You cannot be serious about 2008 being a bubble can you?
It was absolutely a bubble. Housing prices had been escalating above their historical rate of increase since the late 1990’s.
Take a look at the RED lines. The thin red line is the historical rate of housing price appreciation going back to the signing of the National Housing Act under LBJ, which legalized the packaging and selling of mortgages by the primary lender. You can clearly see (1998–2000) where price inflation first deviated from its historical trend line, peaking in 2006/2007, and then KABLAM! Right back to the historical trend line.
(You can also see, in 2010–2011, the next bubble starting to form. But let’s not digress.)
It was the direct result of corrupt activities by the big banking communities to sell off risk to investors by bundling subprime mortgages as AAA investments.
Well, that’s what CAUSED the bubble, in part. :-) Bubbles have a proximate cause, you know. Often that cause is “irrational exuberance”, but not always. In this case, you had a bubble fueled by bad behavior on the part of the banks and GSE’s (and AIG, but again, let’s not digress.)
While Canada experienced much of the same property appreciation during the same period .. and still do today, BTW .. they had no crash, even to this very day, and property there continues to appreciate.
Bingo. Canada had no law against bundling mortgages the way we did, they had no law against having large money center banks, and they had no law preventing them from BUYING those subprime derivatives. They simply had better systems of internal governance in place than the US banks did.
Their banking system is well regulated to prevent what happened in the US.
This is a common misconception. As I said above, there were no laws and no regulations that prevented Canada from doing what we did. They just…..didn’t. There are hours of interviews on CNBC with the CEO’s of Toronto Dominion, Scotiabank, CIBC, Bank of Montreal, and all the other big Canadian banks where they were asked the same question, “Why didn’t this happen to you?” Their answer was always the same: “It just didn’t seem prudent for us to invest our money in that way. We COULD have, we just didn’t.”
Personally I blame the ratings companies, none of which were ever fined nor jailed, and the same companies which subsequently lowered the US Treasuries investment grade. You cannot make this stuff up.
I completely agree. There are a lot of bad actors in the events of 2008, but the worst of them all were the ratings agencies. I mean, who wouldn’t jump at the chance to buy into an investment rated AAA by S&P which will return you double digits? And how is that any different from Madoff and Stanford selling “no risk” securities at 6% return?
Please come back to reality of this critical event that nearly took down the entire western world economy. You are a very smart person. Do not let ideology color your remembrance of that horrific time. You only harm your own critical thinking process.
Nope. You and I on the same page, we’re just using different terms. You make the assumption, it seems, that a “bubble” can only form through irrational investing, but that’s not true. In this case, the bubble formed because of bad actors in the financial system.
Same story, just different semantics.