Yep, that sounds like a true world crisis. And you can read about it right here in the NYT. The headline of the article tells readers that this year’s meeting of the world’s rich will focus on the aging of Asia’s population. As the piece explains:
“Asia’s aging has big implications globally. It ultimately means fewer workers and higher wages, adding to the cost of goods manufactured in Asia. And it could mean less dynamic growth in a region that is increasingly important to the world economy.”
Of course most of us value growth because it can increase living standards. This means things like higher wages, which translate into more income per person. Higher GDP that is simply due to more people, is not anything to be valued. (I’m open to a story if someone wants to give it.) And of course in a world where global warming is a huge problem facing the future, lower rates of population growth or population decline should be celebrated, not feared.
The piece also seems to get some of its basic numbers wrong. At one point it tells readers:
“Roughly 9 percent of Chinese, well over 110 million people, are now aged 65 or older. That percentage is only slightly below that in the United States. Moreover, it will rise to more than 16 percent by the end of the next decade, according to United Nations projections, meaning that by then China’s population will be roughly as old as Europe’s is now.”
Let’s see, 9 percent of China’s population is over age 65 and this is only slightly below the ratio in the United States? That’s not what the Social Security trustees say. The 2013 trustees report puts the total population in 2012 at 319.7 million. The over 65 population is listed at 43.6 million. This puts the share of the elderly at 13.6 percent. That’s more than 50 percent higher than share of 9 percent given for China in this article.
Typo corrected, thanks Joe.
Yep, that sounds like a true world crisis. And you can read about it right here in the NYT. The headline of the article tells readers that this year’s meeting of the world’s rich will focus on the aging of Asia’s population. As the piece explains:
“Asia’s aging has big implications globally. It ultimately means fewer workers and higher wages, adding to the cost of goods manufactured in Asia. And it could mean less dynamic growth in a region that is increasingly important to the world economy.”
Of course most of us value growth because it can increase living standards. This means things like higher wages, which translate into more income per person. Higher GDP that is simply due to more people, is not anything to be valued. (I’m open to a story if someone wants to give it.) And of course in a world where global warming is a huge problem facing the future, lower rates of population growth or population decline should be celebrated, not feared.
The piece also seems to get some of its basic numbers wrong. At one point it tells readers:
“Roughly 9 percent of Chinese, well over 110 million people, are now aged 65 or older. That percentage is only slightly below that in the United States. Moreover, it will rise to more than 16 percent by the end of the next decade, according to United Nations projections, meaning that by then China’s population will be roughly as old as Europe’s is now.”
Let’s see, 9 percent of China’s population is over age 65 and this is only slightly below the ratio in the United States? That’s not what the Social Security trustees say. The 2013 trustees report puts the total population in 2012 at 319.7 million. The over 65 population is listed at 43.6 million. This puts the share of the elderly at 13.6 percent. That’s more than 50 percent higher than share of 9 percent given for China in this article.
Typo corrected, thanks Joe.
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Paul Krugman is a very smart person who does a fine job of defending himself. But he has enough detractors who repeat the same nonsense enough times that some reasonable people may actually be deceived.
For this reason, I will briefly intervene to point out that the people claiming Krugman called on Greenspan to create a housing bubble in 2002, like Bret Stephens in the Wall Street Journal today, are just making stuff up.
The basis for this absurd claim was a 2002 column on the weak recovery following the 2001 recession. The column notes the weakness of the economy at the time (we were still losing jobs 8 months after the official end of the recession) and attributes it to the fact that the 2001 recession was not a standard post-war recession. It was brought about by the collapse of the stock bubble.
Krugman then wrote:
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
It should have been pretty evident that this was sarcastic. Later in the piece, Krugman derides Greenspan for failing to have taken steps to head off the stock bubble, explaining that Greenspan badly needed a recovery:
“to avoid awkward questions about his own role in creating the stock market bubble.”
The last paragraph expresses Krugman’s pessimism about the recovery’s prospects:
“But wishful thinking aside, I just don’t understand the grounds for optimism. Who, exactly, is about to start spending a lot more? At this point it’s a lot easier to tell a story about how the recovery will stall than about how it will speed up. And while I like movies with happy endings as much as the next guy, a movie isn’t realistic unless the story line makes sense.”
