Title

Housing, Depressions and Credit Collapses

Document Type

Article

Publication Date

1-24-2010

Abstract

Unprecedented residential mortgage credit expansions preceded the economic collapses in 1929-1930 and 2007-2008, and both collapses generated household balance sheet crises, which were then transmitted to banks as the worth of assets collapsed against debts. Decreasing expenditures on housing and durable goods affected industry negatively, and incomes fell further as a result of decreased production and employment. Irving Fisher (1933) described this as “The debt-deflation theory of great depressions.”

Comments

This article was published in Financial Times on January 24, 2010. This blog requires free registration.

Copyright

Financial Times