A Theory of Permanently Higher & Higher Income

"covers a 13-month old exploration of a major research paper, arising mostly out of Fed research, that celebrates how modern mortgage securitization released the power of Milton Friedman's "Permanent Income Hypothesis." That theory asserts that people spend according to their long-term income expectations. Doomers probably don't need much help imagining how this mind-set combined with America's traditionally positive attitude towards the future to produce millions of households who weren't exactly bracing for a radical plunge in home prices starting in '07."