Afternoon Must-Read: Òscar Jordà, Moritz Schularick, and Alan M. Taylor: The Great Mortgaging
…(1) Mortgage lending was 1/3 of bank balance sheets about 100 years ago, but in the postwar era mortgage lending has now risen to 2/3, and rapidly so in recent decades. (2) Credit buildup is predictive of financial crisis events, but in the postwar era it is mortgage lending that is the strongest predictor of this outcome. (3) Credit buildup in expansions is predictive of deeper recessions, but in the postwar era it is mortgage lending that is the strongest predictor of this outcome as well…