|
Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles Don't Listen To Wall StreetE-mail - editor@economyincisis.org |
|
The US Housing Bust IS a Big Deal As U.S. home prices at the national level begin to decline for the first time since the Great Depression, most Wall Street analysts maintain their rosy outlook for the U.S. economy by allowing hope to triumph over experience. For while they concede that any bottom to the housing market bust is slipping ever further into the distant future, they hew to the view that the U.S. housing sector is far too small to derail the overall U.S. economy. In maintaining their rosy economic outlook, most Wall Street analysts choose to ignore Fed Chairman Ben Bernanke's recent reminder that a protracted decline in home prices could have a material impact on consumer spending. According to Mr. Bernanke's congressional testimony last week, the Federal Reserve estimates that household consumption could be negatively impacted by as much as 9 cents for every dollar that home prices decline on a sustained basis. And considering that housing wealth, which is the main source of household wealth, presently amounts to 150 percent of GDP, and that household consumption still accounts for around 70 percent of GDP, the prospect of a protracted period of declining home prices is not something one wants to cavalierly brush aside. Contrary to what many on Wall Street would have us believe, the prospect of a protracted period of declining home prices now seems to be anything but a remote possibility. Indeed, with home prices already falling and with increased inventories of unsold homes rapidly mounting, it is difficult to see how home prices do not start falling at an accelerating rate over the next few months in order to clear a saturated market. This would seem to be all the more so the case as a tightening in mortgage lending standards and as the resetting of adjustable rate mortgages further crimp housing demand at the very same time that a marked increase in home foreclosures leads to more houses returning to an already glutted market. If the economy indeed slows abruptly over the next few quarters under the weight of its housing market woes, it will not be the first time that Wall Street analysts as a group missed a major turning point in the economic cycle. Rather, it will only confirm that those analysts seem to have learnt little from the bursting of the earlier dot.com bubble in 2001. *The above article has been excerpted from Desmond Lachman’s article “The US Housing Bust Is a Big Deal,” from the American Enterprise Institute for Public Policy Research. Lachman is a resident fellow at AEI. Read the entire article at http://www.aei.org/publications/filter.all,pubID.26627/pub_detail.asp. Use of this article by EconomyInCrisis.org is in accordance with the ‘Fair Use’ privileges of U.S. Code Title 17, Section 107. Click here to contact your Representative in Congress. Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles
|
Comment on this article
Article Comments From Readers
|
guest says "Housing Bust-Savings and Loan Bust- What's the difference?" on 08/30/07
|
|
It is the same old story again, only the people have changed. Whether it is the savings amd loan institution bail out years ago or now the coming real estate bail out, the feds will reward these crooks again over and over again. Why is no one going to jail over all this stuff? Can anyone else here say "lack of balls"? Is it because our politicians bigger crooks that these real estate morons and finanical geniuses who bankroll them?
|
|
guest says "Problem Solved" on 08/15/07
|
|
I say we let the foreclosures play out, then bulldoze all empty homes and print money to calm the economy. Less glut will make demand rise and my home will be worth more :o)
|
|
guest says "Don't Listen To Wall Street " on 08/14/07
|
|
Manufacturing in the US has declined tremedously over the past few decades. Housing and banking had become substitutes for the loss of major industries. Take it away and there isn't much of an engine drving the US economy.
|
|
guest says "You forgot however.." on 08/12/07
|
|
Don't worry about this. If the economy falters too much, the Treasury can simply print billions or trillions of dollars more to insure liquidity.
No one will know because the Treasury's operations and supply are secret and not accountable to any fixed measure such as Gold or Silver.Hence people may only suspect that there is more currency on the market, but no one can prove it. There is simply too much to count. If the Treasury doesn't spill the beans then there won't be any inflation. Problem solved! Remember folks, since our currency is based solely on Trust, the Treasury can just turn trust into T-R-U-S-T or T---R---U---S---T. What ever is needed Trust is elastic and can be stretched to accomodate world demand. The only real limits are paper and ink. People won't cash in their chips (dollars)because that could signal worry and cause inflation to rise more. Its the job of the Treasury to create money as is needed so everyone will have enough to be happy. The world's currency needs can be met and no one will be the wiser. This problem of a housing bust is nothing to worry about. |
|
guest says "Don't listen to Wall Steet on 8/10/07" on 08/12/07
|
|
You guys are spot on! Wall Street's trying to get the investor to buy so they can unload.. just like in 2000-2001 era. Anyone who buys this story deserves to loose their investment. They always change their ratings on any stock after the horse has bolted the barn. Real estate is even worse because of the poor liquidity it affords. The current crisis is fully due to that idiot Greenspan who artificially kept long rates low to pander to Bush and his cronies.
|
|
guest says "Don't Listen To Wall Street" on 08/10/07
|
|
You obviously don't know real estate history or econonics very well. You should stick to scaring little kids a your local playground.
|
