I am in the process of writing a paper on the current economy and how we got there for my macroeconomics class and I found this article quite interesting. The big important part to the article is the date that it was written. This was written in February of 2007 almost a year and half before anyone knew we were in some sort of recession. I thought this was an important line….
“just as in the 1920’s the equity bubble was not created by wages keeping pace with productivity (the healthy formula for growth) but by the expansion of personal debt. Also, one could buy stocks without the money to purchase them, just as one can buy a $600,000 or $700,000 house today with zero-down and no monthly payment on the principle for years to come.”
The similarities are remarkable between the current recession and the Great Depression. It just seems that the great depression involved overinflated stocks while this current recession involved overinflated housing prices. A good long read that is worth it because it shows how powerful economics can be in understanding the future of the economy. I was truly amazed on the shear accuracy of everything written when it was written ahead of any remote sense that a recession was coming.