[GJM] Economy Looks Bad for 2007

[E. Crockett]

--- marguerite hampton <ecopilgrim at aabol.com> wrote:

> (To change your settings or unsubscribe please go to
>
http://lists.riseup.net/www/info/globalnetnews-summary)
>  
> http://www.commondreams.org/views07/0105-20.htm
> This column was distributed to newspapers by
> McClatchy-Tribune
> Information Services
> Published on Friday, January 5, 2007 by
> CommonDreams.org
> Economy Looks Bad for 2007
> by Mark Weisbrot
>  
> The big question for the U.S. economy now is whether
> we will make it
> through 2007 without a recession. Most of the top
> economic
> forecasters are predicting a "soft landing," which
> means the economy
> slows but not so sharply as to cause a recession.
> But almost all of
> these same experts failed to forecast the last
> recession, and they
> missed the stock market bubble (the largest
> financial asset bubble in
> history). And most of them also missed the housing
> bubble until it
> began to burst. So it would not be prudent to rely
> solely on their
> forecasts at this time.
> The timing of any downturn is not easy to predict.
> But a recession is
> likely, because of the enormity of the housing
> bubble and the impact
> of its collapse. Recall that our last recession (in
> 2001) was caused
> by the bursting of a stock market bubble of about $7
> trillion. The
> housing bubble is comparable in size (about $5
> trillion at peak) and
> the bubble wealth is much more widely distributed:
> most Americans
> still have most of their assets in housing and
> little or nothing in
> stocks.
>  
> As this housing wealth disappears, people cut
> spending. We have
> already seen an enormous drop in the amount that
> people borrow on
> their homes, from $600 billion last year to about
> $350 billion for
> 2006. It was this borrowing, enabled by soaring
> house prices that
> allowed people to borrow more against the value of
> their homes, that
> fueled the U.S. economic recovery since 2001.
>  
> Housing construction and sales are also a big sector
> of the economy,
> currently about 6 percent of GDP. If that falls
> 30-40 percent, as it
> has in previous downturns, that's a drop of about 2
> percent of GDP.
>  
> The recession caused by the stock market bubble
> bursting, which
> lasted only from March to November of 2001, would
> have been a lot
> worse if not for the enormous demand created by the
> housing bubble.
> So what will rescue the U.S. economy from the
> collapse of the housing
> bubble?
>  
> It's not easy to imagine what that would be.
> Personal savings rates
> are already negative, a phenomenon not seen since
> the Great
> Depression. How much can consumers borrow on their
> credit cards? A
> sustained surge of business investment is unlikely
> in the face of an
> economy that is already slowing: GDP growth was just
> 2.0 percent in
> the third quarter, down from 2.6 and 5.6 percent in
> the previous two
> quarters.
>  
> And there are downside risks from the global
> economy: foreign central
> banks are keeping our long-term interest rates
> extremely low -- below
> short-term rates -- by accumulating 10-year U.S.
> treasury bonds. They
> could lose just some of their appetite for this debt
> at any time and
> send U.S. long-term rates upward. A decline in the
> dollar, which is
> inevitable given that we are borrowing more than 6
> percent of GDP
> from other countries, poses similar risks - although
> it will
> eventually help the U.S. economy by narrowing our
> trade deficit.
>  
> We could possibly get through the international
> imbalances for
> another year but the housing bubble collapse is
> already upon us, with
> November's housing starts down 25 percent over the
> last year, home
> sales plummeting, and home prices falling. This is
> something that our
> political leaders and policy-makers should have
> warned people about,
> rather than encouraging the same kind of speculative
> excess that
> dominated our economy during the late 1990s stock
> market bubble.
>  
> ----------
>  
> Mark Weisbrot is Co-Director of the Center for
> Economic and Policy
> Research, in Washington, DC
>  > _______________________________________________
> Discussion mailing list
> Discussion at globaljusticemovement.net
>
http://globaljusticemovement.net/mailman/listinfo/discussion_globaljusticemovement.net
> 


 
____________________________________________________________________________________
Want to start your own business?
Learn how on Yahoo! Small Business.
http://smallbusiness.yahoo.com/r-index
-------------- next part --------------
An HTML attachment was scrubbed...
URL: /pipermail/discussion_globaljusticemovement.net/attachments/20070110/5f7f1312/attachment-0001.html