US housing bubble: Economy in denial

[NNN0LHI]

http://www.atimes.com/atimes/Global_Economy/HI27Dj02.html

Every day, another economist claims that the impact of the slowdown in housing on the US economy has been overstated; a few months ago, many still disputed that there even was a housing bubble. There has been a housing bubble, the bubble has only started to deflate, and it may have very negative long-term implications for the US economy as well as the US dollar.

Almost every day, a high-profile company directly or indirectly targeting the US consumer warns that its outlook is bleak. Let it be Yahoo warning about advertising revenues; let it be Dell's warning that its eternal rebate programs cannot push sales any more; or let it be the automakers that sell many of their brands at prices below last year's level, yet are still unable to boost volume. All these incidents are linked to the US consumer; and US consumer spending, in turn, is very closely linked to the health of the housing market. It also comes as no surprise that so far this year, the US dollar has fallen significantly versus a basket of currencies.

Home-building activity has collapsed, with some builders reporting as many as half their orders canceled. The volume of homes sold has declined and inventories are up. Home prices have - so far - held up reasonably well, mostly because the cost of long-term mortgages has been reasonable; while short-term interest rates have risen, interest rates on longer-term loans have in some instances even come down.

As a result, the squeeze on consumer spending has been relatively mild and limited to a squeeze on homeowners who have been dependent on adjustable rate mortgages who have seen their rates rise; beyond that, the squeeze has been on home owners who have employed their homes as automated teller machines - these owners are dependent on eternally rising home values to finance their spending.

[AX10]

1. Just look at the massive debts: Federal, Consumer, Jumbo Mortgage,

trade deficits. This cannot go on forever.

[acmejack]

2. The end is nigh.

I have marveled at how long this has lasted to be honest.

[OrangeCountyDemocrat]

3. Why Exactly Is That?

How has it lasted so long, and assuming "they" are aware of the danger ahead, how come they're not concerned?

I mean, to anybody who thinks about it, and is pessimistic about the Many, Many problems created by this housing bubble, there is a Bad Moon Rising.

Do they have a plan to deal with it? How can this fiscal responsibility go on without resulting in severe damage to something? Obviously the worst is a worldwide recession or depression. The best is what they continue to trumpet, an indefinite expansion, lots of low interest money forever and ever.

I am a CPA, and I just don't understand. I can't explain to myself how all these supposedly intelligent and educated individuals don't see any warning signs or cause for alarm. I've been predicting a crisis for years. When will it get here? And what surprises do "They" have in store for us to try and deal with the crisis when it arrives?

[Deja Q]

5. What's the difference between reality and tinfoil?

What do "they" have in store and all that?

[acmejack]

7. Not being sarcastic.

I have been surprised that the bottom hasn't fallen out quite bit before this. Have you read "Greenspan's Fraud"? Very enlightening, penned by a SMU economics professor. I am quite alarmed (read scared shitless). You have more knowledge of these things than I given your background, so I am not telling you anything, OCD...

[OrangeCountyDemocrat]

4. Notice The Source Of That Article

ASIA.

Not Amerika.

If it had been here, it would have been sugar coated, with all sorts of positive SPIN to try and balance the facts and figures.

But that's the "liberal" U.S. media for ya.

[Deja Q]

6. Asia - home to China and India.

Whatever. They love biting the hand that feeds them, so they'll say whatever they want to irk us.