“The Petrodollar Illusion,” a research paper from the hedge fund Clarium Capital, argued that these investments included products backed by subprime mortgages. Housing prices were partly driven by mortgage availability, and mortgage defaults were mitigated by rising home prices. Someone who couldn’t pay their mortgage with their current salary could tap the appreciated value of their home for a home equity loan and pay it that way. This created a cycle in which some of the money that came out of people’s pockets through rising gas prices went right back into those same pockets through rising
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