Saturday, 14 April 2012

5. Why the financial crisis of 2008 started with real estate: the weakest debt link

We see in post 6, that  an over-debt monetary, system is vulnerable to financial crisis-es, e.g. by sudden increase and decrease of oil prices. 

Now over-debt exists in all levels of the economic system

a) In the public sector
b) In enterprises
c) In the households

But the households are the more  vulnerable, as they do not have organised ability for profits as enterprises do, neither large inertia and resources as a public sector does.
Therefore  the weakest over-debt link would be the debts of the household. Now the main debt of the household is the real-estate loans. Indeed the financial crisis of 2008 started with the securitized  home-loans.