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The poor are the cause of the crisis?

Simon Johnson United States is torn by a heated debate on the causes of the financial crisis of 2007-2009. Should we blame the government for what went wrong? And, if so, how?

In December, the Republican minority in the Commission of Inquiry into the Financial Crisis (FCIC, for its acronym in English) intervened with a narrative of dissent trial. According to this group, the wrong policies of government, designed to increase the number of homeowners among relatively poor people, too many people pushed to get subprime mortgages they could not afford.

Potentially, this narrative can gain much support, especially in the House of Representatives controlled by Republicans and on the eve of the presidential election of 2012. But while Republicans in the FCIC eloquently written, is there any evidence to back his claim? Do poor people in America is responsible for causing the most serious global crisis in more than a generation?

Not according to Daron Acemoglu of MIT (and author along with me on other issues), which presented its findings at the annual meeting of the Association of Finance United States in early January. (The slides are available on its website at MIT.)

Republican narrative Acemoglu broken into three different questions. First, is there evidence that American politicians respond to the preferences and wishes of low-income voters?

The evidence on this point is not as definitive as one would like, but what we have, for example, from the work of Larry Bartels of Princeton University, suggests that in the last 50 years, virtually the entire political elite U.S. stopped sharing preferences of voters in low and middle income. The views of the officials are much closer to those commonly are heard at the top of the income distribution.

There are several theories regarding why this change occurred. In our book '13 bankers', James Kwak and I emphasize a combination of the growing role of campaign contributions, the revolving door between Wall Street and Washington, and, above all, an ideological shift towards the idea that the finances are good, that more finance is better and the best thing is finance out of control. There is a clear corollary: the voices and interests of relatively poor people have little in American politics.

Acemoglu's assessment of recent research on the 'lobby' is that private sector parties wanted to relax financial regulations, and worked hard and invested a lot of money to get this result. The impetus for a large market for subprime mortgages came from inside the private sector "innovation" by the giant mortgage lenders like Countrywide, Ameriquest, and many others, backed by large investment banks. And, to speak bluntly, were some of the biggest players on Wall Street, not overly indebted homeowners, those who received government bailouts after the crisis.

Acemoglu then asks if there is evidence that income distribution worsened in the United States in late 1990, prompting politicians to loosen the reins with respect to loan money to people who were "behind." Revenues in the U.S., effectively, became much more unequal over the past 40 years, but the timing does not fit this story at all.

For example, from the work he did with David Author Acemoglu (also of MIT), we know that income for 10% more gains rose sharply during 1980. Weekly earnings grew slowly in the case that less than 50% and 10% earn less earned at the time, but less favored sector in the distribution of income was actually relatively well in the second half of the 1990's. So nobody had to fight it but this segment on the eve of the foolishness of the subprime mortgage, which occurred in early 2000.

Data From Thomas Piketty and Emmanuel Saez, Acemoglu also notes that the dynamics of income distribution by 1% to more wins in America seems different. As suggested by Thomas Philippon and Ariell Reshef, a marked increase in this group in the earning power seems more related to the deregulation of finance (and perhaps other sectors). In other words, the big winners of the "financial innovation" of all kinds in the past three decades were not poor (or even the middle class), but the rich-people already charged too much -.

Finally, Acemoglu examines the role of federal government support housing. Without doubt, the United States long provided subsidies to owner-occupied housing, mainly through a tax deduction for mortgage interest. But this subsidy at all explains the time the housing boom and the crazy loans.

FCIC Republicans accuse the firm of Fannie Mae, Freddie Mac and other government-sponsored companies that supported housing loans under guarantees of different types. They are right when they say that Fannie and Freddie were "too big to fail", allowing them to ask money borrowed at a lower cost and more risk-financing with little capital to support his statement -.

But if Fannie and Freddie poured into dubious mortgages (particularly those known as Alt-A) and made transactions with high-risk providers, this represents a relatively small and appeared late in the cycle ( example, 2004-2005). The main impetus for the rise came from the whole machinery of the securitization of "private label", it was just that: private. In fact, as pointed out by Acemoglu, the powerful private sector players consistently tried to marginalize Fannie and Freddie and exclude them from segments of the rapidly expanding market.

FCIC The Republicans are correct in placing the government in the heart of what went wrong. But this was not a case of over-regulation or excess of range. By contrast, 30 years of financial deregulation, which was possible because it captured the hearts and minds of regulators, and politicians both Republicans and Democrats, gave a narrow elite of the private sector, mainly on Wall Street " - almost all the benefits of the housing boom.

The negative side went to the rest of society, especially in people with little education and poorly paid, now lost their homes, their jobs, hopes for their children all at once. These people did not cause the crisis. But paying for it.

WASHINGTON, DC.

* Simon Johnson, former IMF chief economist, is co-founder of a leading economics blog, http://BaselineScenario.com , a professor at MIT Sloan and senior fellow at the Peterson Institute for International Economics. His book, 13 bankers, who wrote with James Kwak, is now available in paperback.

