Calculated Risk: Housing and Trade: Virtuous Cycle about to Become Vicious?: "If housing cools down (prices do not need to collapse), this will lead to lower equity withdrawal. In turn this will lead to a slow down in GDP growth and lower imports.
"Lower imports might lead to a lower trade deficit, depending on the strength of exports. This could lead to less foreign CB investment in dollar denominated assets. And this could lead to higher interest rates followed by lower housing prices and the cycle repeats.
"The result: a Vicious Cycle with lower housing prices, less consumption and higher interest rates."
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