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walkitouthttp://www.calculatedriskblog.com/2009/06/wsj-real-time-economics-housing-bubble.html
CR is quoting Mian and Sufi, writing over at the WSJ in response to some people who claimed the housing bubble and its collapse didn't have a lot to do with consumption (CR and these two disagree. Guess who I think is right?).
"Finally, the effect of house prices on homeowner borrowing is isolated to homeowners with low credit scores and high credit card utilization rates. These “credit-constrained” households respond aggressively to house price growth, whereas the highest credit quality borrowers do not respond at all."
Two responses to this spring immediately to mind (beyond, "Duh"): the rich get richer and the poor get poorer is one. I feel guilty about the other one (which ends the same, but starts with, well, there's a _reason_ why...).
Quick on the heels of those two responses comes what I really believe: this is why we shouldn't let asset bubbles develop, and we _really_ shouldn't let people borrow against those assets if the loan terms are dangerous for them.
CR is quoting Mian and Sufi, writing over at the WSJ in response to some people who claimed the housing bubble and its collapse didn't have a lot to do with consumption (CR and these two disagree. Guess who I think is right?).
"Finally, the effect of house prices on homeowner borrowing is isolated to homeowners with low credit scores and high credit card utilization rates. These “credit-constrained” households respond aggressively to house price growth, whereas the highest credit quality borrowers do not respond at all."
Two responses to this spring immediately to mind (beyond, "Duh"): the rich get richer and the poor get poorer is one. I feel guilty about the other one (which ends the same, but starts with, well, there's a _reason_ why...).
Quick on the heels of those two responses comes what I really believe: this is why we shouldn't let asset bubbles develop, and we _really_ shouldn't let people borrow against those assets if the loan terms are dangerous for them.