On The Pan‐da‐nation of Global Savings In Sub‐prime Markets

In Ideal Money and the Motivation of Savings and Thrift (Honesty) Nash opines:

...the “panic of 2008”, which was quite severe and somehow very reminiscent of the American “panic of 1907”, seemed to derive from causal factors in the USA which linked with the traditional array of efforts provided by federal support and/or subsidies for the building a single-family homes.

...there, somehow, came into being a flood of “sub-prime mortgages” which led to floods of “derivatives” which were, unjustifiably, advertised as being of high “investment grade”

An individual of the species “homo oeconomicus”, blessed, we presume, with the facility of “rational expectations”, can be imagined in the situation of needing to decide on whether to put money into a “savings account” or perhaps to follow some other strategy with his money, over a period of time. It is not widely advertised by American financial or banking institutions, but the rate of interest that they would pay on deposit or “money market” accounts might be lower than the rational expectation for the rate of inflation relevant for the national currency.

So should the “economic person” rationally decide to “save”, using such a channel for the depositing of his money, or, perhaps, should that person decide to go early into a housing purchase for which he/she might need to borrow money, perhaps under the conditions applicable to “sub-prime borrowers”?

It is obviously not simply “thrifty”, but under conditions of uncertainty about the continuing value of the national currency it could, indeed, be the more rational choice to go earlier into the house purchase rather than to wait to develop a stronger basis, by saving money over a time period, before reaching the time to make a “down payment” on a mortgage financed house purchase.