 Home Equity Extraction, Growth, and the Subprime Crisis within the Theory of the Monetary CircuitRémi Stellian
European Journal of Economic and Social Systems, 2010, vol. 23, issue 1, 45-62 Abstract: Economic policy attempts to stimulate growth after the subprime crisis. In light of the theory of the monetary circuit, this paper focuses on a too much neglected phenomenon associated with this crisis, which makes it difficult for growth to restart in the United States. The phenomenon at issue is as follows: home equity extraction gave an increasing support to consumption, but this support is suppressed by the subprime crisis. We first explain home equity extraction and the related support, before incorporating the latter within the theory of the monetary circuit. This leads to consider this support as a decisive component of the working of the economy, as it increasingly contributes to the reflux phase of monetary circuits. We then explain the suppression of this support by the subprime crisis. As this comes to suppress a decisive component of the working of the economy, we thereafter explain why recovery is undermined, since monetary circuits can no longer rely on the above support to achieve their reflux phase. Keywords: Consumption; Growth; Home Equity Extraction; Monetary Circuit; Subprime Crisis (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:ejessy:0042 Access Statistics for this article European Journal of Economic and Social Systems is currently edited by Bernard Paulré and Stefano Lucarelli More articles in European Journal of Economic and Social Systems from Lavoisier |
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