The worst housing recession in U.S. history
(posted by jackson)
Nouriel Roubini argues that we are in the middle of the worst housing recession ever:
There is indeed no end in sight to the worst housing recession ever. Compare what happened to housing in the last 18 months to the utter nonsense and self-interested spin that was being spewed by most analysts in the fall of 2006 and into early 2007 about this being a moderate housing “slump”, about the subprime being a “niche and contained” problem that would have no contagion to other mortgages, about housing having no spillovers to the rest of the economy and about the limited financial losses deriving from subprime and the housing recession. This worsening housing recession, together with the worst liquidity and credit crunch in the last 20 years, oil close to $100, faltering capex spending by the corporate sector and a saving-less and debt-burdened consumer that is on the ropes and stopped spending (in real terms) in December will lead in 2008 to the worst US economy wide recession of the last 20 years. At this point the debate is only on how mild or severe this recession will be, not on whether we will have one.
The appropriate policy response? It seems to me that anything that returns the easy flow of credt threatens to reinflate the housing bubble, which might keep the economy expanding for another year or two, but it would also mean that when the crash finally came, it would be that much worse. Greater transparency in the lending process might protect the U.S. economy against future housing bubbles, but in the short-term seems likely to ensure the maximum severity for the current contraction.
February 14th, 2008 at 3:24 am
(Almost used my Battlepanda login…must break that habit lest I accidentally lay myself open to charges of sock-puppetry here)
I don’t think it’s anywhere near so clear, mysterious editor 2, that a stimulus will reinflate the housing bubble. The overvalued cat is out of the bag. Look at it this way…if you had a hunk of cash lying around now, would you think that the logical place to put it is in real estate?