Note, there is no moaning about how difficult it is to get a housing bubble going. The point was that we needed some additional source of demand and Krugman did not see where it would come from. In this respect, it is worth noting that two weeks later, partly at my prodding, Krugman wrote a column explicitly warning about the dangers of a housing bubble.
So let’s cut the crap. There are plenty of places that right-wingers should be able to take issue with what Krugman says, but the story about him urging Greenspan to create a housing bubble in 2002 is complete nonsense. The people who repeat this line are either dishonest or too clueless to take seriously.
Paul Krugman is a very smart person who does a fine job of defending himself. But he has enough detractors who repeat the same nonsense enough times that some reasonable people may actually be deceived.
For this reason, I will briefly intervene to point out that the people claiming Krugman called on Greenspan to create a housing bubble in 2002, like Bret Stephens in the Wall Street Journal today, are just making stuff up.
The basis for this absurd claim was a 2002 column on the weak recovery following the 2001 recession. The column notes the weakness of the economy at the time (we were still losing jobs 8 months after the official end of the recession) and attributes it to the fact that the 2001 recession was not a standard post-war recession. It was brought about by the collapse of the stock bubble.
Krugman then wrote:
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
It should have been pretty evident that this was sarcastic. Later in the piece, Krugman derides Greenspan for failing to have taken steps to head off the stock bubble, explaining that Greenspan badly needed a recovery:
“to avoid awkward questions about his own role in creating the stock market bubble.”
The last paragraph expresses Krugman’s pessimism about the recovery’s prospects:
“But wishful thinking aside, I just don’t understand the grounds for optimism. Who, exactly, is about to start spending a lot more? At this point it’s a lot easier to tell a story about how the recovery will stall than about how it will speed up. And while I like movies with happy endings as much as the next guy, a movie isn’t realistic unless the story line makes sense.”
Note, there is no moaning about how difficult it is to get a housing bubble going. The point was that we needed some additional source of demand and Krugman did not see where it would come from. In this respect, it is worth noting that two weeks later, partly at my prodding, Krugman wrote a column explicitly warning about the dangers of a housing bubble.
So let’s cut the crap. There are plenty of places that right-wingers should be able to take issue with what Krugman says, but the story about him urging Greenspan to create a housing bubble in 2002 is complete nonsense. The people who repeat this line are either dishonest or too clueless to take seriously.
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The NYT treated its readers to the French version of Le Grande Bargain, with a column by Sylvie Kauffman, the editorial director and former editor in chief of Le Monde. Ms. Kauffman’s piece, “the unbearable lightness of Hollande,” is devoted to the indecisiveness of the French president both in his policies and apparently in his personal life.
Her main complaint is:
“Perplexed by their president’s economic indecisiveness since he took office, the French now learn that he is equally indecisive in his private life. And they have found out at the worst moment. After hesitating to address squarely the issue of radical economic reforms, after avoiding to cut public spending to reduce the fiscal deficit, after procrastinating on measures needed to restore the competitiveness of French companies, the president, having lost 20 months, finally decided that it was time to do all of the above.”
Hmmm, Hollande put off Kauffman’s radical economic reforms and spending cuts for 20 months and this perplexed the French? Well if Hollande ran on an agenda of cutting social spending to go along with tax cuts, it certainly was not widely reported in the United States. I haven’t checked back issues of Le Monde (my French is mixed at best), but my guess is that Ms. Kauffman’s paper did not report any such commitments from Hollande either.
In fact, what was reported on Hollande’s campaign was a promise to break with austerity and to follow the precepts of modern economics. This means increasing deficits in a downturn, not cutting them. There is no evidence that the private sector will make up for the demand lost due to reductions in the deficit. In fact, there is now a large body of evidence, much of it produced by the International Monetary Fund, showing that the program demanded by Kauffman will lead to slower growth and more unemployment.
In effect, Kaufman is telling NYT readers that she finds it unbearable that a French president, who was elected on a platform going 180 degrees in the opposite direction, waited 20 months to embrace the economic policies that she favors; policies that have been shown to slow growth and raise unemployment.
Undoubtedly being the editorial director or editor in chief of Le Monde is a very important and prestigious position in France. Just as people like Peter Peterson and his fellow corporate chieftains in Fix the Debt feel that their policy perspectives should over-ride the views of the vast majority of the public and the state of knowledge in the economics profession, Ms. Kauffman feels the same way with respect to the French people.
