Abstract
Since the financial crisis in 2008 and the ensuing economic recession that rocked the
world economy, plenty of blame has been going around. The chairman of the U.S. Federal
Reserve, Ben Bernanke, specifically singled out subprime mortgages and the Wall Street
bankers that sold those mortgages. In bureaucratic jargon it is often dubbed a regulatory
oversight failure. This study, however, shows that the Federal Reserve¿s loose monetary
policy at the start of the new millennium triggered the U.S. refinancing boom in 2003 and
2004, spurring personal consumption expenditures through home equity extraction. The
U.S. spending binge boosted economic growth and savings in China and oil-exporting
nations. The build-up of savings in China, which are heavily skewed towards fixed income
assets, depressed interest rates worldwide from 2004 on. The decline in long-term interest
rates accounts for the U.S. housing boom. Despite popular belief, the proliferation of
exotic mortgage products can hardly be faulted for the U.S. housing boom and eventual
bust.
Original language | English |
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Awarding Institution |
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Supervisors/Advisors |
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Award date | 28 Aug 2012 |
Place of Publication | Rotterdam |
Print ISBNs | 9789058923110 |
Publication status | Published - 28 Aug 2012 |