[lbo-talk] Goodbye to the export of surplus capital?

brad babscritique at gmail.com
Mon Feb 7 09:37:48 PST 2011


Furthermore, SA, doesn't fig 3 from the link you provided: http://www.frbsf.org/publications/economics/letter/2011/el2011-01.html actually make the opposite point?

They state: To explore this relationship further, Figure 3 plots a measure of credit availability constructed from the Federal Reserve Board Senior Loan Officer Opinion Survey. Following Muellbauer (2007), we examine the quarterly changes since 1966 in the net percentage of reporting institutions indicating a greater willingness to make consumer installment loans. The quarterly changes are cumulated over time and the resulting series is scaled to have a value of 100 at the peak, which occurred in the first quarter of 2007. The figure shows a long-term uptrend in the availability of credit to U.S. households that tracks reasonably well with the uptrend in household leverage, as measured by the ratio of household debt to disposable income. The correlation of the two series suggests that the dramatic run-up in household debt relative to income was largely driven by an increase in the supply of credit over time.

Aren't they claiming that it was the availability of credit that drove up debt levels? Not that rising home prices, or the belief therein, led to increased borrowing. Maybe you could explain how rising home prices led to increased credit availability without new financial tools and new public policies that increased lending.

Brad



More information about the lbo-talk mailing list