I suppose elites everywhere never had much use for democracy or inconvenient truth. Get me some freedom fries.
The NYT treated its readers to the French version of Le Grande Bargain, with a column by Sylvie Kauffman, the editorial director and former editor in chief of Le Monde. Ms. Kauffman’s piece, “the unbearable lightness of Hollande,” is devoted to the indecisiveness of the French president both in his policies and apparently in his personal life.
Her main complaint is:
“Perplexed by their president’s economic indecisiveness since he took office, the French now learn that he is equally indecisive in his private life. And they have found out at the worst moment. After hesitating to address squarely the issue of radical economic reforms, after avoiding to cut public spending to reduce the fiscal deficit, after procrastinating on measures needed to restore the competitiveness of French companies, the president, having lost 20 months, finally decided that it was time to do all of the above.”
Hmmm, Hollande put off Kauffman’s radical economic reforms and spending cuts for 20 months and this perplexed the French? Well if Hollande ran on an agenda of cutting social spending to go along with tax cuts, it certainly was not widely reported in the United States. I haven’t checked back issues of Le Monde (my French is mixed at best), but my guess is that Ms. Kauffman’s paper did not report any such commitments from Hollande either.
In fact, what was reported on Hollande’s campaign was a promise to break with austerity and to follow the precepts of modern economics. This means increasing deficits in a downturn, not cutting them. There is no evidence that the private sector will make up for the demand lost due to reductions in the deficit. In fact, there is now a large body of evidence, much of it produced by the International Monetary Fund, showing that the program demanded by Kauffman will lead to slower growth and more unemployment.
In effect, Kaufman is telling NYT readers that she finds it unbearable that a French president, who was elected on a platform going 180 degrees in the opposite direction, waited 20 months to embrace the economic policies that she favors; policies that have been shown to slow growth and raise unemployment.
Undoubtedly being the editorial director or editor in chief of Le Monde is a very important and prestigious position in France. Just as people like Peter Peterson and his fellow corporate chieftains in Fix the Debt feel that their policy perspectives should over-ride the views of the vast majority of the public and the state of knowledge in the economics profession, Ms. Kauffman feels the same way with respect to the French people.
I suppose elites everywhere never had much use for democracy or inconvenient truth. Get me some freedom fries.
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Joe Nocera makes an important point very badly in his column today. He contrasts a sharp reduction in poverty in Brazil over the last dozen years with continued high unemployment in the United States. Nocera then notes Brazil’s recent growth slowdown, which he attributes to slow productivity growth. He then notes the rapid growth in the United States in the third quarter and continually rising productivity and concludes that growth may not be the most important goal of the economy.
While the point is well taken, Nocera discussion of growth in the United States and Brazil is completely wrong. While growth in Brazil has not been especially strong for a developing country, it did not manage to achieve its reductions in poverty without growth. According to the IMF, Brazil’s growth has averaged 3.5 percent in the years from 2002-2013. This is far from the rates that countries like Thailand and China have maintained, but it is very far from zero. It is unlikely that Brazil could have accomplished anywhere near as much poverty reduction if its growth had been zero.
In the case of the United States, high unemployment is directly connected to slow growth. While we had one quarter of relatively good growth (4.0 percent is not especially strong for an economy recovering from a severe downturn), economic growth has generally been weak in this recovery. In the years 2010-2012 the growth rate averaged just 2.4 percent, which is roughly the same as the economy’s potential growth rate. This means that the economy was making up almost none of the ground lost in the downturn. Insofar as we were able to achieve reductions in the unemployment rate it was the result of lower than normal productivity growth and people dropping out of the labor force.
By contrast, in the three years following the 1974-75 recession, growth averaged 5.2 percent. In the three years after the 1981-82 recession, growth averaged 5.4 percent. There is no reason to believe that if we saw faster growth we would not see more rapid reductions in unemployment. The problem with the third quarter growth figure was that it has not been sustained. If I’m driving across country I get there more quickly if I drive 70 MPH than if I drive 50 MPH. But it doesn’t make much difference if I drive 70 MPH for just 10 minutes. Nocera seems to think that it should.
