Consumption booms and housing busts

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A bit of detective work at Pieria. I was puzzled by Mian & Sufi's claim in their book House of Debt that from 2006-8, falling house values caused householders to cut back spending sharply enough to cause a recession. Although wealth effects were severe, particularly for lower-income households, there didn't seem any reason for them to have such a dramatic effect. What was really going on? And what has this got to do with current London house prices?

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