Many mortgages have not just been modified once, but twice, and sometimes more. Loan servicers are holding higher-end mortgages rather than foreclosing a decade after the crash. Thus, there is plenty of shadow inventory lurking, waiting for the next crash.
After lying dormant for several years in the aftermath of the Great Recession, the subprime market has returned with a vengeance. Subprime has become prevalent in every facet of the credit industry, and we should be terrified.
Even if the central bank policymakers could implement policies without error, Milton Friedman’s and Robert Lucas’s monetary schemes could not secure stable economic growth.
The mainstream National Bureau of Economic Research definition of recessions is of little value. Real saving, not consumer demand, is the real driver behind economic growth.
As money loses its purchasing power, income and wealth are stealthily redistributed. Some individuals and groups of people are enriched at the expense of others.
"I am not saying that fiat money, once established on the ruins of gold, cannot then continue indefinitely on its own. Unfortunately … if fiat money could not continue indefinitely, I would not have to come here to plead for its abolition."
It is a huge mistake to call the repeating cycle of boom and bust a business cycle. That name implies the bust is the failure of markets and capitalism. But it is really due to monetary and credit inflation licensed and promoted by governments and central banks.
As long as there is still room for pushing the market interest rate down even further, the chances are reasonably good that the boom continues, and that the bust will be postponed into the future.
Suppose that a convincing orator should go on TV tomorrow, and urge the public: "The banking system of this country is insolvent."
The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration.
