Question

In: Economics

Why is N. Ferguson suspicious of what he calls the “American Dream” where everyone owns their...

Why is N. Ferguson suspicious of what he calls the “American Dream” where everyone owns their home? What roles do lenders play in this “dream”? What is an example in recent economic history of this “dream” gone wrong?

Solutions

Expert Solution

Lenders play a very important role in fulfilling this 'American dream' when everyone has their own home. The recent economic history of this dream gone wrong is 2008 financial crises of USA. In 2008, the housing bubble that was generating since early 2000 hone burst. So the prime of that bubble burst was inefficinet or irrational behaviour of lenders. They were lending above their capacity due to their blind faith in real estate market that I won't burst.

So, it is very important for this American dream that lenders fulfill their role with par efficinecy and rationality. Only then this dream can be achieved without any loss.


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