Fiscal Intelligence

“But did the Fed’s approach spare Americans a harsh reckoning, or only delay it? Even after more than $1 trillion in defaults and repayments, Americans still hold twice as much housing debt as they did in 2000. If mortgage debt had merely stayed in line with the growth in other prices instead of outpacing inflation, we’d owe a collective $6.6 trillion today on our houses, not $9.4 trillion. And what happens when mortgage rates rise, or when house prices stagnate or even fall again? We could end up where we were six years ago—with borrowers and lenders alike realizing that they can’t repay their debts.”

Of Interest at the Fed by Nicole Gelinas, City Journal Winter 2015.