Guess What? More Houses Equals a Bigger Housing Crash

Here’s an interesting chart from the St. Louis Fed. It shows exactly what you’d expect, but it’s still nice to see it demonstrated so clearly:

What this chart shows is simple:

  1. Countries with high homeownership rates (on the right) had the biggest housing bubbles and the biggest crashes.
  2. The effects of those crashes persisted for over a decade.
  3. Today, the countries with the biggest crashes (on the bottom) are still feeling the worst effects on growth rates.

Switzerland and Germany, with low homeownership rates, are growing today at about the same rate as they were before the financial crisis. The US, with a fairly high homeownership rate, is growing about one percentage slower. Ireland and Spain, with huge homeownership rates, were hit the hardest and are still feeling the greatest pain. Their growth rates are two points lower than they were pre-crisis.

But there’s another point to make about this chart: although it’s unlikely that the relationship between housing and growth could have been eliminated completely, the fact that it’s so strong is powerful confirmation that the political response to the crash was far too weak—and it was far too weak everywhere. If the US, to pick an example, had responded with stronger and longer fiscal/monetary/regulatory policies, it could have made up the lost demand from the housing crash far more quickly and gotten back to its old growth rate in a year or three, instead of ten.

Some countries, like Ireland and Spain, were handcuffed by the euro and weren’t strong enough or independent enough to respond properly on their own. In those cases, some of the blame resides in Germany and France, the big EU core countries.

The world’s large economies did respond to the crash. And it’s only fair to acknowledge that, to this day, you can point to no more than one or two countries that have responded to a banking crisis with the proper vigor even after the lesson of the Great Depression. Unfortunately, the prospect of truly massive stimulus seems to be scarier than the prospect of future economic sluggishness. Even now, with abundant evidence that strong stimulus had little to no impact on inflation, I expect that if the global economy crashed tomorrow we’d still be too timid to respond to it with the energy it requires. Our financial class has learned nothing and forgotten everything.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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