From The Cleveland Fed:

Some observers blame monetary policy for lowering interest rates over 2002-2005, pushing up housing demand, increasing residential investment, and raising housing prices. In this view, the monetary-policy-induced housing boom thus set the stage for an inevitable housing bust.

Others contend that relaxed lending standards, highlighted by the rise in subprime lending, played a critical role. This loosening of standards led to an increase in housing demand, as mortgages were issued to households that were likely to have trouble making the mortgage payments. This extension of credit to risky borrowers helped fuel a housing boom and set the stage for the resulting surge in defaults, which were a big factor in the housing "bust."

I would add mortgage interest deductability and nonrecourse mortgages to the factors contributing to the housing bust (or making the housing bust worse than it would otherwise be).

That being said, I am not sure you can let monetary policy completely off the hook. A question that needs to be asked is as follows, "Had the United States had Canada's housing and lending policies and avoided a housing bubble, would we simply have seen the bubble occur somewhere else, such as in equities or gold?" Time to see if anyone has studied that question!

But lower overall. From the Wall Street Journal:

Is the current economic slump worse than the recession of the early 1980s?

Measured by unemployment, the answer appears to be no, or at least not yet. The jobless rate was 10.2% in October, compared with a peak of 10.8% in November and December of 1982.

But viewed another way, the current recession looks worse, not better. The unemployment rate among college graduates is higher than during the 1980s recession. Ditto for workers with some college, high-school graduates and high-school dropouts.

So how can the overall unemployment rate be lower today but higher among each group?

Click on the above link to get the answer.

To me, the bigger question is Why do we use the unemployment rate as our primary indicator on the labor market?

Over the past two weeks, our Economics - The Basics section has expanded greatly to include more Econ 101-level information. Is there anything you would like to see added?

Former Canadian politician Ed Broadbent:

Why is it that Finland, Sweden and Denmark have almost wiped out child poverty, and we have not? Why do more than 600,000 Canadian kids wake up hungry and go to school trying to read, write and think on an empty stomach?

He goes on to present a solution:

In the next budget, let's impose a six-point increase in income tax on those earning more than $250,000 a year (whose average taxable income is $600,000). While leaving them with very high incomes, this would provide $3.7-billion in additional revenue.

Stephen Gordon responds in a much more generous way than I would.

If you are going to ask how Finland, Denmark and Sweden are solving the problem, shouldn't you, say, actually look at how they're doing it? The problem is, if you do, you do not come up with the policy response that Mr. Broadbent has been pushing for 3 decades. Here is how they are financing it:

Sales Tax Rates
Finland - 22%
Sweden - 25%
Denmark - 25%
Canada - 5-15% (depending on the province)
EU Source (PDF)

You would think that Mr. Broadbent's party would support higher sales taxes. Think again.

We should be concerned about high levels of poverty. We should also be concerned with: How Good Intentions Lead to Crushing Marginal Tax Rates on the Working Poor.