Suchergebnisse

Intro -- Contents -- 1: A Scandal in Bohemia -- Part I: Busted -- 2: Debt and Destruction -- 3: Cutting Back -- 4: Levered Losses: The Theory -- 5: Explaining Unemployment -- Part II: Boil and Bubble -- 6: The Credit Expansion -- 7: Conduit to Disaster -- 8: Debt and Bubbles -- Part III: Stopping the Cycle -- 9: Save the Banks, Save the Economy? -- 10: Forgiveness -- 11: Monetary and Fiscal Policy -- 12: Sharing -- Afterword -- Acknowledgments -- Notes -- Index.

U.S. households accumulated debt at an unprecedented pace
between 2001 and 2007. In the aftermath of the housing downturn,
deleveraging by highly indebted households is the most important factor
responsible for the current economic slump. The deleveraging process has
led to sharp drops in both aggregate demand and employment. We argue
that meaningful policies aimed at facilitating debt-reduction for
under-water homeowners in the short run, and replacing non-contingent
debt with contingent-debt in the long run are essential for a robust and
sustained recovery.

Borrowing against the increase in home equity by existing homeowners was responsible for a significant fraction of the rise in US household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Instrumental variables estimation shows that homeowners extracted 25 cents for every dollar increase in home equity. Home equity–based borrowing was stronger for younger households and households with low credit scores. The evidence suggests that borrowed funds were used for real outlays. Home equity–based borrowing added $1.25 trillion in household debt from 2002 to 2008, and accounts for at least 39 percent of new defaults from 2006 to 2008. JEL: D14, R31