The contribution of wealth concentration to the subprime crisis: a quantitative estimation
The crisis that broke out in mid-2007 was caused by the fact that the CDO market had grown to a size sufficient to wreak general havoc when it suddenly collapsed. Several authors have argued that economic inequality was important to the growth of this market. This paper attempts to strengthen this argument by concentrating attention on global wealth concentration. After summarising recent evidence on the negative impact of investor demand on US bond yields in the pre-crisis period, new evidence regarding the specific contribution of high net worth individuals to this negative impact is presented. The paper then goes on to show how, after having helped to caused a yield problem in the major US debt markets, high net worth individuals (via hedge funds) continued to be a major source of the pressure on US banks to resolve this yield problem through the mass production of CDOs
|Date of creation:||10 Dec 2011|
|Date of revision:|
|Contact details of provider:|| |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2006.
"Home bias in global bond and equity markets: the role of real exchange rate volatility,"
Working Paper Series
0685, European Central Bank.
- Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2007. "Home bias in global bond and equity markets: The role of real exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 631-655, June.
- Viral V. Acharya & Philipp Schnabl, 2010. "Do Global Banks Spread Global Imbalances? The Case of Asset-Backed Commercial Paper During the Financial Crisis of 2007-09," NBER Working Papers 16079, National Bureau of Economic Research, Inc.
- �zlem Onaran & Engelbert Stockhammer & Lucas Grafl, 2011. "Financialisation, income distribution and aggregate demand in the USA," Cambridge Journal of Economics, Oxford University Press, vol. 35(4), pages 637-661.
- Photis Lysandrou, 2011. "The primacy of hedge funds in the subprime crisis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 34(2), pages 225-254, January.
- Bandholz, Harm & Clostermann, Jörg & Seitz, Franz, 2007.
"Explaining the US bond yield conundrum,"
OTH im Dialog: Weidener Diskussionspapiere
2, University of Applied Sciences Amberg-Weiden (OTH).
- Adrian Blundell-Wignall, 2007. "Structured Products: Implications for Financial Markets," Financial Market Trends, OECD Publishing, vol. 2007(2), pages 27-57.
- Palma, J.G., 2011. "Homogeneous middles vs. heterogeneous tails, and the end of the ‘Inverted-U’: the share of the rich is what it's all about," Cambridge Working Papers in Economics 1111, Faculty of Economics, University of Cambridge.
- José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 829-869, July.
- Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
- Ricardo J. Caballero & Arvind Krishnamurthy, 2009.
"Global Imbalances and Financial Fragility,"
American Economic Review,
American Economic Association, vol. 99(2), pages 584-88, May.
- De Loubens, A. & Idier, J. & Jardet, C., 2007. "Determinants of long-term interest rates in the United States and the euro area: A multivariate approach," Working papers 170, Banque de France.
- Mustiers, J P. & Dubois, A., 2007. "Risks and return of banking activities related to hedge funds," Financial Stability Review, Banque de France, issue 10, pages 85-94, April.
- Thomas Goda & Photis Lysandrou & Chris Stewart, 2011. "The contribution of us bond demand to the us bond yield conundrum of 2004 to 2007: an empirical investigation," DOCUMENTOS DE TRABAJO CIEF 010719, UNIVERSIDAD EAFIT.
When requesting a correction, please mention this item's handle: RePEc:col:000122:010718. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Centro de Investigaciones Económicas y Financieras (CIEF))
If references are entirely missing, you can add them using this form.