This comment is spot on. We never actually "solved" the consumer crisis of 2008. We only solved the acute corporate crisis (money market funds breaking the buck, under-capitalized/insolvent investment banks, bond liquidity leading to a markdown death spiral.)
The problem we didn't solve IMHO is the massive housing bubble. To be fair, solving the housing bubble involves lots of winners and losers, so the government would rather kick this can down the road. Obama was able to keep kicking this can for 8yrs.
While there were pops in many places, the steady state price has become whatever a two-earner household can afford with massive debt living paycheck-to-paycheck on a 4% mortgage. That isnt sustainable and causes numerous problems:
- Everyone not already in "the game" loses (youngsters)
- Moving is difficult due to transaction costs (poor job mobility)
- Selling will be impossible (underwater) once rates go up
- Disposable income for spending is reduced, causing people to borrow further.
On the other side of the fence, low rates are horrible for pension funds, pensioners relying on fixed incomes, etc. Pension funds and asset managers with return expectations struggle and reach for riskier assets yielding more. (Tech, to some extent has been a winner here as one result of this has been diversification of pension assets into VC.)
The problem we didn't solve IMHO is the massive housing bubble. To be fair, solving the housing bubble involves lots of winners and losers, so the government would rather kick this can down the road. Obama was able to keep kicking this can for 8yrs.
While there were pops in many places, the steady state price has become whatever a two-earner household can afford with massive debt living paycheck-to-paycheck on a 4% mortgage. That isnt sustainable and causes numerous problems:
- Everyone not already in "the game" loses (youngsters)
- Moving is difficult due to transaction costs (poor job mobility)
- Selling will be impossible (underwater) once rates go up
- Disposable income for spending is reduced, causing people to borrow further.
On top of that, Fannie Mae and Freddie Mac continue to stay in an uncertain state: https://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae...
On the other side of the fence, low rates are horrible for pension funds, pensioners relying on fixed incomes, etc. Pension funds and asset managers with return expectations struggle and reach for riskier assets yielding more. (Tech, to some extent has been a winner here as one result of this has been diversification of pension assets into VC.)