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Post by unlawflcombatnt on Sept 8, 2006 18:45:42 GMT -6
Economist Nouriel Roubini posted a very insightful letter on September 4th at the RGE Monitor regarding the effect of the housing bubble on the economy, and the relative magnitude of the effect. Roubini's message is that many economic commentators are not only understating the magnitude of the effect of a housing crash on the economy, but they are deliberately understating the effect. He gives a very sound and detailed explanation. Roubini's well-supported assertion is that the housing industry is responsible for at least 30% of the total job growth under the Bush dictatorship, or slightly over 1 million jobs. These are the directly related jobs. Adding in those peripherally related to housing, the percentage may be as high as 45%. The underlying theme is that a housing collapse will cause a major economic downturn. And Roubini is still predicting a recession by the beginning of the 1st quarter of 2007.
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Post by lc on Sept 8, 2006 19:08:02 GMT -6
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Post by unlawflcombatnt on Sept 8, 2006 22:29:40 GMT -6
I think the effect will be bigger as well.
The number 1 industry in San Diego is real estate & homebuilding. In fact, it's very close to being the number 1 industry in all of Southern California. When it collapses, there'll be nothing to take its place.
It'll be a very "hard" landing when it comes.
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Post by lc on Sept 10, 2006 10:22:35 GMT -6
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Post by unlawflcombatnt on Sept 10, 2006 12:50:11 GMT -6
You gotta admit some areas are far more poised for collapse than others. Yes. No doubt some areas are more poised than others. However, as Professor Roubini pointed out on the Larry Kudlow show last week, the so-called "coastal" bubble areas make up over 50% of the current real estate sales market. So the effect of a crash in these "localized" markets will be felt nationwide. Add to these "coastal" markets the numerous (and large) non-coastal bubble burstings, such as in Las Vegas and Phoenix, and the bubble areas include much more than 50% of the market. Many Midwestern areas are also experiencing sales declines and price stagnation as well. Some apparent non-bubble areas have had housing price appreciation attenuated by population declines. This applies to several Midwestern areas, as well as the San Francisco area. Population declines certainly limit localized home price appreciation. Such areas could also experience declines, because even their relatively stable prices may not be sustainable, due to a decline in buyers and decline in aggregate local income. Overall, it seems that it's only certain localized markets that are not involved in the bubble. In other words, those markets not experiencing a bubble are the exception, not the rule. The bubble bursting will affect a majority of real estate markets, because a majority of markets have experienced a real estate bubble. Given that 10% of American jobs (or over 14 million jobs) are housing industry related, and that housing has been the #1 area of job creation since 2000, the bubble's bursting will significantly reduce employment and job creation directly. This job loss, combined with a large decline in home equity related consumer spending (both through reduced "wealth effect" and decreased home equity extraction) will indirectly reduce employment by reducing consumer spending power, production demand, and demand for labor to provide production. The bursting of the housing bubble will be a major blow to our economy. It remains to be seen how large the effect will be.
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Post by KennethKranz on Oct 27, 2006 14:43:52 GMT -6
Looks like he was right. GDP came in at 1.6%. and you might enjoy this note. Greenspan finally talked about Central Bank diversification. news.yahoo.com/s/nm/20061026/us_nm/economy_greenspan_dollar_dc_4and setsers calculation that foreign inflows reduce rates by 150 to 200 bps. I have to look up the link. I am on my way home for the evening. This is 2 times in a row the market experts have missed the growth forecast. seems they missed the multiplier impact of housing sector spending and that is pretty strong. We now are relying on grwoth from sectors that have a much higher bleed factor to other markets mainly far east.
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Post by unlawflcombatnt on Oct 28, 2006 3:19:52 GMT -6
Looks like he was right. GDP came in at 1.6%. and you might enjoy this note. Greenspan finally talked about Central Bank diversification. Yes, Roubini had predicted a 1.5% 3rd quarter GDP growth for a long time. And Greedspan, true to form, while reluctantly suggesting we might have some economic problems, also managed to throw in some of his Pro-Globalist, anti-worker pearls. Again, he warns against the prospect of "protectionism." His real concern is the well-being of American investors who've invested abroad, not the majority of Americans whose real wages have declined through competition with low-wage foreign workers. The problematic "adjustment" from protectionism that he warns against means "problematic" only to his rich friends. The sooner we change our trade policies to more "protectionist," the sooner we'll stop bleeding jobs and the sooner worker/consumer income will recover from the policies of the Bush-Greedspan Corporatocracy. Greedspan still thinks wealth can be created out of thin air. When you're chairman of the Federal Reserve, that almost seems true.
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