That is the point. You assume there is too much capital out-there, but the housing bubble proves that there was NO capital in the housing sector. That’s why nobody bought the houses, bankruptcies ensued, capital that was diverted to the housing sector had nobody to buy the houses so nobody got paid back on their investments, and so the market collapsed in that sector of the economy. That’s what happened. That’s a fact. I mean are you going to argue that people didn’t go bankrupt on their houses and that people paid back all their mortgages? You know they didn’t. That’s why it collapsed.
That’s the market. The market is ONLY about consumers. The market ONLY exists because there are people who want to exchange for what another person has. You can’t make bread when nobody wants to buy it. So make butter instead because people do want butter. The market doesn’t collapse and producers get returns on their investments. win-win.
There were no savings. We proved that already. Mortgages are IOU’s, MBS and CDS are derivatives (not savings), and these were not paid off because they are credit, not savings. They were not paid back because nobody had any savings to pay off this part of the economy. It was credit driven, NOT savings driven.
Yes because the theory you are using caused it.