Where did the money go?

by Russ Roberts on December 2, 2008

in Housing

I talk at NPR’s Planet Money about where the money went when housing prices tanked. My part starts around the 15 minutes mark. The earlier stuff on hyperinflation with Steven Hanke is interesting, too.

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{ 3 comments }

Keith December 2, 2008 at 1:03 pm

I get the feeling that neither NPR person learned anything from this segment.

tw December 2, 2008 at 3:22 pm

Russ,

This was somewhat humorous throughout, and that's a good thing because economics is too often depicted as a dry subject.

What I liked the most was your point that while everybody asks 'where did the money go' after a bust, nobody is asking 'where is the money coming from' during the boom.

BIll Nichols December 3, 2008 at 11:28 am

Q: "Where did the money come from?"
A: China. Rather than purchase US goods or services, China backed us mortgages, in large part through Fannie Mae/Fredie Mac

Q: "Where did the money go?"
A: In large part, the bubble/bust was concentrated in CA, NV, FL, , and AZ, areas with a very large illegal immigrant population and a disproportionate representation in the building trade. It's likely that much of the wages paid to build the homes and profit from selling on the way up found their way to family in Mexico or other Latin American destinations. If this scenario is correct, we seem to be left with nothing but the obligation to pay money to China in the future and a large number of new homes that should not have been built.

Please give me a reason to think I'm too pessimistic.

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