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Subprime Mortgage Market and Current Financial Crisis

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Housing Market Challenges in Europe and the United States

Abstract

The prevalent view is that the current credit crisis has its origin in the bust of the housing bubble. But what is missing from this view is that the finance of a bubble is only possible through a corresponding increase in credit — no credit, no bubble. Thus at the heart of the current woes lies the excessive liquidity that was put in place in the last ten years or so.3 This liquidity financed in the first instance the internet bubble, but because there was no deleverage following the burst of this bubble the liquidity went on to finance other bubbles, including housing, private equity and commodities. Thus, the housing bubble is a transformation of the previous internet bubble.

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References

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Author information

Authors and Affiliations

  1. Cambridge Centre for Economic and Public Policy, Department of Land Economy, University of Cambridge, UK

    Philip Arestis

  2. Cambridge Centre for Economic and Public Policy, University of Cambridge and Director of Guildhall Asset Management, PCC, Ltd, UK

    Elias Karakitsos

Authors
  1. Philip Arestis
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  2. Elias Karakitsos
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Editor information

Editors and Affiliations

  1. Cambridge Centre for Economics and Public Policy, Department of Land Economy, University of Cambridge, UK

    Philip Arestis (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor) (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor)

  2. Department of Economics, University of Utah, USA

    Philip Arestis (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor) (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor)

  3. Levy Economics Institute, New York, USA

    Philip Arestis (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor) (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor)

  4. Leeds Business School, University of Leeds, UK

    Philip Arestis (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor) (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor)

  5. Department of Finance and Management Studies, School of Oriental and African Studies (SOAS), University of London, UK

    Philip Arestis (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor) (University Director of Research, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor)

  6. Economic Analysis and Research, Department of the Oesterreichische Nationalbank, Vienna, Austria

    Peter Mooslechner (Director) (Director)

  7. Oesterreichische Nationalbank, Austria

    Karin Wagner (Economist) (Economist)

Copyright information

© 2009 Philip Arestis and Elias Karakitsos

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Cite this chapter

Arestis, P., Karakitsos, E. (2009). Subprime Mortgage Market and Current Financial Crisis. In: Arestis, P., Mooslechner, P., Wagner, K. (eds) Housing Market Challenges in Europe and the United States. Palgrave Macmillan, London. https://doi.org/10.1057/9780230246980_3

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