Dont make me part of an invention in your own mind. Nothing to do with me. Dont keep insulting me or I wont talk to you. Sounds like a good deal to me.

Dont you really mean to say “agree with my view or dont talk to me. Is that too much to ask?”

I agree with one thing. The Fed was asleep at the wheel but not because they tightened a little after 2004 but that they didnt tighten more and fuelled the housing bubble.
As for house prices being sustainable in the US. Revisit the bursting of Japans property bubble in the 90s. In the doldrums for ten years plus. Yes a property market that is overblown can crash the economy when it corrects. The fed should have tightened more than they did earlier than they did.

Get off the gin bottle. We’re talking about the US/GFC. Stay off the booze or don’t talk to me. Is that too much to ask?

You say

” There were significant rate changeswith the Fed tightening from 2004 onward and more importantly the CB’s were signaling continued rate increases even after the Lehman collapse.”

From what cash rate to what JC?.

They were small changes. NO way you could call them large when I paid my first house of at 11%, 10% and down to 8%.

The sub prime market was a specialist part of lending. Things needn’t have been so bad if the CB’s had reacted in such doctrinaire fashion to both the rise in commod prices and then to the fall in NGDP. They were asleep at the wheel. The Fed has more or less admitted to it last week. Read the comments about the minutes hat were released about that period.

I think the toxic waste went a lot deeper than just the subprime market, there are just too many mortgages in default right now for any other explanation. Real estate tends to be reflective (long term) of how other parts of the economy are doing because people who are doing well in life often want a bigger, nicer house. That’s why a real estate led recovery is basically impossible…

US industry has faced increasing competition on many fronts, for a long time. Their choices are to get competitive (i.e. offer less easy benefits to unions), or isolate themselves and stagnate (trade barriers), or start wars and get maximum leverage out of their military dominance (imperial style).

Carried to its extreme, the creation of wealth collapses as the economy is plundered for more handouts.

The problem is that once the plundering is underway, you get a bunch of military tough-guys taking control and end up like North Korea. That’s a dead-end situation.

Without a taboo against deficits, deficit spending tends to become habitual. It is politically corrosive, because no constituency expects to be the one to have to sacrifice when the limits of borrowing have been reached.

This is another one of those fundamental trust things, just like abortion, euthanasia, and operating a nuclear reactor. If we could be confident would consistently make an effort to bring deficits under control, we could easily forgive the occasional splurge for a justifiable reason. The problem is that time and again, past and present governments have demonstrated they can’t be trusted, don’t keep their promises, and are perfectly happy to dump their problems onto future generations.

We have a really deep trust problem in our society, and I think it’s getting worse.

I can’t see how anyone could call themselves an economist and believe that swill.

The sad thing ,JC is that I think you and I are the minority. Maybe not here at the cat, but in the broader economics profession, and indeed in the general community, almost certainly. I’d like to think that’s changing, but I’m not optimistic…

I think we can both agree though that Keynesianism is bullshit! Personally, I think it is the road to hell.

Lol… I can’t see how anyone could call themselves an economist and believe that swill.

It is politically corrosive, because no constituency expects to be the one to have to sacrifice when the limits of borrowing have been reached

This in the Herald Sun today.

http://www.heraldsun.com.au/news/victoria/the-alfred-hospital-forced-to-axe-300-operations/story-e6frf7kx-1226560426696