Was the Housing Cycle the Proximate Cause of the Great Recession?
The first signs of distress in this Great Recession started in mid-2006 when mortgage default levels began growing – and lending institutions began tightening their credit standards. It surely was the obvious indicator of the beginning of the Great Recession – and it does appear to be the epicenter of the series of events which destroyed wealth in historic proportions. But if we go further back in time, there were signs of duress when we entered the 21st century. We had a recession in 2001/2002, and it is almost as though we never fully recovered. • Gross private domestic investment was growing almost 10% per year through the 90’s, dropped to 3% growth after 2000. We stopped investing in ourselves. • Employment levels which were running over 62% of the population (aged 16 and over) had fallen below 59% by the end of 2007. • Over one half of the total GDP growth since 2000 has been on consumer credit. This type of growth is not sustainable. • Since 2000, $10 trillion dollars of the GDP
