
by William D. Cohan
Published 11 Apr 2011

“The individuals do sometimes, but while it requires the utmost humility from us in response[,] I feel very strongly it binds clients even closer to the firm, because the alternative of [‘]take ur money to a firm who is an under performer and not the best,[’] just isn’t reasonable. Clients ultimately believe association with the best is good for them in the long run.” Needless to say, Blankfein did not respond to Kraus. —— ON OCTOBER 11, Moody’s—one of the three large bond-rating agencies—downgraded $32 billion of publicly traded mortgage debt that had been originally issued in 2006, the second large and sweeping ratings downgrade by Moody’s in six weeks. Swenson shared the news with Montag and Mullen. “This will eventually filter into downgrades in CDOs,” he wrote, adding that one of the ABX indexes sold off “by a point” after the news, meaning more profits for Goldman.

Before the Storm: Barry Goldwater and the Unmaking of the American Consensus
by Rick Perlstein
Published 17 Mar 2009

Men who got a taste of the Sunshine State as Pacific Theater veterans flocked back after the war to settle there with their families; all you had to do was visit a real estate office at the edge of some former citrus grove, point to a site on a tract map, and lay down a $200 down payment (less if you were a veteran), and you’d bought yourself a house. But with mortgage debt a constant, silent presence, the new homesteaders were not keen on squandering their precious salaries, their only assets, on high taxes to help out the other guy. In 1959 Orange County congressman James Utt reintroduced an effort to add a “Liberty Amendment” to the Constitution—which would repeal all federal income, estate, and gift taxes and ban all government enterprises that competed with the private sector.

Power at Ground Zero: Politics, Money, and the Remaking of Lower Manhattan
by Lynne B. Sagalyn
Published 8 Sep 2016

Silverstein began construction on the speculative office tower in October 2003, after construction of the urgently needed ConEdison electrical substation destroyed on 9/11 was complete. He had gone ahead with 7 World Trade before many of the legal agreements and economic issues with his creditors holding the mortgage debt had been firmly resolved.38 The developer’s leasing agents began listing space for rent in fall 2003, but almost two years later, “Larry Silverstein’s 52-Story Vacancy Problem” was a feature story in New York Magazine. Silverstein’s “stubborn insistence” on asking for rents that were substantially above what was typical in the downtown market was putting the “whole site at risk,” was how Crain’s described the situation in early May.39 By year end 2005, Silverstein still hadn’t found any major tenants willing to pay his asking rents of $50 to $55 per square foot—easily the highest prices in downtown.

Global Crisis: War, Climate Change and Catastrophe in the Seventeenth Century
by Geoffrey Parker
Published 29 Apr 2013

The rebels entitled their political anthem ‘The new song of William Tell, made in the Entlebuch in 1653’.82 Finally, the valley possessed a considerable measure of political and religious autonomy, a cadre of experienced and respected leaders and a well-developed communications network that facilitated rapid mobilization. On 26 February 1653 a gathering of peasants from all over the region approved a manifesto drafted by Hans Emmenegger that blamed their desperate situation on a synergy of human and natural factors: The common farmer can scarcely hold on to his house and home, let alone pay his mortgage, debts and interest on them, or support his wife and children … Drought or the loss of horses or cattle has forced people to leave their houses and homes, to give up their property and to move to a distant place to make their living. Later that day, the assembled peasants swore to oppose the policies imposed on them by the authorities in Luzern.