Home > Uncategorized > Financialization, home ownership edition

Financialization, home ownership edition

Recent research has emphasized the negative effects of finance on macroeconomic performance and even cautioned of a “finance curse.” As one of the main drivers of financial sector growth, mortgages have traditionally been hailed as increasing the number of homeowners in a country. This article uses long-run panel data for seventeen countries between 1920 (1950) and 2013 to show that the effect of the “great mortgaging” on homeownership rates is not universally positive. Increasing mortgage debt appears to be neither necessary nor sufficient for higher homeownership levels. There were periods of rising homeownership levels without much increase in mortgages before 1980, thanks to government programs, purchasing power increases, and less inflated house prices. There have also been mortgage increases without homeownership growth, but with house price bubbles thereafter. The liberalization of financial markets might after all be a poor substitute for more traditional housing policies.

That’s from Sebastian Kohl. Housing policies of course also include policies aimed at affordable rents.

  1. Ken Zimmerman
    December 21, 2019 at 11:08 am

    I assume that Kohl meant to show us something of importance beyond economists’ ivory tower in his article. What he demonstrates in his article is just the opposite. What happens when government oversight of both mortgages and financialization is pushed to 2nd, 3rd, or even 4th place behind goals protecting the rich and super rich? Little research is necessary to answer this question. Mortgages quickly become a ‘financial tool’ to increase wealth of the rich and super rich and ordinary home buyers become the unwitting and unwilling source of these increases. It’s an old scenario. You know it’s part of the myth of America — don’t rob the poor to enrich the plutocrats. But it is only a myth, right?

  2. Craig
    December 21, 2019 at 6:03 pm

    Mosler’s Modern MONETARY Theory, Keen’s Minsky FINANCIAL Instability Hypothesis, Brown’s Public BANKING, Hudson’s FINANCIAL Parasitism.

    “It’s about the monetary and financial paradigm, stupid!”

    Everyone,

    Let’s have your best guess for the SINGLE concept that defines the new monetary and financial paradigm and every new paradigm. Keen says we need it. If he’s listening here at all I’d like to hear his thoughts about it. C’mon, you can do it. You don’t risk anything in attempting it.

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