Heavy Lifting - thoughts and web finds by an economist
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Thursday, October 09, 2008

Where was the greed?

There is a lot of blame to go around concerning the current economic situation, but corporate greed (at least that referred to by politicians) is likely one of the smaller contributors to the problem. As I have mentioned before, I think a smarmy form of political correctness pushed the financial markets to do things that they normally would not have done. Couple that with a de facto government guarantee to bail the industry out when the predicted bad debts became actual bad debts, and we are where we are today.

However, during the housing bubble in 2004-2007 period, my house in Arlington, Texas appreciated at a historically-normal rate of about 3.3% per year. The house we purchased in North Carolina wasn't artificially inflated in price either (if anything we got a deal).

So where were the problems? This working paper from the IMF suggests that the problems were widespread but my guess is that the problems were still concentrated to certain cities and states.

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