5min chapter

The Joe Walker Podcast cover image

Housing Bubble Week Epilogue: Not All Bubbles Are Created Equal - Vernon Smith

The Joe Walker Podcast

CHAPTER

The Effect of Negative Equity on Consumption

Housing bubbles represent a way of tricking people into taking on too much debt. When prices finally subside when the tide pulls back out, people are left holding fixed nominal debt. But due to the nature of debt, they have the junior claim, they lose the equity and suddenly they're under water on their household balance sheet.

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