Joe Nocera makes an important point very badly in his column today. He contrasts a sharp reduction in poverty in Brazil over the last dozen years with continued high unemployment in the United States. Nocera then notes Brazil’s recent growth slowdown, which he attributes to slow productivity growth. He then notes the rapid growth in the United States in the third quarter and continually rising productivity and concludes that growth may not be the most important goal of the economy.
While the point is well taken, Nocera discussion of growth in the United States and Brazil is completely wrong. While growth in Brazil has not been especially strong for a developing country, it did not manage to achieve its reductions in poverty without growth. According to the IMF, Brazil’s growth has averaged 3.5 percent in the years from 2002-2013. This is far from the rates that countries like Thailand and China have maintained, but it is very far from zero. It is unlikely that Brazil could have accomplished anywhere near as much poverty reduction if its growth had been zero.
In the case of the United States, high unemployment is directly connected to slow growth. While we had one quarter of relatively good growth (4.0 percent is not especially strong for an economy recovering from a severe downturn), economic growth has generally been weak in this recovery. In the years 2010-2012 the growth rate averaged just 2.4 percent, which is roughly the same as the economy’s potential growth rate. This means that the economy was making up almost none of the ground lost in the downturn. Insofar as we were able to achieve reductions in the unemployment rate it was the result of lower than normal productivity growth and people dropping out of the labor force.
By contrast, in the three years following the 1974-75 recession, growth averaged 5.2 percent. In the three years after the 1981-82 recession, growth averaged 5.4 percent. There is no reason to believe that if we saw faster growth we would not see more rapid reductions in unemployment. The problem with the third quarter growth figure was that it has not been sustained. If I’m driving across country I get there more quickly if I drive 70 MPH than if I drive 50 MPH. But it doesn’t make much difference if I drive 70 MPH for just 10 minutes. Nocera seems to think that it should.
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Why is hard to understand that a healthy person who pays $6,000 a year into the insurance system is more helpful to its finances than a healthy person who pays $2,000 a year? That is the basic story when it comes to older people in the exchanges (ages 55-64) and younger people. The average premium for this older group is three times as much as for the younger group. Large portions of both age groups will require little or no health care services over the course of a year.
This is why it makes relatively little difference if the exchanges have a skewing of enrollees by age, as a Kaiser report showed last year. It does matter hugely if there is a skewing by health condition with only less healthy people signing up. This is why it is annoying to see the Post once again tell readers:
“If not enough young and healthy people sign up on the federal and state insurance marketplaces, that could lead to a cycle of increasing premiums and decreasing enrollment, or what some call a ‘death spiral.'”
The word “young” just takes up space and makes the article less accurate. The program could face a death spiral if enough healthy people do not sign up. It doesn’t matter whether or not they are young.
Why is hard to understand that a healthy person who pays $6,000 a year into the insurance system is more helpful to its finances than a healthy person who pays $2,000 a year? That is the basic story when it comes to older people in the exchanges (ages 55-64) and younger people. The average premium for this older group is three times as much as for the younger group. Large portions of both age groups will require little or no health care services over the course of a year.
This is why it makes relatively little difference if the exchanges have a skewing of enrollees by age, as a Kaiser report showed last year. It does matter hugely if there is a skewing by health condition with only less healthy people signing up. This is why it is annoying to see the Post once again tell readers:
“If not enough young and healthy people sign up on the federal and state insurance marketplaces, that could lead to a cycle of increasing premiums and decreasing enrollment, or what some call a ‘death spiral.'”
The word “young” just takes up space and makes the article less accurate. The program could face a death spiral if enough healthy people do not sign up. It doesn’t matter whether or not they are young.
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It amazing what you can learn reading the New York Times. Andrew Ross Sorkin devoted his column today to the annual World Economic Forum held in Davos, Switzerland. He goes through a list of top executives of major companies and then tells readers:
“Whatever their reasons for staying away, the leaders of some of the largest and most transformative companies are demonstrating, with their absence, the difficulty of convening a global conversation with all the main stakeholders. Given that one of the themes this year is how to address economic inequality, it would be helpful to have the world’s largest employers participate in that discussion, not to mention a sampling of rank-and-file workers, who never receive an invitation.”
