http://www.frumforum.com/what-americans-care-about-post-recession-will-be-dictated-by-the-downturns-course Building a conservatism that can win again Sat, 11 Feb 2012 17:50:44 +0000 http://wordpress.org/?v=2.9.2 hourly 1 http://www.frumforum.com/what-americans-care-about-post-recession-will-be-dictated-by-the-downturns-course/comment-page-1#comment-50847 sinz54 Thu, 22 Jan 2009 23:35:47 +0000 #comment-50847 The severe downturn in the U.S. economy was caused by a collapse of the credit markets. The securitization of home mortgages in the secondary market, which had enabled American homeowners to finance all kinds of consumer purchases with mortgaged money at high leverage for 25 years, has dried up as home prices have fallen sharply. The Fed has tried mightily to reflate credit--but who can borrow money against a depreciating asset for collateral? I have heard both liberal and conservative economists who both agree that there is no quick fix for this, short of just waiting till housing prices stop falling and stabilize at some level. That kind of de-leveraging can take a long time to work through. It took the Japanese the better part of a decade to work through theirs. And in the meantime, the Japanese economy and stock market entered a prolonged period of doldrums that continued into the 2000s. The severe downturn in the U.S. economy was caused by a collapse of the credit markets. The securitization of home mortgages in the secondary market, which had enabled American homeowners to finance all kinds of consumer purchases with mortgaged money at high leverage for 25 years, has dried up as home prices have fallen sharply. The Fed has tried mightily to reflate credit–but who can borrow money against a depreciating asset for collateral? I have heard both liberal and conservative economists who both agree that there is no quick fix for this, short of just waiting till housing prices stop falling and stabilize at some level. That kind of de-leveraging can take a long time to work through. It took the Japanese the better part of a decade to work through theirs. And in the meantime, the Japanese economy and stock market entered a prolonged period of doldrums that continued into the 2000s.

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