Credit, Money and Macroeconomic Policy
Show Less

Credit, Money and Macroeconomic Policy A Post-Keynesian Approach

A Post-Keynesian Approach

  • New Directions in Modern Economics series

Edited by Claude Gnos and Louis-Philippe Rochon

With recent turmoil in financial markets around the world, this unique and up-to-date book addresses a number of challenging issues regarding monetary policy, financial markets and macroeconomic policy.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 3: The Collapse of Securitization: From Subprimes to Global Credit Crunch

Robert Guttmann

Extract

3. The collapse of securitization: from subprimes to global credit crunch Robert Guttmann INTRODUCTION While it is still too early to tell where the global credit crunch of 2007 will lead us, this latest financial crisis is well worth analyzing. Acute crisis, with its ruptures, ripples and shifts across time and space, reveals qualitative aspects of the system’s modus operandi usually hidden under the veil of normalcy. Any closer look at what has transpired so far may well show this to have been the first systemic crisis of a new finance-led accumulation regime and as such an important stress test for an entire infrastructure of financial markets underpinning this regime.1 THE HOUSING BOOM The origins of the present crisis lay with the decade-long US housing boom and its denouement in 2006. In the mid-1990s favorable demographic trends (for example, population growth), economic conditions (for example, interest rates, labor market), and socio-political forces (for example, ideology of ‘ownership society’) came together to set off a boom in real estate that soon became a key pillar in the resurgence of the US economy. Fueling that expansion was the successful launch of a major financial innovation, the securitization of loans, which transformed the funding of investments in real estate. The US government, having long supported homeownership with various tax breaks and subsidies, also set up its own specialized lending institutions to assure a steady supply of funds to prospective homeowners. Two of these government-sponsored banks, known as Fannie Mae and Freddie Mac, have...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.


Further information

or login to access all content.