House of Debt

House of Debt

How They (and You) Caused the Great Recession, and How We Can Prevent It From Happening Again

Book - 2014
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The Great American Recession resulted in the loss of eight million jobs between 2007 and 2009. More than four million homes were lost to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recession—that the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Atif Mian and Amir Sufi reveal in House of Debt how the Great Recession and Great Depression, as well as the current economic malaise in Europe, were caused by a large run-up in household debt followed by a significantly large drop in household spending.

Though the banking crisis captured the public’s attention, Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt. As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. How do we end such a cycle? With a direct attack on debt, say Mian and Sufi.  More aggressive debt forgiveness after the crash helps, but as they illustrate, we can be rid of painful bubble-and-bust episodes only if the financial system moves away from its reliance on inflexible debt contracts. As an example, they propose new mortgage contracts that are built on the principle of risk-sharing, a concept that would have prevented the housing bubble from emerging in the first place.

Thoroughly grounded in compelling economic evidence, House of Debt offers convincing answers to some of the most important questions facing the modern economy today: Why do severe recessions happen? Could we have prevented the Great Recession and its consequences? And what actions are needed to prevent such crises going forward?

With clear and powerful evidence, House of Debt shows how society’s reliance on debt is dangerous and leads to economic disaster. Atif Mian and Amir Sufi compellingly illustrate how debt too easily destroys common borrowers’ net worth, how these borrowers stop spending, and how people lose jobs as a result. Thoroughly grounded in compelling economic evidence,House of Debt offers convincing answers to some of the most important questions facing the modern economy today.


Baker & Taylor
Looks at the impact the housing market had on the banking industry as household debt increased and spending decreased.

Publisher: Chicago : The University of Chicago Press, 2014
Chicago : The University of Chicago Press, 2014
ISBN: 9780226138640
9780226081946
022608194X
Branch Call Number: 330.97 MIA 2014
Characteristics: 219 pages : illustrations ; 24 cm
Additional Contributors: Sufi, Amir - Author

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r
roystreet
Feb 21, 2015

This is an excellent unbiased corrective to the idea that government's first job in balance-sheet depressions is to "save the banks." What went wrong in the housing market, and what can we do to prevent its recurrence? Read the answers here.

j
jaycrossing
Jan 02, 2015

I read a few chapters, despite the fact it was written by Ivy League professors, and finally called it quits. This is pure liberal spin . . .

s
StarGladiator
Jul 01, 2014

The book states: // the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? \\ According to several Federal Reserve studies, between 1997 to 2007, around $23 trillion in securitized debt was sold by the bankers. So perhaps $7 trillion out of the $23 trillion was household debt, but we are talking about securitized debt, so that is a layered debt construct! See the difference? The authors make any number of contradictory statements, under the seemingly appealing aegis of the bankers as bad actors - - which, of course, was/is true! They suggest that we get away from money-as-debt structures, while continuing to allow the elites to control the creation of money-as-debt?!?!?!? These guys are meaning to confuse us, or else they are simply fools.
When they create money-as-debt, then use layers of debt for speculation and further business endeavors, they are driving up costs upon costs and therefore negating anyone's value from their production [work, et cetera]. The entire concept of fair value is subject to their whims, which is to always destroy it, as they destroy surplus capital!

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