The conventional wisdom is that the Great Recession was caused by the collapse of the sub-prime mortgage market. The data suggest otherwise. While many low-income people took out mortgages for the first time and defaulted, their numbers were lower than thought, and actually declined during the period. Also, they bought cheaper homes, which meant less money was loaned to them as a group. The majority of the funds affected by foreclosures were for expensive homes. From 2001 to 2006, the poorest neighborhoods only accounted for an debt increase of $0.327T while the rich neighborhoods accounted for $1.587T. That coupled with the poorly-understood and under-insured derivatives market are the main causes of the crash. Greed, not a desire for simple housing, caused the Great Recession.
(Click on the graph for the link.)
greed and a willingness of wealthy patrons to default on a whim…like our brave leader?
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