Recent commentators have suggested that house prices have a ways yet to fall, and that these further declines will lead to a further collapse in US output, potentially lengthening and deepening an already severe global downturn. But while this US recession was kicked off by the sub-prime crisis, even the large declines in housing wealth […]
A host of commentators are arguing that the current U.S. slowdown – the most severe in a quarter century – is far from over and in fact destined to get much worse. The argument usually invokes a parallel with the Japanese recession of 1990. In Japan in 1990, real estate prices fell sharply after rapid […]
The Chinese economy is slowing rapidly. The latest estimates show declines of several percent in official Chinese growth rates, which might be indicative of an actual recession. The Chinese government, like many around the world, is responding with a large economic stimulus plan. Official estimates are that the plan will cost roughly 14 percent of one year of China’s GDP, or well more than double the relative size of the proposed plan in the U.S. While some of the proposed stimulus spending may be worth doing anyway, the idea of a stimulus plan is to spend and build more than is worth doing in an economic slowdown. In the rush to stimulate the economy, there will surely be some waste and investments undertaken that in retrospect may be worthless.
One of the great successes of financial regulation in the US is the Truth in Lending Act, passed in 1968, which protects borrowers from predatory lending. In the new financial architecture that will emerge following the current crisis, it is now obvious that we also need truth in borrowing legislation to protect banks and other financial institutions (if we still have any) from predatory borrowing by consumers.
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