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Stephen S. Roach: US is facing double bubble trouble - property and credit bubbles peaked at 78% of GDP - 6 times the size of the tech bubble
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 1 year 236 days ago (chinadaily.com.cn). Views: 531
Tags: housing bubble |
| Related Tags: credit crisis gold wall street economics peter schiff inflation banks |
If the economy of the United States was entering a standard cyclical downturn, there would be good reason to believe that a timely counter-cyclical stimulus like that devised by Washington would be effective. But this is not a standard cyclical downturn. It is a post-bubble recession.
The US is now going through its second post-bubble downturn in seven years. Yet this one stands in sharp contrast to the post-bubble shakeout in the stock market during 2000 and 2001. Back then, there was a collapse in business capital spending, a sector that peaked at only 13 percent of real gross domestic product.
The current recession has been set off by the simultaneous bursting of property and credit bubbles. The unwinding of these excesses is likely to exact a lasting toll on both homebuilders and American consumers. Those two economic sectors collectively peaked at 78 percent of gross domestic product, or fully six times the share of the sector that pushed the country into recession seven years ago.
For asset-dependent, bubble-prone economies, a cyclical recovery - even when assisted by aggressive monetary and fiscal accommodation - is not a given.
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ian said |
| 1 year 236 days ago |
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"6 times the size of the tech bubble" is a very important point
I have been trying to make this point to many people for quite a while (without much success). The tech bubble lead to almost an 80% decline in the Nasdaq and almost a 50% decline in the S&P 500; yet by any estimate (for example in paper wealth created) the housing bubble is at least 5 times the size of the tech bubble, and far more important for the everyday American. Where the S&P 500 will bottom is anyone's guess, but I believe at least 50% down from its peak.
-March 12, 2008
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