POLSCI 2J03 Lecture Notes - Conditionality, Structural Adjustment, Mutualization
4 Mar 2014
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Document Summary
Till 1990s the us government did not guarantee loans to red-lined communities labeled subprime. In 1990s us government policy to encourage extension of credit to underserved, largely poor minority communities. Homeownership rates increased to 69% in mid-2000s. The greenspan put & zero interest rate monetary policy: federal reserve response to burst of tech stock bubble and 9/11 cheap credit. Asian savings provided liquidity for the us financial system. High asian savings rates resulting from (a) trade imbalances (chinese manufacturing; oil price per barrel from 10 in "99 to 147 in. 2008) (b) lessons learned from 1990s financial crisis. China relied on america as a source of exports and us relied on china for savings and cheap manufacturing. Households that took on debt to stimulate the economy: causes of the crisis: overextension of credit. Declining lending standards: ninja loans, liar loans , low-doc , and no- doc loans: no jobs, those who lied about their income, etc.
