Foreign Capital Inflated The Housing Bubble  A blog about
business and economics. Nov. 21 2013 3:23 PM  Foreign Capital
Inflated The Housing Bubble  Thanks, China!  Photo by DAMIEN
MEYER/AFP/Getty Images  An interesting new paper from Alejandro
Justiniano, Giorgio Primiceri, and Andrea Tambalotti finds that
"foreign capital inflows" account for between a third and a
quarter of the increase in U.S. house prices and household debt
from before the financial crisis.   This is similar to a story
we often here about, say, Spain. In that case, the adoption of
the euro and the integration of Spain into the larger Germany-
directed European economic sphere led to a surge of optimism
about the Spanish economy. The surge of optimism led to a surge
of foreign capital and Spanish housebuilding. German citizens
put money in German bank accounts, German banks leant to Spanish
banks, Spanish banks leant to Spanish homebuyers. Then
eventually you had the crisis and the turnaround.   The
interesting thing about the American cas