A “credit event” was NOT what set off our current recession.
The NBER put the start of the current recession as December, 2007. Lehman tipped over early in the morning of September 15, 2008.
The recession is and was caused by the consumer’s inability to lever up any more to increase consumption. Effectively, the warning sign was on the wall in early 2007 when borrowers of home equity lines and first-time mortgages started defaulting from the very first payment. There was no more money with which to service new debt. After that, it was a certainty that debt deflation would follow.
Household incomes stagnated since 2002, and with the backslide we’re seeing now, consumers have had (on average) no increase in organic (ie, non-credit) purchasing power since about 1998. The US economy is effectively broken, and easy credit was able to paper over the problems until we ran out of credit to extend to the consumer. You’re seeing the exact same thing happen in student debt now as happened in home construction and sales, as happend in autos, etc.
Well I agree with you on the underlying cause of the great recession.
Homes were being used as ATMs. Home “equity” was financing the boom of the early 2000s. I heard economist Chris Thornberg say something like that the amount of mortgage equity withdrawal in California equaled dollar-for-dollar the boom of the 2000s. When house prices stalled the party came to an end.
However, the Lehman failure is when the bomb when off in the banking system. You didn’t see real fear in the investment world until this happened, and it is the event that started the mad scramble for survival in the global banking system.
I’ll grant you that the reasons Lehman failed are rooted in the very problems that you cited, but the Lehman bust was the significant event that brought home the severe problem that a decade of folly had created.