America’s Houses of Cards

America’s mortgage problem has global repercussions, because bad mortgages worth hundreds of billions of dollars have been to investors (including banks) around the world. The lesson is that there is a need for greater financial sector regulation, especially better protection against predatory lending, and more transparency.

There are times when being proven right brings no pleasure. For several years, I argued that America’s economy was being supported by a housing bubble that had replaced the stock market bubble of the 1990’s. But no bubble can expand forever. With middle-class incomes in the United States stagnating, Americans could not afford ever more expensive homes.