Your steps to the Crisis are off a bit. You see the re bubble was and is still being deflated. That would have only hit American banks primarily, and it would have been a slowdown only - if that was all that happened.
What you are forgetting ignoring, is that the mortgages were only fuel for the CDO market. That market was powers bigger, completely levered and so the smallest misstep meant outsized failures.
On top of this you had yet more instruments piled on, where people made just plain betson market outcomes.
Oh yeah, the swaps were also insuring far more than what the underlings were worth too.
So the real estate bubble wasn't big enough to create a crisis - for that we needed CDOs and CDSs to lever the bubble.
And a lot of those write downs have happened, the banks has their PE ratios and the rest crushed in 08. They took most of their hits.
All they have now is shadow inventory, which they can't afford to let onto the market because it would depress housing prices further.
This when some Americans are too broke to live in tents :)
For the glass steagal bit, sorry but right now your aim to be above the debate is making you take a stand based on what you think is a talking point.
It's your perception that it's a talking point, but in that case why my example was someone who was on the other side of the evil banker discussion, who was saying that glass steagal was good.
And this was even before the predicted outcome - rapacious irresponsibility, was proven. While you may want to be above the debate, it's not a talking point. It's more like a strongly substantiated theory.
>For the glass steagal bit, sorry but right now your aim to be above the debate is making you take a stand based on what you think is a talking point.
Either I've been unclear or you seem to have misinterpreted what I said. When you say "It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis," I can see why you think that. It doesn't mean I don't think you're wrong. I do. And I do think it's a talking point - you write as if this was all settled, and it's not.
And my point about economics as a pseudo science was really a long winded way of saying your assertion that "my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit" carries the same intellectual weight as "The guy who runs the local sandwich shop has a sister whose brick-layer husband think glass steagal is useful"
What you are forgetting ignoring, is that the mortgages were only fuel for the CDO market. That market was powers bigger, completely levered and so the smallest misstep meant outsized failures.
On top of this you had yet more instruments piled on, where people made just plain betson market outcomes.
Oh yeah, the swaps were also insuring far more than what the underlings were worth too.
So the real estate bubble wasn't big enough to create a crisis - for that we needed CDOs and CDSs to lever the bubble.
And a lot of those write downs have happened, the banks has their PE ratios and the rest crushed in 08. They took most of their hits.
All they have now is shadow inventory, which they can't afford to let onto the market because it would depress housing prices further.
This when some Americans are too broke to live in tents :)
For the glass steagal bit, sorry but right now your aim to be above the debate is making you take a stand based on what you think is a talking point.
It's your perception that it's a talking point, but in that case why my example was someone who was on the other side of the evil banker discussion, who was saying that glass steagal was good.
And this was even before the predicted outcome - rapacious irresponsibility, was proven. While you may want to be above the debate, it's not a talking point. It's more like a strongly substantiated theory.