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In two years the poor have suffered a 64% inflation

• The devaluation will boost the cost of
• health services In 2010 the cost of hospital services, which basically include surgical operations, increased 27%

Victor Salmeron @ vsalmeron

The acceleration in price increases do not affect equally all layers of society. Central Bank statistics record that between 2008 and 2010 the poorest stratum has suffered an inflation of 64% while the wealthiest suffer an onslaught of 60%.

The food absorbs 45% of the wages of poorer families and this is the category where the advance in prices is felt more strongly, this explains why inflation hits mainly the lower income strata.

Only in the last twelve months the price of agricultural products has accumulated a 55.1% jump in an environment away from the expropriation of property investment and the government has been forced to allow adjustments in regulated prices to avoid a more pronounced increase in the shortage.

Everything indicates that in 2011 food will absorb a major portion of family income.

Hugo Chávez administration devalued the currency and the exchange rate for imports of basic foods and medicines increased 65% from 2.6 per dollar to 4.30 per dollar.

The result is that in the coming months will come further adjustments in administered prices, to which is added to the global cost of wheat, Rice and corn are at the highest point since 2008.

The devaluation also increases the cost of imports of medicines and therapeutic devices in the last twelve months and accumulated a 17.8% increase.

According to data from the pharmaceutical sector, about two thousand drugs, ie 30% of the portfolio of local market, are regulated by the authorities. To a large extent, these medications the World Health Organization (WHO) describes as "essential."

The predictable is that exchange rate adjustment also impacts the cost of hospital services include surgical operations basically and in 2010 and increased 27%.

Overall the price increase has far exceeded improvements in wages and private consumption growth essential part of the economy accumulates two years in decline.

Looking at the expense of businesses and people in the country, which technically economists call aggregate demand, 58.8% for the consumption and investment rest.

Thus, the weakness of private consumption, which shows a decrease of 5.9% over the past two years, weakens the possibility that the economy afloat out and leave behind the recession.

Willing to credit control consumption, regarded as superfluous, the government pushed the reform of the Banking Act limits funding cards, essential nut on the engine of economic growth and on the family budget.

consulted Bankers explain that the use of credit cards is not only associated with the purchase of clothing, shoes and other products that the Government can be categorized as non-core in their crusade for what he calls the "necessary consumption."

The middle class also uses credit cards to raise money actually available at the end of each half and remove foods, medicines, clinics and even the cost of private schools. In

According to data from the Superintendency of Banks two private financial institutions are already above the limit for financing with credit cards and another group is near the ceiling.

The law provides 180 days to comply and if not definitely rule is relaxed banks will have to choose between a range of delivery options that include fewer new cards and review of the available space for each client.

Facts:

- The middle class private hospital services used by the deficiencies in the public hospital network.

- The rising cost of medicines and operations adds that qurúrgicas medical and dental visits increased 33.6% in 2010 and rising insurance premiums.

- Private consumption to GDP stood at 61.29% in 2005.

- The Central Bank data from Venezuela suggest that in the first nine months of this year represented 71.90% of GDP.

THE UNIVERSAL
Read the same author, in El Universal: The plan strengthened socialist rentier nature of the economy

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Government

Juan Carlos Caldera

with astonishment to say the least, the Government says all Venezuelans must continue sacrificing and as a Caracas subway pickpocket us reaches into his pocket announcing more taxes and devaluing our bolivar. I think no

Venezuela has seen a gesture of sacrifice, austerity, administrative executive responsible to have the moral authority to ask us to sacrifice ourselves for Venezuelans that it remains rich and poor people increasingly.

It is no secret that wage inflation is eating for Venezuelans and do in each family a true act of magic to make ends meet every month to an economy "socialist" which closes employment, tax increases, it devalues \u200b\u200bthe currency.

is one thing but another is said that since the government does, without flinching announced the devaluation of 2.6 to 4.3 BsF affecting items such as food, medical supplies, medical and surgical equipment and medicines that are the items that represent about 60 percent of household budgets.

are many measures that the government has to take before the people ask for more sacrifices.

A government that cares about its people would at last in the list of sacrifices to the people and not in the first place.

A responsible government would throw first-hand cuts in military spending is clearly not a spending priority for our country in the same direction all the gifts we cut with indignation of the people always made a few buddies of the President countries.

A government that protects people first would reduce the bureaucracy that exists in it, an efficient restructuring of many ministries, autonomous institutions, state enterprises, foundations and how they are created presidential whims.

Venezuelans
why we must remain united in rejecting this paquetazo consolidating a regime that asks sacrifices rich to a poor village.

There is certainly a better way, a path where the Government is a promoter of employment, be a facilitator of free initiative of the Venezuelan people, that is for everyone, an administration and a productive austere.
is most fertile
promote the revival of domestic production to increase the VAT, is more important to create employment to expropriate companies. This new Venezuela

together we can achieve because the Venezuelan people deserve a land of opportunity, a country of employment and safety.

Come together, let's move to the new Venezuela.