Reply To: Can Consumer Loans Cause the Business Cycle?


So, let me see if I understand this correctly in the case of the housing bubble. Because of the low interest rates and irresponsible housing policy, more houses could be purchased than otherwise would have been the case absent government interference. This, in turn, resulted in more producer loans in the industry, since the increased availability of consumer loans was signaling to lenders that it was a profitable market. But, the distortions in the capital structure only came about as a result of the producer loans, and the consumer loans were simply a catalyst.