The New Housing Bubble

The New Housing Bubble
Construction at the Hudson Yards Redevelopment Project which is developing Manhattan's far West Side along the Hudson River, in New York on August 16, 2013. Spencer Platt/Getty Images
Dan Oliver
Updated:

Financial bubbles are not accidents. Our asset-backed banking system creates bubbles by design—they’re an inevitability.

Imagine a homeowner who owns a $1 million house free and clear. The owner goes to a bank and borrows $800,000 against the house. This credit money springs into existence as an accounting entry of a private bank. The borrower goes out into the market and starts purchasing other assets: stocks or a weekend house. The new money drives prices higher, including the assets that form the collateral of the banking system.

Dan Oliver
Dan Oliver
Author
Dan Oliver is the principal at gold mining fund Myrmikan Capital.
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