It’s not clear why Sorkin thinks that the top executives of the world’s largest companies would have something special to say about addressing economic inequality. After all, these are the people who are pushing hardest to increase inequality. This is a bit like bemoaning the failure of tobacco company representatives to show up at a meeting devoted to ending smoking.
Most of us think that these executives focus on getting rich themselves and possibly enriching their shareholders. If they place a lot of emphasis on reducing inequality that would be news to many of us. For example, does the head of a major corporation come to a board meeting and tell the directors:
“sales and profits are down, but we’ve reduced global inequality.”
That would be news if it were the case, but somehow I doubt it. It is reasonable to assume that corporations are trying to make money, which is why their directors have little interest in even pretending they care about inequality.
It amazing what you can learn reading the New York Times. Andrew Ross Sorkin devoted his column today to the annual World Economic Forum held in Davos, Switzerland. He goes through a list of top executives of major companies and then tells readers:
“Whatever their reasons for staying away, the leaders of some of the largest and most transformative companies are demonstrating, with their absence, the difficulty of convening a global conversation with all the main stakeholders. Given that one of the themes this year is how to address economic inequality, it would be helpful to have the world’s largest employers participate in that discussion, not to mention a sampling of rank-and-file workers, who never receive an invitation.”
It’s not clear why Sorkin thinks that the top executives of the world’s largest companies would have something special to say about addressing economic inequality. After all, these are the people who are pushing hardest to increase inequality. This is a bit like bemoaning the failure of tobacco company representatives to show up at a meeting devoted to ending smoking.
Most of us think that these executives focus on getting rich themselves and possibly enriching their shareholders. If they place a lot of emphasis on reducing inequality that would be news to many of us. For example, does the head of a major corporation come to a board meeting and tell the directors:
“sales and profits are down, but we’ve reduced global inequality.”
That would be news if it were the case, but somehow I doubt it. It is reasonable to assume that corporations are trying to make money, which is why their directors have little interest in even pretending they care about inequality.
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Actually this excellent piece only talks about the first part of the picture, the outlandish paychecks that many medical specialists receive. Most news outlets are too committed to protectionism to discuss the idea of subjecting our doctors to the same sort of international competition as autoworkers or textile workers.
Actually this excellent piece only talks about the first part of the picture, the outlandish paychecks that many medical specialists receive. Most news outlets are too committed to protectionism to discuss the idea of subjecting our doctors to the same sort of international competition as autoworkers or textile workers.
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The NYT has a very nice (in substance, not appearance) chart on per person spending on a wide variety of government programs. readers would find that the military budget costs us $1,802 per person, Medicare $1,591, and Head Start $27. I was disappointed not to see TANF mentioned, which I would eyeball at around $55 per person and the Corporation for Public Broadcasting at around $1.50 per person.
Anyhow, it is great to see this chart, but this should be the standard way to express budget numbers, not something special for holidays. This is providing readers with information. Telling readers that we are projected to spend $8.1 trillion on Medicare over the next decade is just a silly fraternity ritual that budget reporters like to do. It is not informing readers.
The NYT has a very nice (in substance, not appearance) chart on per person spending on a wide variety of government programs. readers would find that the military budget costs us $1,802 per person, Medicare $1,591, and Head Start $27. I was disappointed not to see TANF mentioned, which I would eyeball at around $55 per person and the Corporation for Public Broadcasting at around $1.50 per person.
Anyhow, it is great to see this chart, but this should be the standard way to express budget numbers, not something special for holidays. This is providing readers with information. Telling readers that we are projected to spend $8.1 trillion on Medicare over the next decade is just a silly fraternity ritual that budget reporters like to do. It is not informing readers.
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A Washington Post article on the issues involved in relationship to the chemical spill in West Virginia identified the Competitiveness Policy Institute as a “free-market think tank” in presenting its views opposing increased regulation of dangerous chemical. This is inaccurate.
Supporters of the free market do not believe that others can damage life and property with impunity. For example, it is not consistent with a free market to think that anyone can dump toxic chemicals on Bill Gates’ lawn. Protection of life and property are fundamentals of free market economics.
In this case, it is likely that the company responsible, Freedom Industries, will largely escape responsibility for the damage it caused with its actions since it declared bankruptcy. This means that the victims of the spill were effectively forced to give money to Freedom Industries. This is antithetical to free market principles. A think tank that supports such outcomes should be labeled as a proponent of upward redistribution, not a supporter of free markets.
