Problem: The land I have been working on over the last 7 years is owned by my family. The land prices in that area have already appreciated and going forward they predict it will appreciate even further. So much so, that doing agriculture on it doesn’t make business sense. Given their background in real estate development, they eventually plan to demolish my Indo Israel Avocado Nursery and farm and develop residential housing on it. They are offering to buy me another larger piece of land where I can do my project. But even that land won’t be solely be owned by me, thus I won’t have locus of control.
Given my track record (which is easily available online), I am partly if not wholly responsible for the land appreciation in that area. And I am known for being modest.
What should I do? Let them cut my avocado trees which have only just begun fruiting that me and my team have been working hard on over the last 7 years. Or find a solution?
Search for the Answer
Since the fourth turning is taking some time and the markets aren’t collapsing as soon as I need them to. So I have begun reading, Understanding the Great Recession – A pluralist approach to US Capitalism in the 21st Century.
Some notes –
How did US capitalism expand without significant job creation, without rising real incomes for workers, and with relatively greater consumption of foreign goods and services?
– Bush administration ran budget deficits. A budget deficit occurs when govt expenditures exceed tax revenues. Both policy decisions and weak economic performance can contribute to a deficit. Therefore there are 2 types of fiscal deficits –
- Structural – Bush administration ran series of tax cuts that heavily favored the rich, expansion of Medicare and budget allocation to wars in Afghanistan and Iraq.
- Cyclical – sluggish economic growth
Tax revenues decreased, as it was more difficult for the government to collect taxes from middle-income earners, whose incomes were stagnant. Tax cuts for top income earners in particular exacerbated the drop in federal tax receipts.
Expenditures also increased as more people qualified for social welfare programs, such as food stamps and unemployment insurance.
But at the same time, consumption increased significantly. The deeper question then becomes, how did US workers spend more without actually earning more? Simple answer: they borrowed more.
Beginning in the late 1990s, US Capitalism experienced a significant home price appreciation that developed into a housing market bubble. Workers financed greater consumption, despite stagnant earnings, by borrowing against the only asset that they typically own: their home.
Historically low interest rates, as a result of the Federal Reserve’s expansionary monetary policy, combined with greater access to credit through subprime mortgage lending, enabled a sharp increase in household debt.
A sub prime mortgage product is a loan for riskier borrowers who do not qualify for traditional fixed rate mortgages.
In the spring of 2006, the rapid home price appreciation ended and the bubble began to burst. As workers no longer had access to significant source of credit. This had several dire consequences that slowed economic performance over the next year. Resulting in
- Workers could no longer sustain their level of consumption, which was the largest source of overall spending.
- Second, they could no longer refinance their already high level of debt, which led to a surge in mortgage defaults and foreclosures.
- Third, as economic uncertainty rose with the implosion of the subprime mortgage market, business investment collapsed.
In an effort to stem the increasingly inevitable slide into recession and boost spending, the Federal reserve lowered bench mark interest rates in the summer of 2007. It was no where near enough, by December, 2007 the inherently weak fundamentals following the 2001 downturn were no longer sustainable and US capitalism slipped back into recession.
Questions for the Indian context?
Does Indian government has fiscal deficits? – ask Devashree
If Yes, are they structural or cyclical? – figure it out yourself
Do Indian workers spend more without earning more? – ask staff
Are they borrowing more? – ask staff
Is the interest rate of borrowing low? – no? why? and why do cashless economies have lower interest rates than developing economies?
Is the monetary policy expansionary? – ask chatgpt
What about subprime mortgage lending? – hinduja housing finance, shriram housing finance, aadhar housing finance, SMFG
How does refinancing mortgages work in India?
Date: 7 May, 2026
The 2008 financial crisis and the policy responses of the Bush Admisnistration
In March, the collapse of Bear Stearns set in motion the transition from a mortgage default crisis to a full blown financial crisis. Bear Stearns was a wallstreet investment bank that engaged in mortgage securitization.
Securitization is a process whereby an investment bank purchases mortgages from a commercial bank using borrowed funds, pools the mortgages and sells the income flow from the underlying pool as a security. As long as borrowers paid their mortgages, investors in mortgage backed securities held financial assets with solid market value and bear stearns in turn made a profit.
The perception at the time was that mortgage – backed securities were high quality, low default risk investments because commercial banks primarily lent to low-default risk borrowers.
With the sub prime crisis, however, investors began to question Bear’s exposure to subprime mortgages, and a lack of confidence in the quality and risk of bear’s mortgage pools set in.
The problem for wallstreet was this: if Bear had invested heavily in sub prime mortgages, and those borrowers defaulted on their payments, then Bear would no longer have access to the income flows from mortgages. If Bear ran out of money, and the underlying value of its mortgage pools collapsed, it would be unable to transfer income to mortgage backed security investors. Bear would also be unable to repay its own creditors. This sentiment heightened the default risk of mortgage – backed securities and led to a collapse in their market value throughout global financial markets. With their rebranding as toxic assets, bear could no longer engage in profitable securitization.
Furthermore, institutional investors in mortgage backed securities throughout the financial system now held an asset with almost zero market value, which they could no longer liquidate. Resulting in a loss of net worth for them.
Once confidence in bear stearns detriorated, a self fulfilling prophecy ensued and the process unwound.
When investors perceived that bear was at risk of default, they took actions actions that culminated in the very outcome they sought to avoid. Unable to raise capital due to high degree of uncertainity, the federal reserve bank of new york arranged the sale of bear stearns to jp morgan chase.
What started as a housing market bust, led to a mortgage default crisis, the failure of an investment bank, and now a crisis in the securirites markets.
By the summer of 2008, it was clear that uncertainity in the financial system had extended beyond the failure of bear stearns. A surge in oil prices to over 130$ per barrel placed further stress on economic activity.
It was also clear that traditional expansionary fiscal and monetary policies would not be enough to boost economic growth.
The federal government therefore decided to take more direct action against the subprime mortgage meltdown and passed the housing and economic recovery act (HERA) in July.
HERA featured the following provisions: A tax credit for new home owners, in order to stimulate housing demand and stem the collapse of housing prices, funding to refinance subprime loans to traditional 30 year, fixed rate loans and capital injections for fannie mae and freddie mac, which set the stage for their eventual takeover by the federal government in the fall of that year.
Fannie Mae and Freddie Mac are government chartered, publicly traded home mortgage companies. At the time
