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79 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

That would be really, really bad. Any house that loses value will be unsellable, and thus virtually worthless. Most people living in such a house would be prevented from moving. They cannot sell it, ...
Klas Lindbäck's user avatar
29 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

And everyone is safe, the crash prevented and everyone will keep making millions simply by borrowing more for risk free "investing" in simply owning ones own house, right? It is true, your investment ...
Jeutnarg's user avatar
  • 401
25 votes
Accepted

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

If you want all details read this excellent Brookings report on the Origins of the Financial Crisis by Baily et al. Its an excellent source on this topic and it is not too technical for laymen to ...
1muflon1's user avatar
  • 56.8k
15 votes

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

@1muflon1's answer is correct, but only tells half of the story. The other half of the story, that Brookings studiously avoids mentioning, because it conflicts with their values, is that lenders were ...
Eugene's user avatar
  • 471
12 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

Mandating a house be sold at last price sold does not mean that people value it at that sticker price. I could mandate that water bottles only be bought for $1,000,000. This does not mean anyone would ...
rrod18's user avatar
  • 97
11 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

If the housing bubble would burst in Scandinavia as it has done in many other places the recent decade, certainly all banks will immediately be wiped out and millions of Scandinavians will become ...
pjc50's user avatar
  • 558
8 votes
Accepted

Are cryptocurrencies a ponzi scheme or a bubble?

In general, "Ponzi schemes" in the context of asset pricing refer to "rational bubbles", or a failure of the transversality condition you need when passing from a flow identity to a present value ...
Ege Erdil's user avatar
  • 691
7 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

Bursting bubbles don't destroy actual wealth. Instead, they stop destructive processes which convert actual wealth into imaginary wealth. Suppose it would cost \$120,000 to build a house that's ...
supercat's user avatar
  • 285
6 votes
Accepted

True or False: During the Japan Bubble, one sky scraper in Tokyo was worth more than the entire state of california?

Brian is right. The claim was that, if you took the cost per square meter of land area in Tokyo based on market rates, the Imperial Gardens in Tokyo were worth more than California. Source: http://...
dismalscience's user avatar
6 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

There will be a rapid rise in artificial schemes to get round the letter of the law. For example, an agent may charge you 90% of the minimum legal sale price to officially register your house as ...
alephzero's user avatar
  • 451
5 votes
Accepted

because bitcoins do not generate earnings, then (it is a ponzi scheme)?

What is the reasoning behind the notion that because bitcoin has no intrinsic value therefore it's not suitable as currency? Or, to put another way, if no one "held" US dollars, but simply used ...
JimmyJames's user avatar
4 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

This would be a catastrophically bad idea. The next time the economy turns down, what happens? Workers who own houses for which they cannot find a buyer at the same price they paid for the house, ...
nigel222's user avatar
  • 261
3 votes

A law against selling any house cheaper than it was bought for, what consequences would that have?

Price is the thing that balances supply and demand, if you fix prices artificially low then you create supply shortages. If you fix them artificially high you create demand shortages. So people who ...
Peter Green's user avatar
3 votes
Accepted

Why recent crises all started with a housing bubble?

In a fractional reserve monetary system loans create money and loan repayments destroy money. Most bank lending in modern times is for the purpose of purchasing real estate. So the amount of money ...
Mick's user avatar
  • 1,046
2 votes

because bitcoins do not generate earnings, then (it is a ponzi scheme)?

In general, it is possible to find assets that earn a positive yield. There are still positive-yield low-risk bonds and savings accounts out there, for most currencies. Therefore, rational people ...
410 gone's user avatar
  • 8,168
2 votes

Does it affect locals negatively when a new company moves in?

This is a very unique situation in Dallas/North Texas. This is the absolute worst economic growth possible for locals. Here are two key elements to look into: Wages are fairly stagnant in DFW. This ...
Alan C.'s user avatar
  • 21
2 votes

What activity or event(s) marks the point at which an economic "bubble" burst?

An Economic bubble "bursts" when we see a sudden drop in price (as you have said in your question). Wikipedia has an appropriate comment on the issue of bubbles being: "...bubbles are often ...
EconJohn's user avatar
  • 8,405
2 votes

What activity or event(s) marks the point at which an economic "bubble" burst?

An economic "bubble" bursts when the buyers in the market deem the good or service to be overpriced. At a certain point, the price of whatever is causing the bubble will reach a certain "threshold ...
Mathematician's user avatar
2 votes

Was the financial crash of 2008 caused by top graduates of the American Ivy Leagues working at wall street banks?

Question 1: Was the financial crash of 2008 caused by top graduates of the American Ivy Leagues working at wall street banks? No for several reasons. First financial crises are unavoidable, no ...
1muflon1's user avatar
  • 56.8k
2 votes
Accepted

Why would China's housing be in a bubble?

This issue has been at the fore among China watchers for many years. While bubble classification is often subjective (even the Fed concedes): [The] econometric detection of asset price bubbles cannot ...
Arash Howaida's user avatar
2 votes
Accepted

Empirical means of discerning "economy" and "bubble"

You are probably not far off the mark. While there may be no consensus what a bubble is, one proposed definition is Unusual changes in single measures, or relationships among measures (e.g., ratios) ...
against very long user names's user avatar
1 vote

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

Quick answer: the banks who created the mortgages got paid for creating them (origination fees) then offloaded the risky loans to someone else within 30-60 days. Why there was a downstream market for ...
JWally's user avatar
  • 119
1 vote

In the context of Blanchard and Watson (1982), what is the difference between the bubble component, bubbles and bubble?

The bubble component refers to the deviation of the price of an asset from its fundamental value, that is, the value that would be expected based on economic fundamentals such as earnings or dividends....
Timmetje's user avatar
  • 111
1 vote

True or False: During the Japan Bubble, one sky scraper in Tokyo was worth more than the entire state of california?

Clearly false. One of the largest skyscrappers in Tokyo has an area of 2,630,300 square feets. Estimating value per square feet to be \$5000, its value is less than $15 billion. The houses in Los ...
Giskard's user avatar
  • 29.2k
1 vote

Are cryptocurrencies a ponzi scheme or a bubble?

I would say cryptocurrencies are in a speculative boom phase based on examples of Ethereum being 10 dollars in 2016 and jumping to 370 dollars the following year and Bitcoin going from 900 dollars to ...
Daniel's user avatar
  • 476
1 vote
Accepted

Is a financial bubble harmless if rich people choose to hoard their wealth?

As discussed in comments, we can define a financial bubble as a situation where financial assets are overvalued based on expected cash flows, yet investors expect other investors will be willing to ...
Brian Romanchuk's user avatar
1 vote

Is a financial bubble harmless if rich people choose to hoard their wealth?

an economic bubble happens when too much money was chasing after too little goods This is not correct statement. When too much money chases too little goods you get inflation including asset prices ...
1muflon1's user avatar
  • 56.8k
1 vote
Accepted

Does it affect locals negatively when a new company moves in?

I can't add a comment as I don't have enough rep, so this is my reply to @LetTheWritersWrite. First off, as for a recession: It is believed by many economists that we are beginning a recession right ...
user117428's user avatar
1 vote

A law against selling any house cheaper than it was bought for, what consequences would that have?

A point that doesn't yet seem to have been made is that banks and other mortgage lenders would have to stop lending as soon as such a law was proposed, never mind enacted, and that would in itself ...
Mike Scott's user avatar

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