Typo corrected, thanks Dax.
A Washington Post article on the issues involved in relationship to the chemical spill in West Virginia identified the Competitiveness Policy Institute as a “free-market think tank” in presenting its views opposing increased regulation of dangerous chemical. This is inaccurate.
Supporters of the free market do not believe that others can damage life and property with impunity. For example, it is not consistent with a free market to think that anyone can dump toxic chemicals on Bill Gates’ lawn. Protection of life and property are fundamentals of free market economics.
In this case, it is likely that the company responsible, Freedom Industries, will largely escape responsibility for the damage it caused with its actions since it declared bankruptcy. This means that the victims of the spill were effectively forced to give money to Freedom Industries. This is antithetical to free market principles. A think tank that supports such outcomes should be labeled as a proponent of upward redistribution, not a supporter of free markets.
Typo corrected, thanks Dax.
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The Washington Post used a standard that would have shown subprime loans to be a great boon to tell readers that a housing program by the conservative government in the UK has been a “winner.” The Post’s declaration of the program as a winner is based on the fact that the program, which allows people to buy homes with a 5 percent down payment, has allowed many people to buy homes who could not otherwise afford them. This was true of zero down subprime mortgages issued during the housing bubble years also.
The Post is also confused in its assessment of bubble conditions in the UK. The article implies that existence of a bubble depends on the rate of price increase as opposed to the level of prices, based on this view it tells readers that there may be a bubble in London, but little risk in the rest of the country.
The chart accompanying the piece shows rapidly rising prices in the London market, with prices rising at a more modest pace in the rest of the country and still below their bubble peak in 2007. However the level of prices in the UK is shown as being more than five and a half times its 1983 level. This implies an inflation adjusted increase in house prices of almost 140 percent over the last three decades. Rents have shown no comparable increase, which indicates that house prices are not being driven by the fundamentals of the housing market.
At some point it is likely that house prices will fall to a level more consistent with the fundamentals of the UK housing market. At that time, the beneficiaries of the Conservatives’ homeownership program will be winners in the same way that subprime purchasers in the United States were winners following the crash here.
It is also worth noting that the increase in consumer spending mentioned in this article is likely directly related to the renewed run-up in house prices. People are likely spending against the wealth in their home. This is the well-documented housing wealth effect which shows people increasing annual consumption by between 5-7 cents for each additional dollar of housing wealth. This wealth effect was the reason that the savings rate fell to nearly zero at the peak of the bubble and then rose sharply after house prices collapsed in 2007-2008.
The Washington Post used a standard that would have shown subprime loans to be a great boon to tell readers that a housing program by the conservative government in the UK has been a “winner.” The Post’s declaration of the program as a winner is based on the fact that the program, which allows people to buy homes with a 5 percent down payment, has allowed many people to buy homes who could not otherwise afford them. This was true of zero down subprime mortgages issued during the housing bubble years also.
The Post is also confused in its assessment of bubble conditions in the UK. The article implies that existence of a bubble depends on the rate of price increase as opposed to the level of prices, based on this view it tells readers that there may be a bubble in London, but little risk in the rest of the country.
The chart accompanying the piece shows rapidly rising prices in the London market, with prices rising at a more modest pace in the rest of the country and still below their bubble peak in 2007. However the level of prices in the UK is shown as being more than five and a half times its 1983 level. This implies an inflation adjusted increase in house prices of almost 140 percent over the last three decades. Rents have shown no comparable increase, which indicates that house prices are not being driven by the fundamentals of the housing market.
At some point it is likely that house prices will fall to a level more consistent with the fundamentals of the UK housing market. At that time, the beneficiaries of the Conservatives’ homeownership program will be winners in the same way that subprime purchasers in the United States were winners following the crash here.
It is also worth noting that the increase in consumer spending mentioned in this article is likely directly related to the renewed run-up in house prices. People are likely spending against the wealth in their home. This is the well-documented housing wealth effect which shows people increasing annual consumption by between 5-7 cents for each additional dollar of housing wealth. This wealth effect was the reason that the savings rate fell to nearly zero at the peak of the bubble and then rose sharply after house prices collapsed in 2007-2008.
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