In their book, House of Debt, Princeton economist Atif Mian and University of Chicago economist Amir Sufi claim reduced consumption by subprime homeowners occurred when home prices fell and caused the Great Recession. Larry Summers thought the book was “likely to be the most important economics book of 2014.” Paul Krugman cited it as evidence of “problems created by debt overhang.” In a recent blog post, Krugman rails: “The process of deleveraging produces huge, ... Read More
Summers and Krugman Justify Stimulus Using Mian and Sufi’s Hard-to-Believe Theory Subprime Savings Caused Great Recession
Larry Summer and Paul Krugman cite Atif Mian and Amir Sufi's hard-to-believe theory of the Great Recession to justify fiscal stimulus. In their book, House of Debt, Mian and Sufi claim falling home prices caused highly levered subprime households to reduce consumption and temporarily save a larger portion of their earnings. A more likely scenario is that subprime consumption fell back to sustainable levels when low-income households could no longer borrow against the ... Read More
Rescuing Subprime Borrowers Won’t Fix the Economy
Fortune Magazine By Edward Conard | June 11, 2014 In their new book, House of Debt, Atif Mian and Amir Sufi make a persuasive argument that a decline in consumption caused by a drop in home prices slowed the economic recovery more than a weakened banking system. Even if banks were strong, they argue, the demand for loans would still be weak. Mian and Amir Sufi blame a sharp increase in savings by highly levered homeowners for the fall off in consumption and ... Read More
