The Great Mortgaging

Òscar Jordà, Moritz Schularick, and Alan Taylor provide a little historical perspective on banks’ mortgage lending here.

8 replies on “The Great Mortgaging”

Too many risk mouths to feed. And the notion that risk can be managed and even removed by computer modelling. Would engineers or biologists ever be so shortsighted ?

The word mortgage is derived from a “law French” term used by English lawyers in the middle ages meaning “death pledge”, and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure.

What can one say (whilst remaining polite)? – “Duh! I could have told you so!”. That’s not much help, is it?

What I presume is being sought is the identity of causal factors, and the causal process which have produced this Great Financial Crisis. Why might this be important? To propose remedial action? When it should be obvious (to anyone capable of actually learning) that politicians make the decisions, and that all a politician cares about is getting re-elected. So, economic decision-making – especially where it involves ‘money’ – and its distribution, is going to be a mighty fraught affair. Sentiment will always triumph over rationality.

From an academic perspective, it is useful and interesting to get historical data (why is it ‘disaggregated – rather than ……?). And what is ‘endogenicity’ – built-in? Thanks to the joint authors for publishing.

I think Greta Krippner’s* description and explanations of the origins and the unwelcome and unfortunate outcomes, of the role and actions of powerful financial institutions (who went on to gain immense power) as they finagled and finessed all legal restraints on fiat credit (leverage) creation might be a useful starting point.

This current crisis had its origin in the mid-1970s following on from almost 15 years of increasingly problematic fiscal and monetary issues. In other words, are we looking at symptoms, rather than the underlying disease of diminishing marginal returns on GDP, in respect of the input of …….. what factors of production? Is it actually some class of a consumer demand problem? Or what?

Moral: Attempting any ‘fix’ of our current residential mortgage problems will be a very tricky political matter indeed. The opposition to any controls or restrictions is powerful, vocal, quite amoral and decidedly anti-social.

* Krippner, Greta. (2011). ‘Capitalizing on Crisis: the Political Origins of the Rise of Finance’. Harvard University Press. see – “Inflation and the Credit Crunch”: pp63-73.

I have an off topic question for someone (apologees for the irrelevance of it, feel free to delete if neccesary) Im looking for a book on the Irish economy post famine, particularly how Ireland ‘modernised’ .. something along the lines of Cormac O Grada’s book, or JJ Lees Ireland 1912-85 (although maybe going back further, does anyone know if his short book from 1848 to 1918 is any good and/or still relevant ?)
Any recommendations ? Is O grada’s the best ?

Forum Monetaire de Geneve has an interesting perspective on how things may unravel. Lots of links.

The overall economic and monetary model is deadlocked
The overall economic and monetary model , based on: 1 / inserting money in unfettered globalization resulting in lower wages and social protection of the population to continually improve the competitiveness of enterprises, 2 / exponential debt States and organized by the ultra loose monetary policies of central banks whose balance sheets bloated rotten no longer stretch to infinity economic agents without risk of a major accident , 3 / unbridled financial speculation that diverts capital available for investment productive, is deadlocked because it no longer produces sufficient consumption or real growth but, on the contrary, mass unemployment and a debt deflation that will become likely in depression. Deflation whose political leaders are trying to get out of the war. This is basically the scenario of the 1930s (when properly described but not well anticipated by the economist Irving Fisher) breeds.

Pseudo better jobs in the United States is not a:”

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