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Image Set I: Chapter 2

 


Figure 2.1 Income Growth versus Housing Price Growth 2001–2006: Contrary to what some experts say, the earlier rapid growth of housing prices was not driven by rising wage and salary income. In fact, from 2001 to 2006, housing price growth far exceeded income growth.

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Figure 2.2 Price of Homes Adjusted for Inflation Since 1890: Contrary to popular belief, housing prices do not ordinarily rise rapidly. In fact, until recently, inflation-adjusted home prices haven’t increased that significantly, but then they just exploded after 2001 (1890 index equals 100).

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 Source: Irrational Exuberance, second edition, 2006 by Robert J. Shiller.

 

 

 

Figure 2.3Dow Jones Industrial Average 1928–2009: Despite massive growth in the U.S. economy between 1928 and 1981, the Dow only rose about 300 percent. But after 1981 it rose an astonishing 1400 percent.

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Figure 2.4Rise of the Financial Assets Bubble:  Financial Assets As a Percentage of GDP: The exploding value of financial assets as a percentage of GDP is strong evidence of a financial bubble.

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Sources: Thomson Datastream and the Federal Reserve.

 

 

 

Figure 2.5Growth of the U.S. Government’s Debt: The U.S. Government’s debt is massive and growing rapidly. With no plan to pay it off and not much ability to pay it off either, it is quickly becoming the world’s largest toxic asset. 

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Source: Federal Reserve.

 

 

 

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Copyright © The New Yorker Collection 2008, Leo Cullum from cartoonbank.com. All rights reserved.

 

 

 

Figure 2.6 Total Non-Farm Jobs 2000 – 2011:  The US has lost almost every single job created during the housing bubble—no jobs, not much demand for homes.

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Sources: Bureau of Labor Statistics.

 

 

 

Figure 2.7Household Debt as a Percentage of Disposable Income: Consumers are having to service an increasing amount of debt relative to their income, making defaults much more likely as the economy goes down.

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Sources: Federal Reserve and U.S. Bureau of Economic Analysis.

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