While many investors are celebrating the tenth anniversary of the bull market in stocks, real estate agent John Wake suggested last week that a shift in the kind of loans that banks made was the cause of the housing bubble.
The Debt Shift Theory says that the removal of central bank credit guidance policies in the 1980s and 1990s led to a large shift in lending toward pre-existing assets which lead to a large shift in debt toward real estate and financial asset purchases. The shift in debt had impacts on real estate and financial asset prices, price instability, expenditures on goods and services, labor productivity, wage growth, income inequality and was the root cause of the Great Financial Crisis.
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