Hacker Cinema
The Flaw
2011 · Film · documentary · 78 min
Directed by David Sington
The story of the credit bubble that caused the financial crash. Through interviews with some of the world's leading economists, including housing expert Robert Shiller, Nobel laureate Joseph Stiglitz, and economic historian Louis Hyman, as well as Wall Street insiders and victims of the crash including Ed Andrews - a former economics correspondent for The New York Times who found himself facing foreclosure - and Andrew Luan, once a bond trader at Deutsche Bank now running his own Wall Street tour guide business, the film presents an original and compelling account of the toxic combination of forces that nearly destroyed the world economy.
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Correct. People with only the basic gist of "Economics 101" fail to understand that supply and demand economics do not apply to the housing market the way they do for consumer goods.
In a nutshell, hyper-inflation of rents in a metro area actually decreases the rate at which new units are built. Landlords have incentive to keep supply down; and when they do build "nice new" units for rent, those rent prices increase the average rents on the market.
In a sense, landlords are able to bully renters into being "customers" for longer period of time. Harms middle-class housing in two ways:
(1) larger portion of renters' income dumped into rent decreases ability to save for down-payment to buy
(2) fewer people buying decreases rate at which new units are built, and thus never allows the "housing supply" to react to actual market realities.
And what causes hyperinflation in rents? People being unable to "save enough money for a down payment" to buy.
Great documentary called "The Flaw" that explains more.
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