More than five years into the depression that is the dominating fact of our economy, we still have no clear picture of its causes.
The consensus is that the bursting of a housing bubble was to blame. Borrowers started to walk away from mortgages based on inflated home prices, and financial companies had to write down the value of securities based on those mortgages. That’s what led to the financial panic of late 2008 and early 2009, and the seizing-up of credit markets in turn sent unemployment soaring. This is the explanation to which President Obama alluded in a July 24 speech on his economic agenda.