Colloquium - It’s more than just subprime: The housing crisis, global capital flows, and American power
February 8, 2008
12:30PM - 12:30PM (EST)
Herman Schwartz, Professor of International Relations, University of Virginia
Herman Schwartz's research focuses on the political and economic causes for the relocation of production on a global scale, and the political and economic consequences of such shifts. He edited and was a contributor to Employment "Miracles" (University of Amsterdam Press, 2005) and also wrote States vs. Markets: The Emergence of the Global Economy (2nd edition, Palgrave, 2000).
We cannot directly see or measure American global economic power, but we can observe capital flows and their physical manifestation in goods like housing. This presentation emphasizes three things about these flows to learn something about American power and its limits: America operated a massive system of financial arbitrage or intermediation that borrowed short and loaned long. Housing sat at the center of those flows because a housing powered U.S. economy grew faster than other rich countries, attracting in more short term investment. The current mortgage crisis is undermining U.S. power by transferring ownership to foreigners who are converting short term holdings in America into long term holdings. The subprime mortgage crisis thus has serious global political and economic consequences that extend beyond a few American metro areas and financial institutions.