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August 28, 2006

Another Housing Crisis Post - A Very Big Deal

-- by Dave Johnson

Just after posting below I came across this: Stephen Roach: Bursting Housing Bubble A Very Big Deal ,

If the US consumer slows, the demand expectations that typically drive capital spending will also weaken. So, too, will the growth dynamic of America’s export-led trading partners -- thereby undermining support for US exports, as well. In short, for a wealth-dependent US economy, the bursting of another major asset bubble is likely to be a very big deal.

It is also likely to be a big deal for an unbalanced global economy. In 2000, when the equity bubble burst, the gap between current account surpluses and deficits was less than 4% of world GDP. This year, as the housing bubble bursts, that same gap is likely to be around 6% of world GDP. The disparity between current account surpluses and deficits -- and the added point that the US accounts for about 70% of all the deficits in the world -- underscores the increased dependence of the rest of the world on the US. For that reason, alone, a bursting of the property bubble poses equally serious risks for America’s key trading partners and for the rest of an increasingly integrated global economy.

Posted by Dave Johnson at August 28, 2006 4:37 PM

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Comments

We are soooooo fucked.

Posted by: richard [TypeKey Profile Page] at August 28, 2006 6:07 PM

I ran across this post over at WashBlog that I've grown quite fond of as the picture tells the WHOLE story about the Rep leadership. It is a picture of a campaign sign, in front of an abandoned farm house for the local Rep Incumbent. And it is priceless http://www.washblog.com/ posted there by Gibney "Metaphor"

Posted by: mainsailset [TypeKey Profile Page] at August 29, 2006 8:04 AM

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