We´re all Brazilians now (Nós somos todos Brasileiros agora)

O post abaixo foi colocado pelo Prof. Paul Krugman no seu blog no dia 06/10/2008, mas só agora pude lê-lo.  Ao contrário do que venho fazendo neste blog (colocando os títulos dos respectivos posts que aqui reproduzo), resolvi colocar o título acima como uma expressão interessante colocada pelo Prof. Krugman ao final do seu post.

Muito vivem falando que os EUA são agora o maior devedor do mundo, mas vejam só (abaixo) dois indicativos da robustez daquela economia: os ativos do mundo depositados nos EUA (em vermelho) e os ativos americanos depositados no estrangeiro (em azul), como percentagem do PIB não-americano!

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It’s a small world after all

One point I think is really important in understanding the crisis is that there has been a huge increase in financial globalization just in the last few years — basically since 1995. The chart above shows rest-of-world assets in the United States (red) and US assets abroad (blue) as a percentage of non-US GDP; while we talk a lot about the US as a debtor nation, what’s really striking is the surge on both sides of the balance sheet. This has made the global financial system a lot more tightly linked, so that big economies are now experiencing the kind of contagion previously associated with emerging markets caught up in the 1997-1998 crisis. We’re all Brazilians now.

Causes of the Mortgage Meltdown (Causas do Derretimento da Hipoteca, nos EUA)

Mais evidências trazidas por bons especialistas de Economia de que, ao contrário do que se tem procurado alardear (que a crise financeira se deve à falta de regulação), a verdadeira causa é a má regulação que comprometeu regras (e mecanismos) estáveis para uma política pública de ampliação da casa própria nos EUA.  Post copiado do blog do Prof. Mark Perry!

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Tuesday, October 07, 2008

Causes of the Mortgage Meltdown

 From the article “Anatomy of a Trainwreck,” by Economics Professor Stan Liebowitz, University of Texas at Dallas

Executive Summary: Why did the mortgage market melt down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be?

This report concludes that, in an attempt to increase home ownership (see chart above), particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The price bubble, along with relaxed lending standards, allowed speculators to purchase homes without putting their own money at risk.

The recent rise in foreclosures is not related empirically to the distinction between subprime and prime loans since both sustained the same percentage increase of foreclosures and at the same time. Nor is it consistent with the “nasty subprime lender” hypothesis currently considered to be the cause of the mortgage meltdown. Instead, the important factor is the distinction between adjustable-rate and fi xed-rate mortgages. This evidence is consistent with speculators turning and running when housing prices stopped rising.

Conclusion: The political housing establishment, by which I mean the federal government and all the agencies involved with regulating housing and mortgages, is proud of its mortgage innovations because they increased home ownership. The housing establishment refuses, however, to take the blame for the flip side of its focus on increasing home ownership—

first, the bubble in home prices caused by lowering underwriting standards and then the bursting of the bubble with the almost catastrophic consequences to the economy as a whole and the financial difficulties being faced by some of the very homeowners the housing establishment claims to be trying to benefit.

MP: More support of the proposition that U.S. public policy turned good, responsible renters into bad, irresponsible homeowners.