Calculated Risk: Housing, Jobs and Bernanke Revisited: "There is a housing bubble, it is going to burst, and those areas dependent on housing related jobs will experience a snowball economic effect."
Duh.
But, is it enough to throw the economy, nationwide, into a loop?
In other words, is there a scenario, where this (finally) gets us into serious trouble?
Well, there is, if policymakers make a big boo-boo -- or they find themselves in a circumstance in which a big mistake is almost inevitable. For example, if China and Japan stop financing the U.S. federal deficit, and long-term interest rates are forced up, just in time to exacerbate the bursting of the housing bubble. Or, panicking over signs of inflation picking up, the Fed over-reacts and actually creates a deflation, which, in turn, leads to a kind of financial panic.
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