Tuesday, Nov 20, 2007
US housing market collapse
Times Online: Rumsfeld logic serves as guide to direction of US economy
There are, in principle, three ways that a housing collapse can affect the broader economy and financial markets:
1. Directly, through a cutback in construction activity.
2. Indirectly, through a negative wealth effect on consumer confidence and demand for credit.
3. Indirectly, through damage to bank capital and, thus, the supply of credit.
Posted by peter @ 12:55 PM (325 views) Add Comment
2 Comments
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1. enuii said...
Hmmm, pity they have got all three then.
2. dohousescrashinthewoods said...
Interesting that the increase in exports is making inroads into their trade deficit. Perhaps a falling currency is not all bad news.
1. Inflation eats debt (ans since there is more debt than savings, the government will be pleasing the majority)
2. Increased exports brings more real money into the country (ie money paid for real things that were made and traded)
I can see the UK following suit - let's face it, every potentially Labour-voting chav in hock to the banks for a lifetime of debt will want a get-out-of-jail-free card - and so long as wages spiral up with prices, they will live on.
If the majority are in debt, the majority will want inflation.