A slew of Real Estate Articles - Stiglitz is the tops: Blame it on Bush. By Geniusofdespair

So many real estate stories in the Herald today. The best one is an opinion piece How the bubble started by Joseph Stiglitz a Nobel Laureate in Economics.

He says:
"The story goes back to the recession of 2001. With the support of Federal Reserve Chairman Alan Greenspan, President Bush pushed through a tax cut designed to benefit the richest Americans but not to lift the economy out of the recession that followed the collapse of the Internet bubble. Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment: It had to lower interest rates, which it did in an unprecedented way -- all the way down to 1 percent.

It worked, but in a way fundamentally different from how monetary policy normally works. Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.

But, given that overinvestment in the 1990s was part of the problem underpinning the recession, lower interest rates did not stimulate much investment. The economy grew, but mainly because American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds. And, as long as housing prices rose as a result of lower interest rates, Americans could ignore their growing indebtedness.

In fact, even this did not stimulate the economy enough. To get more people to borrow more money, credit standards were lowered, fueling growth in so-called subprime mortgages. Moreover, new products were invented, which lowered upfront payments, making it easier for individuals to take bigger mortgages."

Read it and weep. Other stories to check out (remember that Herald Stories disappear in 7 days so read them quickly):
Could hedge funds be a looming crisis?
Cay Clubs scrambles to right its finances