Another Housing Crisis Post – A Very Big Deal

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.

2 thoughts on “Another Housing Crisis Post – A Very Big Deal

  1. 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 posted there by Gibney “Metaphor”

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