Wednesday, March 10, 2010

Matched Pairs, Financial Crises, Housing Bubbles, and the Great Recession

Dean Baker* points out that Spain did not have a financial crisis, but it had a housing crisis and a recession arguably worse than most developed countries.

Food for thought: from this he concludes that housing, not finance, is the source of the trouble.

This is consistent with the post by Krugman from a month or so ago – he asserted that Canada got off mildly because it did not have a financial crisis, but interestingly, it didn’t have much of a housing boom either.

But, this is inconsistent with what I pointed out in class that there are lots of states that have floated through this recession, most of which did not have a housing crisis.

*Newspapers in Europe are far more politically biased than those in the U.S. The Guardian is known as a left-center newspaper.

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