» Posted by Martin Weil on October 10, 2007

With higher interest rates depressing housing prices, the game is over. As America moves to, say, a 4% savings rate (still small by normal standards), aggregate demand will weaken, and with it, the economy....It is one thing to borrow to make an investment, which strengthens balance sheets; it is another thing to borrow to finance a vacation or a consumption binge. But this is what Alan Greenspan encouraged Americans to do. When normal mortgages did not prime the pump enough, he encouraged them to take out variable-rate mortgages - at a time when interest rates had nowhere to go but up.

The Nobel Prize-winning Stiglitz writes in House of Cards in the Guardian.

Previous entry: A consumer's 'how to fight back' guide
Next entry: How much does it take to be rich?

Back to Martin's View main page