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Paulson Warns Us House Prices Must Plunge

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From The Times

Paulson warns US house prices must plunge

The US Treasury Secretary gave warning today that there is more pain ahead in the American housing market after he said prices must be allowed to drop before the economy can stabilise.

Henry Paulson’s remarks to the US Chamber of Commerce sent the Dow Jones industrial average plunging by 130 points to 12,402, as investors forecast more months of turmoil ahead.

Mr Paulson said that policymakers were aware it was a housing downturn that fuelled turmoil in the financial markets, and that a slowing housing market posed the biggest risk to the economy.

Mr Paulson acknowledged that the Government would step in to lessen the impact on the economy, but he was emphatic that the house price cycle must run its course.

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“A correction was inevitable, and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilise, more buyers return to the housing market and housing will again contribute to economic growth.”

It emerged yesterday that house prices in 20 US cities had declined by 10.7 per cent in the 12 months to January — the worst fall in more than 20 years.

This month US consumer confidence fell to a five-year low.

Mr Paulson also said that regulation governing commercial and investment banks needed to be re-examined and strengthened, after the collapse of Bear Stearns, the Wall Street bank.

He said: “This latest episode has highlighted that the world has changed, as has the role of other non-bank financial institutions and the interconnectedness among all financial institutions.”

Mr Paulson added: “These changes require us all to think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability.”

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Imagine someone from the Treasury or the Bank of England saying something similar!

They UK Treasury will just use this speech to prove that they need to artificially sustain House Prices in the UK though.(which is of course why they've been doing it since Aug 2005...)

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Imagine someone from the Treasury or the Bank of England saying something similar!

Paulson is right though. Its amazing that a politician has shown such economic foresight.

I think that we will see these comments from politicians over here too, but not until we have seen a significant fall over a 12 month period.

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Paulson is right though. Its amazing that a politician has shown such economic foresight.

He's not a politician. He's a banker who found he could make more money in the public sector.

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I read the other day that Darling was meeting his US counter part (Mr Paulson) to discuss the global economic crisis.

As a UK citizen I felt embarrassed.

I think darling went over there to buy the US BMV.

Its the latest craze over here dontchaknow

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Paulson Warns Us House Prices Must Plunge

Silly boy jp1.

I listened to much of that speach live on TV, as your Times quote indicates Paulson did not use the word "plunge". Paulson is good at no nonsense prose which is just what we need right now, I wish we had a UK New Labour politician who could deliver it straight like Paulson.

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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